A consumer proposal is a more gentle approach when facing financial debt. A consumer proposal is an offer to pay your creditors a percentage of what is owed and extend the amount of time it will take to pay off the debt. It is a legal insolvency proceeding under the Bankruptcy and Insolvency Act that is administered by a Licensed Insolvency Trustee. An individual is eligible for a consumer proposal under the following circumstances: if the person is insolvent, has a total debt of less than $250,000 (excluding a mortgage on their principal residence), has a steady and reliable income source, and has no prior insolvency proceedings currently open. A Licensed Insolvency Trustee will assist you in preparing the paperwork and filing the proposal. A proposal will identify the particular circumstances unique to your case and indicate the reasons or cause of your financial difficulties. Once it is filed, all actions against you are stayed. These actions include interest accrual, lawsuits, or creditors garnishing your wages (unless for child or spousal support). You will no longer need to make payments to your unsecured creditors; instead, you will make one monthly payment to your Licensed Insolvency Trustee for the benefit of your estate. During negotiations, the creditors will typically have 45 days to accept or reject the proposal. At first, it may be daunting to understand the process and legal jargon but, you will receive professional guidance from a Licensed Insolvency Trustee. As an alternative to bankruptcy, it is essential to understand the benefits of a consumer proposal.

Maintaining and keeping your unsecured assets is one benefit of a consumer proposal. Some secured assets, such as homes and automobiles, may also be maintained. Assets can also include monetary assets such as investments or tax refunds. The benefit of a consumer proposal is that you are able to make affordable monthly payments while keeping your possessions. Therefore, the financial circumstance becomes less stressful. Some of you may be thinking, “how is this possible?”; the proposal will offer a more significant amount than the assets you own. The Licensed Insolvency Trustee will calculate the equity available in your assets and present a proposal with a total value exceeding what creditors would typically get if the individual were to have filed for bankruptcy. The end goal is to have you discharged from your applicable debts by making monthly payments over a period of time rather than giving everything up.

The second benefit of a consumer proposal would be a lower monthly payment. Under the negotiated proposal, you will pay a portion of your debt. The payments are typically spread over a 60 month period. A potential benefit is that if you can pay a bit more monthly or pay a lump sum, you can shorten the length of the term by paying off your proposal early. Your Licensed Insolvency Trustee will go over your budget during your initial consultation, ensuring you can afford the monthly payments. You will also have the opportunity to discuss budgeting with your registered BIA insolvency counsellor during your two mandatory debt counselling sessions. An additional benefit is that interest comes to a halt on the day you file a consumer proposal. Therefore, rather than work on paying down interest on your credit card debt, payday loan debt, or tax debt, you can begin to work on paying the proposal. Once you complete your proposal payments, you will receive a Certificate of Full Performance and will be discharged from your debts, subject to certain exclusions.

In a bankruptcy, the more you make, the more you pay and your required payments will fluctuate should your income change. With a consumer proposal, your monthly payments are fixed. Therefore, the amount you must pay does not increase, no matter how much money you make over the course of the proposal. Perhaps you get a raise at work, begin working more hours, or come into a significant amount of money; you will be able to use that toward paying down the amount agreed upon in the proposal.

A consumer proposal is an excellent alternative to deal with financial debt. Contact a Licensed Insolvency Trustee at Pollard & Associates Inc. and see if a consumer proposal is the best solution for you.