What is a consumer proposal and how can it help you?

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A consumer proposal is a formal, government-approved debt settlement process that can help you get out of debt and avoid bankruptcy. It is a type of insolvency proceeding which is an alternative to bankruptcy. Under the proposal, you make a single payment or a series of payments to your creditors over a specified period (usually three to five years). In return, your creditors agree not to take any legal action against you, such as wage garnishment or seizure of assets.

Here are 6 things you need to know about consumer proposals:

1. You must be insolvent to qualify

To be eligible for a consumer proposal, you must be insolvent. This means that you are unable to pay your debts as they come due. If you are able to make your regular repayments, but only make the minimum payments, you are not considered insolvent.

For example, suppose you have $50,000 in unsecured debt, such as credit card debt, personal loans, and lines of credit. Your minimum monthly payments are $1,500. Even if you cannot repay your debt in a reasonable time if you only make the minimum payments, you will not be considered insolvent. This is because you are able to make your regular repayments.

2. You must have a valid reason for the proposal

There must be a valid reason for the proposal. The most common reasons include:

• You have suffered financial hardship, such as job loss or illness

• Your debts significantly exceed your assets and income

• You failed to repay your debts through a debt consolidation loan or other means

Keep in mind that your creditors will review the reason for your proposal and may oppose it if they believe it is invalid. In this case, the proposal will not be approved.

3. How it can help you

If you are having difficulty repaying your debts, a consumer proposal can help you get out of it and avoid bankruptcy. As seen at https://debt.bot/consumer-proposal-alberta/, under this agreement, you can freeze interest, stop collection calls and cancel wage garnishment. This will give you time to catch up on your payments and get your finances back on track.

For example, let’s say you have $50,000 in unsecured debt and your minimum monthly payments are $1,500. If you make a consumer proposal, you will make a one-time payment of $25,000 over five years. This would save you $10,000 in interest and fees.

Additionally, a consumer proposal can help improve your credit score. This is because the debt will be marked as “settled” on your credit report, which is better than “unpaid” or “in collection”.

4. The process takes several months

The consumer proposal process takes several months from start to finish. Once you have filed your documents with a Licensed Insolvency Trustee, they will send a notice to your creditors. Your creditors then have 45 days to oppose the proposal. If there are no objections, the proposal is deemed accepted and you can start making payments.

5. You will need to make payments

If your consumer proposal is approved, you will need to make payments to your trustee. These payments will be used to repay your creditors. The amount you will have to pay will depend on several factors, including the total amount of debt, your assets, and your income.

You will also need to attend two mandatory counseling sessions with a Licensed Insolvency Trustee. These sessions are designed to help you understand the consumer proposal process and develop a budget.

6. There are risks involved

Although a consumer proposal can help you get out of debt, it comes with risks. For example, if you miss a payment, your proposal may be canceled and you may be required to pay the full amount of your debt plus interest and fees.

Additionally, a consumer proposal will stay on your credit report for three years after the discharge date. This can make it difficult to obtain new lines of credit.

7. You may need to hire a lawyer

If you are considering a consumer proposal, you may need to hire a lawyer. Indeed, the process can be complex and there are a number of legal implications. A lawyer can help you understand the process and ensure your rights are protected.

  • The information in this article is for informational purposes only and is not intended to replace professional advice, medical care, or the advice of your physician.

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