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Consumer Proposal Alberta: What Is It? How Can it Help Eliminate Your Debts

Are you struggling to keep on top of your debt? Filing a Consumer Proposal in Alberta may be the right option for you and your financial situation.

A Consumer Proposal is a form of debt repayment, governed by the Bankruptcy and Insolvency Act. It’s a legally binding agreement between you and your creditors, to help you repay a portion of your debt over time. If your total debts do not exceed $250,000 (not including secured debts like a mortgage), a Consumer Proposal may be the right choice for you.

Consumer Proposals can only be administered by a Licensed Insolvency Trustee (LIT). With their support, you can put together a plan of action to settle your debt and work towards becoming debt free.

What is a Consumer Proposal?

A Consumer Proposal is a legally binding agreement made on your behalf with your creditors, to help reduce the amount you owe and settle your debt. An LIT will file the Consumer Proposal for you, to ask your creditors to accept a portion of your outstanding debts and forgive the remaining amount. The aim of a Consumer Proposal is to significantly reduce your debt repayments over a period of up to five years.

To be eligible for a Consumer Proposal in Alberta, you must: 

  • Be unable to make your debt repayments when they are due
  • Owe less than $250,000 to your creditors 
  • Have an insufficient amount of assets that can be used to settle your debt

Why file for a Consumer Proposal?

If your debt feels impossible to manage and you want to avoid Bankruptcy, a Consumer Proposal might be right for you.

With a Consumer Proposal, your LIT will negotiate your debt repayment plan with your creditors.  You’ll essentially have a mediator proposing the best deal possible, while being fair to your creditors. An LIT’s role is to ensure both the debtor and creditor are treated fairly.

You should be able to lower your debt payments and pay on a fixed schedule. Unlike Bankruptcy, it’s unlikely you’ll lose your secured assets with a Consumer Proposal.

A Consumer Proposal isn’t the best fit for everyone – after all, your financial situation is personal to you. To help you decide on the best route forward to manage your debt, you can discuss all your debt settlement options with an LIT. They will sit down with you to go through your finances, and once all options have been considered, together you can make a decision that best suits your unique situation.

Advantages and disadvantages of a Consumer Proposal

Here are some potential advantages and disadvantages of a Consumer Proposal to consider:

Advantages of a Consumer Proposal

  • Alternative to Bankruptcy: If the thought of “going bankrupt” worries you, a Consumer Proposal can work as an alternative way to settle your debt. Filing a Consumer Proposal is not a type of Bankruptcy, but a different insolvency solution.
  • Creditor protection: Once your creditors have approved your Consumer Proposal, you’ll receive creditor protection that will stop you from being contacted by your creditors (such as debt collection calls) and wage garnishments.
  • Reduced monthly payments: With a Consumer Proposal, you will only repay a portion of your debt depending on your agreement set out by your LIT. You may be able to reduce the amount you owe by as much as 70%.
  • Fixed payments: Your Consumer Proposal payments never change. Instead, your monthly payments will stay the same throughout the term unless you have the ability to pay it off sooner.

Disadvantages of a Consumer Proposal

  • Not all debt is covered: Not all debt can be discharged in a Consumer Proposal. Student loans less than seven years old, court fines and any secured loans such as car finance or your mortgage cannot be discharged by a Consumer Proposal. 
  • Length: A Consumer Proposal often takes longer to complete than a personal Bankruptcy. Lowering the amount you pay each month means it will take you longer to repay your debt. But if your situation improves, you can choose to pay off your proposal early.
  • Credit rating: Similar to Bankruptcy, a Consumer Proposal does affect your credit score and will show as an R7 rating which will remain on your credit report for three years after completion. 
  • Proposal terms: You will have proposal terms that you must adhere to and it’s important that you keep up with your payments, otherwise your proposal terms will be terminated.

Who can I talk to about a Consumer Proposal in Alberta?

If you’re looking for a way out of debt and you’re considering a Consumer Proposal, the first step is to consult with a Licensed Insolvency Trustee in Alberta. LITs are licensed and regulated by the federal government to offer advice across all areas of insolvency, from budgeting to Bankruptcy. They will review your financial situation to make sure this is the best way forward for you.

Ready to say goodbye to your debt?

If you’re considering filing a Consumer Proposal, or you are looking to explore your debt settlement options, your first step is to reach out to a Licensed Insolvency Trustee. We have recently opened new offices in Alberta to support people just like you. 

You can discuss your financial situation with one of our experienced and caring Trustees. They will help you decide on the best route forward to clear your debt and improve your financial outlook. Contact us today for a free consultation – We can help™.