victoria consumer proposal

If you’re experiencing financial difficulties, you should get help as soon as possible.

That’s because the sooner you do, the more options you may have available to you to resolve your debt.

But many hard-working Canadians wait until they are so deep in that their only option is insolvency…

Through either a consumer proposal or bankruptcy.

And between these two last resorts, a consumer proposal is typically considered the more favorable.

What is a consumer proposal?

A consumer proposal allows a person who is unable to pay their debts in full to renegotiate their debt with creditors in accordance with their ability to pay.

If your consumer proposal is approved, you’ll end up paying only a portion of the debt owed over a period of usually three to five years, and sometimes even less.

Who is eligible to file a consumer proposal?

Your total debt must not be more than $250,000, excluding a mortgage on your residence.

You’ll also need to show you can repay at least some part of what you owe.

How does a consumer proposal work?

In order to file a consumer proposal, you will need to connect with a Licensed Insolvency Trustee.

These are the only professionals authorized, licensed, and regulated by the federal government to assist Canadians with insolvency.

With the assistance of your Licensed Insolvency Trustee, you make an offer (or proposal) to your creditors, offering to pay them an agreed amount every month based on your ability to pay.

Keep in mind that your creditors are not obligated to accept your proposal. (Though the majority do because they know they’ll get you to repay more through a proposal than a bankruptcy.)

You’ll need the majority dollar vote of your creditors to accept your proposal. If they do, the proposal then becomes binding on all your unsecured creditors.

Once the consumer proposal is complete and you’ve made your last payment, the debts covered therein are considered legally paid in full, with the balances released.

What are the benefits of filing a consumer proposal?

Immediately upon filing, you will:

  • Get protection against your creditors. This means unsecured creditors cannot start or continue any actions to recover debt from you, including garnishments and enforcement of judgments;
  • Stop interest from accruing on your debts; and
  • Probably get to keep your assets, in comparison to filing for bankruptcy, where you may end up losing them.

Are all my debts included in a consumer proposal?

A consumer proposal covers unsecured debt, like credit card debt, payday loans, past due utility bills, and so on.

Debts that are not covered in a consumer proposal include:

  • Debts secured by an asset, such as a mortgage on a house or car. You need to continue to make your payments to your creditors if you want to keep these assets;
  • Spousal or child support. You would need to go to court to get these amended if you’re having difficulty paying them;
  • Court imposed fines; and
  • Student loans that are less than seven years old.

How does a consumer proposal affect my credit rating?

A consumer proposal will show up on your credit report with an R7 rating, and remain there for three years after you make your final payment.

Credit ratings go from R1 to R9. R6 is the rating given to those in collections, and R9 – the lowest possible score – is reserved for bankruptcy.

What’s more, a bankruptcy will stay on your credit report for 6 years after discharge (which typically takes place 9 months after filing).

But don’t let a negative credit rating affect your decision to get debt relief.

If you’re already missing bill payments and your accounts are going into collections, your credit report is not in the best shape anyways. At least by filing a consumer proposal you’ll be taking active steps to eliminate your debt.

What should I do if I’m having financial difficulties?

The best place to turn when you realize you’re in financial distress is a Licensed Insolvency Trustee.

We are qualified to assist you with a wide range of debt relief options, as well as with consumer proposals and bankruptcies.

Contact a Licensed Insolvency Trustee Today

Our mission is to help you achieve debt relief. At your initial, free consultation, we’ll review your financial situation and look at the pros and cons of the debt relief solutions available in your circumstances. We’ll even advise you on what we think is your best option for you and your family.

It may not be too late to avoid insolvency. Get in touch today to find out how you can begin on the journey to better financial health