Most of us have some form of debt or another, whether it’s a mortgage, car loan, or a credit card or two. In some cases, though, debt becomes overwhelming and requires professional help. Help can come in a number of forms, including debt consolidation, bankruptcy, or a Consumer Proposal.
What is a Consumer Proposal?
A Consumer Proposal is a form of debt relief that settles your unsecured debts (such as credit card debt, personal loans, or tax debts) for less than you owe. It’s a legal agreement between you and your creditors that is prepared by a licensed insolvency trustee. You and the trustee decide what amount you can afford to pay, and the trustee presents the proposal to your creditors. If they accept, you make one monthly payment to your trustee instead of your creditors until the settled debt is paid off.
For many people, a Consumer Proposal is a smart move. Here are four reasons why:
It’s an alternative to bankruptcy
For more serious debt problems, a Consumer Proposal can be an alternative to bankruptcy. Although bankruptcy does eliminate your unsecured debts, you must surrender your personal assets, report your income each month to your trustee, and in some cases make additional monthly payments.
A Consumer Proposal, on the other hand, allows you to keep your belongings and does not have the same requirements of a bankruptcy.
It stops creditors from calling
Consumer proposals are one of two options that provide legal protection from creditors. (The other is a bankruptcy.) Once you file a Consumer Proposal, your creditors are not allowed to contact you to attempt to collect your debts. You no longer have to interact with them at all. For many people, this is a welcome relief from stressful phone calls.
It allows you to settle your debts
Other forms of debt help, aside from bankruptcy, typically require that you repay the full amount. For example, with debt consolidation, which may lower monthly payments and interest, still requires that you repay the entire balance of your debts. If you have extensive debt, this can still take a very long time.
A Consumer Proposal, on the other hand, allows you to settle your debts for less than you owe. The majority of Consumer Proposals last five years or less. After that, you’ll be debt-free.
It’s flexible
With a Consumer Proposal, you have the flexibility of repaying your settlement off before it is over. For example, if you get a raise or experience a financial windfall and can afford to make higher monthly payments, you can pay off your settlement before the five year period is over. This allows you to start rebuilding your credit faster. The settled amount does not change if your financial situation improves.
Debt doesn’t have to take over your life. If you’re looking for a solution to your debt, a Consumer Proposal may be a good option. To find out if a Consumer Proposal is the right plan of action for you, make an appointment with a licensed insolvency trustee for a free consultation.
Jillian Taylor-Mancusi, LIT
