If you’re deep in debt and looking for some relief, Bankruptcy is not your only option. A Consumer Proposal is another debt solution that allows you to keep more of your assets and has less of a negative impact on your credit score.
This article digs into everything you need to know about Consumer Proposals in British Columbia. Learn what a Consumer Proposal is, how it works, who is eligible, and if it is the right form of debt help for you.
What is a Consumer Proposal?
A Consumer Proposal is a legal debt relief process that can only be administered by a Licensed Insolvency Trustee (LIT). You work with your LIT to create a proposal in which you offer to:
- Pay a portion of the amount of money you owe
- Extend the amount of time you have to pay off your debt
- Or a combination of both
How Does A Consumer Proposal in British Columbia Work?
Once you’ve developed your proposal, your LIT will submit it to the Office of the Superintendent of Bankruptcy (OSB). When your proposal is filed, you can stop making payments to your creditors. Any wage garnishment and credit lawsuits filed against you will also stop.
Your LIT will submit your proposal to your creditors. An explanation as to how you got into financial trouble will accompany your consumer debt proposal. Your creditors will vote to decide if they want to accept or reject your proposal.
If accepted, you are responsible for paying back the proposed amount of money through monthly payments. If it is rejected, you can update your proposal and resubmit it or, you can consider your other options, including Bankruptcy.
During the Proposal process, you have several responsibilities, which include:
- Providing your LIT with a list of your assets and debts.
- Attending two credit counselling sessions.
- Inform the LIT in writing if you have a change of address.
- Assist the LIT throughout the proposal process.
What Debt is Included in a Consumer Proposal British Columbia?
Most unsecured debts are included in a Consumer Proposal, such as:
- Credit Cards
- Personal loans
- Payday loans
- Tax debts
- Line of credit
- Student loans (if they are more than seven years old)
Secured debts are not included in a Consumer Proposal. A secured debt is backed by some type of collateral. If you can’t pay back your loan, the lender can sell the collateral to recoup some of the money to repay your debt. Examples of secured debts include:
- Car loan
- Secured credit cards
Will a Consumer Proposal Impact My Credit Score?
A Consumer Proposal will negatively impact your credit score for either three years after you pay off the debts included in your proposal or six years after you sign the proposal, whichever is sooner.
While having a proposal on your report is not ideal, it is better than having a Bankruptcy. Bankruptcy will remain on your credit report for up to seven years after the date you are discharged. If you declare Bankruptcy more than once, it will stay on your credit report for 14 years.
Who is Eligible For a Consumer Proposal?
Before considering a Consumer Proposal, make sure you meet the following eligibility requirements:
- Debts can not exceed $250,000 (excluding debt on your primary residence).
- You must be insolvent. This means you are unable to pay your debts when they are due.
- You must prove you have a stable income. This will allow you to continue to make your debt payments as outlined in your proposal.
- You can not have another active Consumer Proposal. If you have filed in the past, it must be forgiven before you can file again.
Your LIT can help you determine if you meet the eligibility requirements for a Consumer Proposal and if it is the right choice for you.
Alternatives to a Consumer Proposal in British Columbia
While a Consumer Proposal is one way to find debt relief, it’s not the only way. When you meet with a Licensed Insolvency Trustee, you can discuss all of the available debt solutions that are available.
Debt consolidation British Columbia
If you are struggling with debt but still managing to pay your bills, you might consider debt consolidation. Debt consolidation is the process of combining multiple debts into one monthly payment.
While debt consolidation doesn’t eliminate your debt, it can simplify and streamline the debt repayment process. Rather than having to keep track of multiple debt payment deadlines and different interest rates, you only have to focus on one payment. This can result in fewer late or missed payments.
Bankruptcy British Columbia
If you are insolvent and do not meet the qualifications for a Consumer Proposal, or your proposal was rejected, you may need to consider Bankruptcy. While the idea of filing for Bankruptcy can bring up all kinds of negative emotions, the purpose is to give people who are down on their luck a fresh start.
The main difference between a Consumer Proposal and Bankruptcy is you can typically keep more of your assets in a proposal. When you file for Bankruptcy, you are expected to surrender most of your assets in order to pay back some of your debts.
Consumer Proposal British Columbia: Is it Right For Me?
If you are insolvent and don’t know what to do next, it’s time to contact a Licensed Insolvency Trustee. An LIT can assess your finances and help you determine which debt solution is right for you. Bankruptcy is not necessarily your only debt relief option. If you qualify for a Consumer Proposal, you can benefit by keeping more of your assets than in Bankruptcy. A proposal will also have less of an impact on your credit score.
An LIT is the only professional authorized to administer government debt relief solutions, including a Consumer Proposal or Bankruptcy. For a free, no-obligation consultation in BC with one of our LITs, give us a call at 1-888-371-8900, or fill out our online contact form. You don’t have to deal with your debt alone, we are here to provide the financial support you need.