#1 Alternative to Bankruptcy
A consumer proposal is considered the #1 alternative to bankruptcy in Canada for good reason. Consumer proposals are the only government approved debt settlement or debt consolidation program available to Canadians.
For those who qualify it has several key advantages over bankruptcy. This is why almost one-half of all insolvencies filed in Canada are now consumer proposals.
- A negotiated debt settlement
- Repay only a portion of your total debts
- One, affordable, monthly payment over no more than 5 years
- Interest is frozen when you file
- Legally binding for you and your creditors
5 Top Advantages of Consumer Proposals
- Keep Your Assets. In a bankruptcy you lose your tax refund, and certain assets (like RESPs and any contributions you made to your RRSP in the year before bankruptcy) and you may lose the equity in your house depending on how much equity you have. With consumer proposals you can keep all of your assets, including your tax refund and all equity in your home.
- Avoid Surplus Income. Unlike bankruptcy where the more you earn the more you pay, consumer proposals have a fixed payment that never increases. If you expect your income to increase, consumer proposals are better than bankruptcy.
- Lower Monthly Payments. In a consumer proposal, you negotiate to repay only a portion of your debt. The result is a single, lower, monthly payment you can afford. It is not unusual to see debts reduced by as much as 75% of the original amount owed. A consumer proposal is one of the best, and safest, debt consolidation options available in many situations.
- Get Creditor Protection. As a legal process under the Bankruptcy & Insolvency Act, a consumer proposal provides the same creditor protection that will stop collection calls and wage garnishments.
- Avoid Bankruptcy. Many people need debt relief but want to avoid filing bankruptcy. If you feel you would like to repay what you can, a consumer proposal is a safe alternative that you should discuss with a Licensed Insolvency Trustee.
Are There Disadvantages to Consumer Proposals?
While consumer proposals are becoming more common in Canada they are not a good option for everyone.
A consumer proposal will usually take longer to complete than a bankruptcy. By lowering your monthly payment through a consumer proposal you are paying your creditors their recovery over a longer period of time. However if your financial situation improves you can pay off a proposal early.
If you do not have any assets that would be seized in a bankruptcy or do not have significant income, then filing personal bankruptcy may be your best choice. During your consultation, your Licensed Insolvency Trustee will explain the pros and cons of each alternative.
Will I Qualify For A Consumer Proposal?
The best way to determine if a consumer proposal is the right path forward for you is to have a free confidential consultation with a debt consolidation expert.
As a federally regulated program, consumer proposals have specific requirements you must meet. To be eligible to file a proposal in Canada:
- You must be able to afford to pay a portion of your debts
- Your debts must be greater than the value of what you own
- Your unsecured debt must not exceed $250,000 (not including your mortgage)
- You must have the ability to make monthly payments, or one lump sum payment
Even if you don't qualify for a consumer proposal, there are still several options available to you for getting out of debt. Review all your options with a Hoyes Michalos & Associates trustee.
Who Should I Talk To About A Consumer Proposal?
If you think a consumer proposal is the right solution for you, the next step is to talk with a Licensed Insolvency Trustee. Only an LIT can act as a consumer proposal administrator.
CAUTION: You do not need a referral to speak with a Licensed Insolvency Trustee nor do you need to pay anyone to help you prepare any paperwork. Please be cautious of debt consultants who advertise about consumer proposals and offer to get you a better deal than your trustee. Creditors do not like dealing with these debt consultants and they are rarely able to arrange a better deal and certainly do not warrant the large fees they charge.
Talk with one of our experts to see if a consumer proposal is right for you.Contact Us Today