If you’re finding your debts too difficult to manage, you may be considering filing a Consumer Proposal in Calgary.
A Consumer Proposal is a debt repayment option, governed by the Bankruptcy and Insolvency Act. It is a legal process between you and your creditors, designed to help you repay a portion of your debts over time. The amount of debt you repay to your creditors is decided by your income and what you own (your assets). As long as your debts don’t exceed $250,000, a Consumer Proposal may be the right choice for you, as an alternative to Bankruptcy.
Consumer Proposals can only be arranged and administered by a Licensed Insolvency Trustee (LIT). With their guidance, you can discuss your financial situation and put together a plan to settle your debts and work towards a brighter debt free future.
Here, we cover how Consumer Proposals work in Calgary, to help you decide on the best debt relief option for you.
What is a Consumer Proposal?
If you’re looking for a debt free plan, filing a Consumer Proposal could be a good option. A Consumer Proposal is a legally binding agreement to help reduce the amount that you owe to your creditors.
LITs act as your proposal administrator to file a Consumer Proposal for you, to ask that your creditors accept a portion of your outstanding debts and forgive the remaining amount. The goal is to significantly reduce your monthly debt payments over a repayment period, usually up to five years.
You may be eligible for a Consumer Proposal if you have outstanding debt between $5,000 and $250,000, and are looking to avoid filing for Bankruptcy.
Why file a Consumer Proposal in Calgary?
The purpose of filing a Consumer Proposal in Calgary is to help you settle your debts sooner, by making a deal with your creditors. You may end up repaying less than the amount you owe, stretch the full amount over a longer period or have the interest rate reduced.
Consumer Proposals are the only government-approved debt settlement program in Canada, designed to help you reduce the amount of debt you owe and then pay it off over a repayment period.
Advantages of a Consumer Proposal
A Consumer Proposal is a popular choice for those looking to settle their debts and avoid filing for Bankruptcy. Here are some potential benefits:
- You may be able to reduce your debts by up to 70% and settle your debts sooner.
- Provided you keep up with your repayments, you may be debt free in three-five years.
- You can keep your assets, including any equity in your home.
- Consolidate debts into one monthly payment.
- Stop paying interest on your debts.
- Stop calls from collection agencies.
- Stop legal action and lawsuits.
- Stop wage garnishments.
- Once the proposal is accepted, the amount you pay won’t change – even if your income increases.
- You avoid filing for Bankruptcy.
Disadvantages of a Consumer Proposal
While a Consumer Proposal is an alternative to Bankruptcy, it does come with potential disadvantages, including:
- A proposal will usually take longer to complete than a Bankruptcy. By lowering your monthly repayments, it will take longer to pay your debts back. However, you can choose to pay off your proposal early.
- A Consumer Proposal does affect your credit score and will show as an R7 rating. This will remain on your credit report for three years after completion.
- You will have proposal terms to adhere to and it’s important that you keep up with your repayments, otherwise your proposal terms will be terminated.
- If you don’t earn a significant amount and don’t have assets that would be seized, then a Consumer Proposal may not suit you – you may need to consider Personal Bankruptcy as an alternative.
How does a Consumer Proposal work?
If you feel a Consumer Proposal may be something that will work for you to help settle your debts, here is the step-by-step process of how to file:
1. Meet your Licensed Insolvency Trustee
The Consumer Proposal process begins with you talking through your financial situation and your debt relief options with an insolvency expert. If it’s decided that a Consumer Proposal is the right option for your financial situation, you will meet with an experienced Licensed Insolvency Trustee. They will review your debts with you, create and file the proposal.
2. Filing the Proposal
LITs, acting as your proposal administrators, can file a Consumer Proposal for you if you have outstanding debt between $5,000 and $250,000, yet do not want to file Bankruptcy. They prepare the proposal based on the information you provide, filing it with the government officials who oversee insolvency administrations in Canada, known as the Office of the Superintendent of Bankruptcy.
3. Complete your obligations
Once your Consumer Proposal is accepted by your creditors, you’ll need to fulfill the terms of the proposal. This tends to include monthly payments that you agree to with your Trustee, as well as two compulsory credit counselling sessions – covering topics such as budgeting and rebuilding your credit score.
4. Certificate of Full Performance
After you’ve completed all the obligations of your Consumer Proposal, your LIT will issue a certificate that officially releases you from the unsecured debts included in your proposal. From there, you will be debt free and ready to rebuild your money confidence for financial peace of mind.
What debts can be included in a Consumer Proposal?
Only unsecured debts (debt that isn’t tied to a valuable asset like your home or car) can be settled by a Consumer Proposal. Types of unsecured debt that can be settled by a Consumer Proposal include:
- Credit card debt
- Personal loans
- Payday loans
- Income tax debts
- Student loans (provided you’ve been out of school for more than seven years)
If you have secured debts, you should continue to make your payments to your secured creditors. With a Consumer Proposal, you may be able to surrender and return your secured assets to your lender and stop making payments for these assets. For more information, discuss your options with your Licensed Insolvency Trustee.
Do I keep my assets with a Consumer Proposal?
An advantage of a Consumer Proposal is that unlike Bankruptcy, all of your assets are protected, meaning you won’t need to part with the equity in your home, or give up your car.
With a Consumer Proposal, you keep all your assets including any investments, equity in your home and tax refunds. With this in mind, a Consumer Proposal may suit you if you’re a homeowner struggling to pay off your unsecured debts, as your home won’t be at risk.
Ready to take control of your debts?
We’re a Licensed Insolvency Trustee firm with locations in Calgary, and Edmonton, Alberta as well as throughout the Maritime provinces. Our LITs specialize in Consumer Proposals to help you settle your debts. So, if you’re considering filing a Consumer Proposal to gain a fresh start, contact us today for a free consultation.