If you’re dealing with significant debt and contemplating Bankruptcy, there may be other options for you. While Bankruptcy is the debt solution that comes to mind when you can no longer pay your bills, do not fret, you may qualify for a Consumer Proposal. Every debt situation is unique, and you may not know all of your available options until you speak to a debt professional.
With a Consumer Proposal, you can keep your assets and consolidate your debts. A Licensed Insolvency Trustee (LIT) can assess your financial situation and help you determine if you qualify for a Consumer Proposal in Vancouver.
What is a Consumer Proposal?
A Consumer Proposal is an alternative debt solution to filing for Bankruptcy. Only a Licensed Insolvency Trustee is authorized to administer a proposal in Canada.
In a proposal, you and your LIT create an offer for your creditors to pay a percentage of your debt, extend the time you have to pay, or both. If your creditors accept, you have up to five years to complete the terms of the proposal.
Who qualifies for a Consumer Proposal?
To qualify for a Consumer Proposal in Vancouver, you have to meet the following criteria:
- You are a resident of Canada
- You are insolvent (can no longer pay your debts on time)
- Have debt over $1,000 and not exceeding $250,000 (excluding your primary mortgage)
How Does a Consumer Proposal Work?
If you decide that a Consumer Proposal is the right debt solution for your situation, your LIT will file your proposal with the Office of the Superintendent of Bankruptcy (OSB).
Once your proposal is filed, you can stop making debt payments directly to your creditors. Any creditor lawsuits, wage garnishment, and collection calls will also halt once your proposal is filed.
What happens if your Consumer Proposal is accepted?
Your LIT will present your proposal to your creditors. If they accept, you are responsible for adhering to the conditions of the proposal. You are also responsible for:
- Making a consolidated payment to your LIT
- Attending two financial counselling sessions
- Trying to maintain your secured assets (such as your car and house) by continuing payments
What happens if your Consumer Proposal is rejected?
If your creditors reject your proposal, you have a few options. You can:
- Update your proposal and resubmit
- Consider alternative debt solutions
- Declare Bankruptcy
Will a Consumer Proposal Impact Your Credit Score?
Filing for a Consumer Proposal will negatively impact your credit score. Generally, you are assigned the lowest credit score and it can remain on your credit report for up to six years after you sign your proposal or three years after you pay off all the debts included in your proposal, whichever is sooner. Having a Consumer Proposal on your credit report can make it more difficult to obtain credit.
What Are the Benefits of a Consumer Proposal?
As soon as you file for a Consumer Proposal, any wage garnishment, creditor lawsuits, or collection calls will stop immediately. Other benefits include:
- Keep your assets
- Consolidate your debt
- Repay only a portion of your debt
- Extend the time you have to repay your debt
- Avoid Bankruptcy
What is the Difference Between Consumer Proposals and Bankruptcy?
The main difference between filing for a Consumer Proposal and Bankruptcy is that you get to keep your assets. When you file for Bankruptcy, you have to give up many of your assets in exchange for being released from your unsecured debts. Other important differences between these two debt solutions include:
- Purpose. In a Consumer Proposal, you negotiate a partial repayment of your debt with your creditors. In Bankruptcy, you surrender many of your assets in exchange for a fresh financial start.
- Credit score. While both debt solutions will negatively impact your credit score, a Bankruptcy will stay on your credit score longer than a Proposal. A first-time Bankruptcy will stay for up to seven years, and a subsequent Bankruptcy will remain for 14 years.
- Repayment. In a Consumer Proposal, you agree to repay a portion of your debt. In Bankruptcy, you are generally discharged from most of your unsecured debts.
Debt Help Alternatives
If you don’t qualify for a Consumer Proposal in Vancouver, or you and your LIT decide it’s not the right option, there are alternative debt solutions, including:
Credit Counselling
In a credit counselling session, your LIT will help you determine the root causes of your debt issues. Your LIT can provide specialized training and tools to help you improve your financial skills and knowledge. For instance, they can work with you to create a budget or provide tips on proper credit usage. If needed, your LIT can also recommend more formal debt relief options, including a Consumer Proposal or Bankruptcy.
Debt Consolidation
Debt consolidation is the process of combining multiple debts into one easy-to-manage debt payment. There are several methods you can use to consolidate your debt, including a debt consolidation loan, a balance transfer credit card, or with a Consumer Proposal.
Personal Bankruptcy Vancouver
The prospect of Bankruptcy can feel devastating. However, the purpose of Bankruptcy is to provide a fresh financial start. Similar to a Consumer Proposal, Bankruptcy is a legal proceeding that can only be administered by a Licensed Insolvency Trustee. Unlike a proposal, you will have to sell some of your assets to help pay for your bankruptcy.
Consumer Proposal Vancouver: Find Financial Support
No matter how significant your debt is, we can work with you to find a solution. You do not have to deal with your debt alone, and you don’t have to feel ashamed. If you’re trying to decide if a Consumer Proposal in Vancouver is right for you, or to learn more about proposals, give us a call for a free, no-obligation consultation at 1-888-371-8900 or contact us online.
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