You should consider a consumer proposal if you’re looking into ways to manage your debts, such as debt consolidation, credit counseling, or bankruptcy. Consumer proposals have become more popular recently, but they remain a relatively unexplored federally regulated debt management option for Canadians.
So what is consumer proposal? It is a legal procedure that enables you to bargain with your creditors to devise a repayment schedule that works for your financial situation. Here are the top five reasons Canadians choose to submit a Consumer Proposal as an alternative to bankruptcy:
Take care of all of your debts.
Because a consumer proposal can include almost all creditors, you can take care of all your debts without worrying about managing multiple balances. A consumer proposal can consolidate various debts, including those from the government, student loans, income taxes, and other debts that typical consolidation loans and programs may not cover.
Repay what you can
One of the main perks of submitting a consumer proposal is that a sizable amount frequently reduces the amount you must pay in full settlement of the debt; it is not unusual for people to pay back only 20–30% of what they originally owed.
Not only is it common for the total amount owed to reduce considerably, but your creditors are also required by law to stop charging interest. People who make regular payments toward their debts frequently find that they cannot pay them off entirely due to accumulating interest.
Protection against creditors
A consumer proposal automatically offers a “stay of proceedings” because it is a debt relief method covered by federal law. Hence, your creditors can no longer pursue you for payments or the collection of past-due accounts once the Licensed Insolvency Trustee has submitted your Consumer Proposal. As a result, they can only contact the trustee. This stay of proceedings will also help you if creditors are garnishing your earnings or bank account because they are required to stop immediately.
Rebuild your credit
A consumer proposal will offer a “reset” on your credit history, giving you a chance for a new financial beginning. The Consumer Proposal stipulates that you must attend two credit counseling sessions concentrating on budgeting and raising your credit score.
Consequently, it will significantly improve your capacity to accomplish future financial goals because you will have the tools to improve your credit rating, and you won’t be carrying debts.
Regulated fees and licensing
You can be guaranteed that there are no additional fees or charges because the trustee’s fees are fully regulated and legalized. No “lump amount” or “up front” payments are necessary to begin a consumer proposal.
Once you and the trustee have determined the monthly payment amount, you pay the trustee once, and the trustee then submits the plan for your creditors’ approval. Only a certified insolvency trustee can legally manage Consumer Proposals, a specialized instrument.
A consumer proposal is worth it. It enables you to handle your debt, repay what you can, stop creditor’s collection activities, and rebuild your credit.