Is your debt out of control? Is it keeping you up at night and causing you constant stress? If you’re ready to find relief but you don’t like the idea of filing for Bankruptcy, you may have another option. A Consumer Proposal can reduce the debt you have to repay while also allowing you to retain more of your assets than in a Bankruptcy.
If you are considering a Consumer Proposal in Victoria, BC, keep reading for more information on what it is, how it works, and the benefits it can provide.
What is a Consumer Proposal?
A Consumer Proposal is a legal debt relief option available to eligible Canadians that is facilitated by a Licensed Insolvency Trustee (LIT). You work with your LIT to develop a proposal that you then present to your unsecured creditors. The proposal is an offer to pay a percentage of what you owe, to extend the time you have to pay off your debt, or both.
How Does a Victoria Consumer Proposal Work?
Once you and your LIT develop a proposal it is submitted to the Office of the Superintendent of Bankruptcy (OSB). At this time you can stop making payments to your unsecured creditors. Additionally, any wage garnishments or lawsuits against you will stop. Your LIT will also submit your proposal to your creditors who then have 45 days to accept or reject it.
What happens if my proposal is accepted?
If your creditors accept your proposal, you are responsible for making payments to your LIT and adhering to any other conditions associated with your proposal. You also have to attend two financial counseling sessions. The purpose of these sessions is to give you new knowledge and tools so you can avoid a similar financial situation in the future.
What happens if my proposal is not accepted?
If your proposal is not accepted, you may have an opportunity to make changes to it and then resubmit. You can also speak with your LIT to see if you have any other options to try and fix your financial issues. If there are no other options, you may have to file for Bankruptcy.
What Debt is Included in a Consumer Proposal?
Consumer Proposals only cover unsecured debts. Secured debts like your mortgage or car loan are not included. However, as long as you continue to make payments to your secured creditors, you can typically keep your car and your home.
Examples of unsecured debts include:
- Credit cards
- Personal loans
- Payday loans
- Lines of Credit
- Tax debts
- Medical bills
- Student loans (if you’ve been out of school for more than seven years)
Consumer Proposal Eligibility
To be eligible for a Consumer Proposal, you must meet the following criteria:
- Individual status. Corporations do not qualify for a Consumer Proposal.
- Debt maximum. Your debt can not exceed $250,000. This does not include mortgage debt on your primary residence.
- Insolvent. You are unable to pay your debts on time.
- Income. You still have income coming in to allow you to make your proposal payments.
- No active proposals. All former proposals must be discharged (forgiven) before you can file again.
Benefits of a Consumer Proposal in British Columbia
If you qualify, a Consumer Proposal provides many benefits, including:
- Debt reduction. You can propose to pay a portion of your total debt based on what you can afford.
- More time to pay. You can request more time to pay off your debts.
- Keep more of your assets. Unlike Bankruptcy, where you surrender your assets in exchange for the elimination of your debts, a proposal allows you to keep your assets including your house and car, providing you make your payments.
- Stops wage garnishment and creditor calls. Once your proposal is submitted, all wage garnishment and unsecured creditor calls will stop.
- Stop interest payments. As soon as your proposal is filed, interest payments will stop.
- Fixed monthly payments. With a proposal, you will have one fixed monthly payment that you give to your LIT who then works with your creditors. Having one fixed payment can make the process more convenient and easier to budget for.
Will a Consumer Proposal Affect my Credit Score?
Yes, a Consumer Proposal can have an adverse effect on your credit score. Typically, when you submit a proposal or file for Bankruptcy, you are assigned the lowest possible credit score.
When the Consumer Proposal will come off of your credit report varies slightly between credit bureaus. Equifax typically removes a proposal from your credit report three years after you pay all of the debts included in the proposal. TransUnion removes the Consumer Proposal from your report three years after all of your debts are paid or six years after you sign the proposal, whichever is sooner.
Once you have fulfilled the terms of your proposal, you will get a “certificate of full performance.” You can send a copy of this document to the credit reporting agencies to ensure your credit report is properly updated.
What if I Don’t Meet the Conditions of my Consumer Proposal?
If you miss three monthly payments or fail to make a payment for more than three months, your proposal will be cancelled. If this happens, you have a few options. Unfortunately, if this happens you go back to the same financial situation you were in before you filed the Consumer Proposal. You owe the original amount of money to your creditors, and you are out any fees paid during the Consumer Proposal. Plus, wage garnishment and creditor phone calls can come back. This is not a situation you want to find yourself in. If you are struggling to make your payments, talk to your LIT as soon as possible.
Is a Consumer Proposal Right For Me?
The most significant difference between a Consumer Debt Proposal and a Bankruptcy is that you get to keep more of your assets. If you’re thinking about a Consumer Proposal in Victoria or you just want more information, give us a call at 1-888-371-8900 or reach out online for a risk-free 30-minute call with one of our financial administrators. We offer several forms of debt help and financial support and can work with you to find the debt relief option that fits your needs.
Learn More
