5 Reasons You Should File a Consumer Proposal

A Consumer Proposal is a powerful debt management tool, and if you’ve considered paying off your debt through a debt consolidation loan, a credit counselling program, or even personal bankruptcy, filing a Consumer Proposal should be on your list of debt solutions to explore. Although Consumer Proposals have gained popularity in recent years, they’re still a relatively unknown option that Canadians have to deal with their debts.

Quick Facts About Consumer Proposals

• By filing a Consumer Proposal, you can legally consolidate and cut virtually all of your debt, without incurring any further borrowing or interest charges.
• Working with a Licensed Insolvency Trustee you’ll offer to repay to your creditors the portion of your debt that you can reasonably afford to pay over a period of up to five years, usually by making monthly payments. At the end of your Consumer Proposal your creditors will consider the unpaid balances forgiven and your debts will be legally eliminated.
• A Consumer Proposal can be made by an individual who owes between $1,000 and $250,000 of debt (not including their mortgage), and if you are filing a joint Consumer Proposal (for example, with your spouse) this doubles the debt limit.
  • If you owe more than $250,000 you could use a different type of debt Proposal that your Trustee can explain in further detail.

Why File a Consumer Proposal?

Consumer Proposals are a unique, customizable debt solution, making them an ideal debt-free plan for many different situations and needs. Here are some of the top reasons to file a Consumer Proposal:

1. Repay What You Can Afford with a Monthly Payment That Fits Your Budget

A major benefit of filing a Consumer Proposal is that the amount of your debt that needs to be paid to settle your debt in full is typically reduced by a significant amount – it’s not uncommon for people to repay only 20-30% of what they owed in total.

• For example, if you owed a total of $30,000, your Consumer Proposal might offer payments of $250 per month for 36 months, for a total repayment of $9,000, cutting your debt by 70%.

Not only is the amount you need to pay to clear your debt often greatly reduced, but by law your creditors must stop charging interest on your debt, and accumulating interest is commonly what hinders people trying to get their debts paid off.

• Because a Consumer Proposal will consolidate and cut your debt without interest and allow you up to five years to complete your payments, the monthly payments in a Consumer Proposal are usually the most affordable among debt management options – especially compared to repaying 100% of your debt with ongoing interest.

Learn More About Calculating Consumer Proposal Payments

2. Combine All Your Debts

Instead of juggling multiple accounts and payments, virtually all of your debts can be paid by making one simple payment each month, as nearly all creditors can be included in a Consumer Proposal.

• Whereas consolidation loans and credit counselling plans cannot address certain debts (such as government debts like income taxes or student loans), these types of debts (and more) can all be easily consolidated, cut, and paid off under a Consumer Proposal.
  • Besides declaring personal bankruptcy or paying the debt off in full, a Consumer Proposal is the only debt solution that can clear government debts.

If you have an ongoing secured vehicle financing or mortgage, you can choose to deal with these outside of your Consumer Proposal if you want to continue with these payments.

Learn More About What Debts a Consumer Proposal Can Cover

3. Get Protection from Your Creditors

A Consumer Proposal is a federally legislated debt relief process that provides an automatic “stay of proceedings” which protects you, your assets, and your income. Virtually no other debt solution (other than personal bankruptcy) can offer you these protections. What this means is that:

• Once your Consumer Proposal has been filed and registered by your Licensed Insolvency Trustee, your creditors can no longer pursue you for payments, charge you interest, or continue collections on overdue accounts.
• If creditors are seizing your wages or bank account, you’ll further benefit from this stay of proceedings as the garnishment or freeze must cease immediately – even if it’s been done on behalf of Canada Revenue Agency.

Only 50% of your creditors (by dollar value) need to agree to your Proposal for it to be considered accepted by all of them. Consumer Proposals have a very high rate of acceptance and in the rare event your Proposal is not accepted you have options to have your Trustee negotiate further on your behalf and/or explore other solutions together.

Read Reviews from Sands & Associates Consumer Proposal Clients

4. Build a Positive Credit History

Filing a Consumer Proposal will provide a ‘reset’ on your credit history, allowing you the opportunity for a financial fresh start to build a credit history that shows positive credit use and a balanced debt-to-income ratio.

• Your Consumer Proposal will be noted on your credit history for three years after it is paid off (or for six years after the date you start it, whichever is soonest). For most people this timeframe is considerably faster than if they continued paying down their debt on their own.
• Two credit counselling session focused on budgeting, savings, and boosting your credit rating are included as part of the Consumer Proposal process.
• You can apply for new credit any time, even while your Consumer Proposal is still active.

Because you can build up your credit rating following your Consumer Proposal and no longer be focused on repaying debts each month, clients often find it much easier to focus on other financial goals such as savings, retirement, or homeownership.

Understanding Credit Reports and Scores

5. Work with a Qualified, Licensed Professional (at No Extra Cost)

To make a Consumer Proposal you’ll work with a Licensed Insolvency Trustee – we are the only people who can file a Consumer Proposal for you. Having a Licensed Insolvency Trustee by your side offers many benefits to you, and you’ll have a safe, dedicated resource to guide you in all aspects of your Consumer Proposal.

• Your Licensed Insolvency Trustee will take over communicating with your creditors and ensure everyone respects the rights and remedies of the Proposal process, removing pressure on you.
• Your Trustee will coordinate bringing your Proposal offer to your creditors and getting payments to your creditors.

One of the best parts of working with a Licensed Insolvency Trustee is that there are no added costs to you for our services:

• Licensed Insolvency Trustees receive a fee for our work, and this is fully regulated and legislated. These government-set fees are calculated by a tariff and paid from the funds your creditors receive, so in this way your creditors are absorbing the cost of your Consumer Proposal, and you won’t be charged anything on top of whatever you are offering your creditors.
• Consumer Proposals are very transparent, with no hidden fees or charges. There is no upfront fee or ‘lump sum’ to pay either. Once you and your Trustee have worked out your monthly payment amount, you’ll just start making this payment after your Consumer Proposal is officially signed.

It’s important to note that Consumer Proposals are a specialized tool that only a Licensed Insolvency Trustee is legally empowered to administer – beware of imitators!

If you’ve been advised against doing a Consumer Proposal by anyone who is not a Licensed Insolvency Trustee, we encourage you to please get a second opinion. Licensed Insolvency Trustees are Canada’s only official debt help professionals, fully qualified to help you evaluate all your debt options.

• The best way to determine whether a Consumer Proposal could be your ideal debt solution is to contact a Licensed Insolvency Trustee for a confidential debt consultation. Consultations are always free, and you’ll come away with information and a debt-free plan that works for you.

Learn more about Consumer Proposals and other debt solutions –  book your free, confidential consultation with a non-judgmental BC Licensed Insolvency Trustee today. Our caring professionals are available for support 7 days a week.