In Canada there is a legal debt solution besides bankruptcy which offers many benefits – a Consumer Proposal. Although Consumer Proposals are not a new debt management tool, discovering that debt relief is possible without having to file bankruptcy is a surprise to many people. This specialized debt solution is only available with the help of a Licensed Insolvency Trustee (“LIT”). Read on to learn more about this versatile and powerful debt relief option:
How a Consumer Proposal Consolidates Debt
Similar to a traditional consolidation loan, a Consumer Proposal will combine your debts into one settlement.
- An advantage of consolidating your debts is that you don’t have to keep track of multiple accounts, all with different payment due dates and payees.
A Consumer Proposal is not a loan, and your credit history is not a qualifying factor to make a Consumer Proposal. Creditors agree to accept payment from you via your LIT.
How a Consumer Proposal is Structured
After discussing your situation, specific needs and goals, your LIT will work with you to decide how much to offer your creditors.
- Because individual circumstances vary, so do the proposed settlement amounts. In general, it’s common to offer to pay anywhere from 20-40% of the current balance.
- Although you’re only offering to repay the portion of the debt you can afford, the Consumer Proposal will settle the debts in full, with no interest. Essentially the remaining balance of the debts will be written off under the Consumer Proposal.
Filing a Consumer Proposal automatically stops further interest from accruing on your debts!
How a Consumer Proposal Gets Accepted
When you’re ready, your LIT will put forward your proposal to your creditors so they can consider your offer.
- The legal backing of a Consumer Proposal means that if half of your creditors (by dollar value) agree/vote to accept your proposal, it is binding on all creditors that you are offering to settle with.
- Filing a Consumer Proposal also means your LIT steps between you and your creditors, so they are no longer allowed to ask your for payments, or try to collect from you.
Virtually all types of debts can be settled under a Consumer Proposal, even government debt for taxes and student loans!
How a Consumer Proposal Achieves a Financial Fresh Start
When you’ve made your last (usually monthly) payment on your Consumer Proposal your LIT will issue you an official document stating that you’ve fulfilled all the terms offered.
- That’s it – you are now debt-free!
Interested in learning more about Consumer Proposals? Book your free confidential debt consultation with a Sands & Associates Licensed Insolvency Trustee today – no referral required!