What is a Consumer Proposal?

A Consumer Proposal is a legally binding document that serves as an agreement between a debtor (the party borrowing money) and their creditors (the party who lends the money). This agreement serves a purpose to settle the unsecured debts the debtor has but is unable to pay. A consumer proposal can do this by:

  • Giving you the ability to only pay a percentage of your total unsecured debt load
  • Extending the time period you have to pay off your unsecured debts
  • Or both

A consumer proposal is executed by a Licensed Insolvency Trustee (LIT) who serves as an unbiased mediator between the debtor and the creditors. An LIT ensures that laws and regulations are distributed equally and upheld by all parties involved. 

Is a Consumer Proposal right for you?

A Consumer Proposal can be helpful to individuals who have a considerable amount of unsecured debt. This means that a Consumer Proposal can include debts such as credit card debts, but it cannot include debts such as mortgages. This is because a mortgage is a secured loan, meaning it is secured to your home. Individuals with a total unsecured debt load of $6,000 or more (up to $250,000) are eligible to file for a Consumer Proposal which may be the most beneficial manner to repay their debt. In addition, married or common law partners can file for a joint consumer proposal, considering their combined unsecured debt load does not exceed $500,000.

If you identify with the statements above, give us a call or send us an email! A specialized financial consultant will reach out to you within 24 hours and will help you to decide if a Consumer Proposal is the right option for you!

What are the advantages of a Consumer Proposal?

In addition to reducing your total unsecured principal debt load and extending your repayment period, a Consumer Proposal:

  • Puts you under legal stay.
    • This means your creditors legally cannot pursue you any longer. This means your creditors can no longer engage in activities such as:
      Collection calls/mail/email/visits
      Garnish your income
      Sue
      Put a writ or lien on your assets
  • Does not accrue interest
    • When you file for a Consumer Proposal and you and your creditors have agreed on the terms of repayment, no interest will accrue on your total repayment amount while you make monthly payments.
  • Repayment terms cannot change
    • Once your Consumer Proposal has been filed as “accepted”, the amount you repay cannot change. This means your creditors cannot ask for a higher repayment.
  • Can be paid off as fast as you would like
    • Unlike a bankruptcy, a Consumer Proposal can be paid off as fast as you would like. This means if you come into some extra money, you can pay down more than your monthly payment, and therefore helping you to complete your repayment sooner than the anticipated time.
  • Gives you the ability to be debt free in 5 years!
    • A consumer proposal allows you to pay off your debts in a total of 60 months, or 5 years.

What are the disadvantages of a Consumer Proposal?

A Consumer Proposal can offer relief for many individuals suffering with a large debt load, but not without a cost. Filing for a Consumer Proposal severely negatively impacts your credit score. This can deter individuals from receiving the help they need, but it shouldn’t scare you. A credit score is something that you can rebuild with time and consistency. In addition, Debthelpers offers programs to help you rehabilitate your credit score while you go through a consumer proposal. If you are still unsure, you should consider the following: When you think about your retirement, what is going to matter more: a good credit score, or having money saved for your retirement? Most people would agree that having money saved for your retirement so you can live comfortably is more important. If you have a large amount of debt and are struggling to reach your financial goals, a Consumer Proposal can help you to reduce your monthly payment as well as be debt free in 5 years! Therefore, you can start saving for that vacation you always wanted to take, your children’s education, your retirement, and any other financial goals you have!