Consumer Proposals: The Top Things You Need to Know
When your debt mounts to the point that you are no longer able to pay your bills, you may choose to file a consumer proposal rather than filing for bankruptcy. A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a "proposal"—an offer to pay creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both. The term of a consumer proposal cannot exceed five years.
Payments are made through the LIT, and the LIT uses that money to pay each of your creditors.
A proposal also allows you to pay off your debts and get back into a better financial place faster than if you attempted to keep making payments at your current rate. Before you file a consumer proposal, however, there are several key things you may need to know.
1. How long does a consumer proposal stay on your record?
A consumer proposal will remain on your credit report for three years after you've finished paying off your debt. This means that any attempt to acquire new debt while still under the terms of your consumer proposal will result in that information being reported to your lender.
2. Are you protected by law if you file a consumer proposal?
A consumer proposal offers a number of key advantages, including the ability to pay off debt at a rate you can afford, rather than a rate that is causing extreme financial difficulty. One of the most important advantages of a consumer proposal, however, is that it offerslegal protection from your creditors. This legal protection includes:
- Putting a stop to harassment from bill collectors.
- Ending wage garnishments that are included in your consumer proposal.
- Preventing future wage garnishment.
3. What types of debt can a consumer proposal include?
Not all types of debt can be included in your consumer proposal. Any secured debts, such as your car loan or your mortgage, if you are keeping these assets, cannot be covered by a consumer proposal. Many debts, however, can be included. Your consumer proposal will cover credit card debt, unpaid income tax, unsecured bank loans or lines of credit and payday loans, as well as other unsecured debt.
Your consumer proposal does not include alimony or child support.
Many people wonder if student loan debt is included as part of a consumer proposal. For students who have been out of school for more than seven years, student loan debt may be included in a consumer proposal.
4. Who can file a consumer proposal on my behalf?
You will need a Licensed Insolvency Trustee to file a consumer proposal on your behalf. Before choosing a Licensed Insolvency Trustee, you should do your research. Your trustee will be responsible for corresponding with your creditors following your consumer proposal as well as helping you review your debt and decide whether a consumer proposal is the right choice for you. You'll want to be sure that you're working with a reputable adviser who will offer you the advice you need to move forward with your consumer proposal, live with the outcome of your proposal, and make better financial decisions moving forward.
If you're considering a consumer proposal to help you pay off your debt faster, contact us . We will help you evaluate your unsecured and secured debt, consider your options, and determine whether a consumer proposal is right for you. If you do choose to file a consumer proposal, we will help you throughout the process, including negotiating with your creditors and ensuring that your rights are upheld.