Filing a Consumer Proposal is one the most popular alternatives to going bankrupt in Canada. It is a legal agreement between you and your creditors to negotiate the repayment of the money you owe. While a Consumer Proposal offers many benefits, here’s a list of the TOP 10 that our clients find the most helpful.
1. It significantly reduces your debt.
With a Consumer Proposal your debts can be reduced by almost 70%. While the debt reduction is calculated on a case-by-case basis, and the amount you owe and your income and assets are major influencing factors, in most situations applicants can look forward to a major decrease in debt.
2. The interest charges stop.
The second greatest benefit is stoppage of interest charges upon filing of the proposal. Even if it takes the full 5 years to pay it off, it’s completely interest-free. You only pay what was agreed upon in the original proposal.
3. Garnishment & Court Orders can be reversed.
All legal actions and claims against you are stopped. If your creditors have filed lawsuits or made legal claims or actions, all these activities will cease.
4. Your creditors won’t bother you anymore.
After you file a Consumer Proposal, you will be free of all forms of harassment from your creditors as it’s no longer legal for them to pursue you regarding your debts.
5. You have a structured plan to become debt free.
Another great thing about the proposal is that you can choose from a variety of payment plans: a 24-60 month plan, a one-time lump sum payment or a combination of the two. Most people’s payments are done in about 36 to 60 months. No matter what payment terms you go with, a Consumer Proposal offers a structured way to become debt free.
6. You can make your payments early.
With a Consumer Proposal, you’re not being forced to stick to a prolonged payment plan and, if your financial situation improves, you can pay off the proposal sooner. In addition, if you win a lottery, inherit funds or get a higher paying job, the proposal payback amount will not change.
7. Your spouse won’t be affected by your debts.
With a Consumer Proposal, your spouse’s credit rating won’t be affected in any way, and neither will the assets they have in their name. Conversely, if your spouse has co-signed or guaranteed your debt, or if your debts are joint, they may also be liable for your debts, which means they should also consider a Consumer Proposal as a valid solution. You can even apply for a Joint Consumer Proposal if the majority of your debts are jointly held.
8. You can keep your assets.
The good news is that with a Consumer Proposal, your assets won’t be taken away from you – even your home or vehicle! You’ll be able to keep clothing and personal effects, household furniture, a motor vehicle, work tools and RRSP’s and pensions.
However, if any of your assets are financed and you want to hold on to them, you’ll have to continue making the necessary payments. For instance, if you have a mortgage on your house or a lease for your car, you should continue making those payments.
9. You can avoid bankruptcy.
Bankruptcy is undesirable to say the least for the majority of people, mainly because someone who files for bankruptcy can lose their assets and tax refunds, while their credit rating drops to an R9 level for a period between 6 (if it’s their first time applying) and 14 years (if they’ve applied before). If you want to avoid the disadvantages brought on by bankruptcy, a Consumer Proposal is a good option to repay your debts in a clean, hassle-free way.
10. The Consumer Proposal is free.
Lastly, filing a Consumer Proposal is free and the costs associated with your program are covered by your monthly payment. As opposed to intermediaries, Licensed Insolvency Trustees will not ask you for any specific fees and the fees they do take from your creditors are set by tariff rules under the Bankruptcy and Insolvency Act.
If you’re struggling to pay off your debt and would like to hear more about available debt management options give us a call. We offer a free no obligation consultation and will gladly answer any questions you may have and provide recommendation on what may be best in your particular situation.