Is the consumer proposal the best debt solution for me? The answer is: it depends. While filing a consumer proposal can provide some relief from the debt burden for some, it is not a universal solution. Here are some important points to consider when considering filing a consumer proposal.
What is a consumer proposal?
Unlike a debt management or settlement plan, a consumer proposal is a formal legal agreement between you and your creditors. In 2016, 19,305 consumer proposals were submitted in the province of Onebec.
Only a licensed insolvency trustee is authorized by the federal government to administer a consumer proposal. Following the filing of a consumer proposal, your creditors will no longer be able to take legal action against you. The attachment of wages will also be interrupted.
What does the process involve?
If you are considering filing a consumer proposal, you must first meet with a licensed insolvency trustee to determine if this is the best course of action to help alleviate your debt. If it is determined that this is the best option, you will work with the Licensed Insolvency Trustee to establish an agreement with your creditors that will allow you to repay only part of what you owe them. You will also have an extended repayment term of up to five years. The authorized insolvency trustee will present the agreement to your creditors who will have 45 days to refuse, accept or modify it. If your creditors accept it, you will make regular or lump sum payments to the trustee until the terms of the agreement are satisfied.
The licensed insolvency trustee will distribute the money to your creditors.
The period following your consumer proposal is important. This is when you need to start restoring your credit, and it is also when you need to make sure you adopt sound financial practices that will help you get back on track financially, such as establishing of a budget. As part of the consumer proposal, you will participate in two mandatory credit orientation sessions during which a planner will offer advice and strategies that will help you restore your credit rating and progress financially.
Factors to consider
As mentioned earlier, a consumer proposal is not necessarily suitable for everyone who is struggling with debt problems. Examine the debts you have. The consumer proposal only covers unsecured debts, or debts that are not related to goods. Unsecured debts include credit card debts, payday loans and lines of credit. A student loan is not normally covered by a consumer proposal if you have been out of school for less than seven years.
Another factor you need to consider when making your decision is the amount of your debt. A consumer proposal can only be filed by people whose total debt is less than $ 250,000.
You will also have to prove that you are able to repay part of your debts.
If a consumer proposal does not seem to you to be the right option, there are other ways to manage debt. Debt consolidation, for example, is an effective way to reduce your interest payments and pay off your debts faster. Bankruptcy could be considered by those for whom debt has become a burden and who cannot pay off their debts. An initial consultation with a debt relief professional, such as a licensed insolvency trustee, can help you determine the best course of action.