A consumer proposal is a proposal made to your creditors through a Licensed Insolvency Trustee. A Licensed Insolvency Trustee is the only type of professional who can administer a consumer proposal.
Once the trustee assesses your financial situation including your income, assets, and debts. The trustee will discuss all options available to you, and may recommend an amount to propose to your creditors which becomes a legally binding settlement. The proposal is usually repaid in monthly installments over 5 years. The payments are made to the trustee and the trustee disperses the payments to your creditors.
Consumer proposals are advantageous because they provide protection from creditors and any enforcement actions being taken against you such as creditor wage garnishments or frozen accounts. In the case of consumer proposals, the overall debt reduces, the monthly payments are much lesser, and interest on debts stops.
- Unsecured credit cards and lines of credit;
- Unsecured loans;
- Payday loans;
- Student loans that are more than 7 years old;
- Tax debt;
- Utilities, and more.
The Main Difference is Repayments
Consumer proposals are different from debt settlements. In a debt settlement, the negotiated settlement often must be paid in full instead of monthly payments.
Consumer proposals are also quite different from a bankruptcy filing. When you declare bankruptcy, you pay down a portion of your debt over time and it puts a block on your debt to stop your creditors from collecting. If your debt is high or have no assets and low income, the trustee may recommend bankruptcy as the best option. By assessing your income, assets, and debts, the trustee will determine your monthly payments. In a first-time bankruptcy filing, this payment generally last 9 or 21 months depending on your income.
A key difference between a bankruptcy and a consumer proposal is that in a consumer proposal, your repayments are set. During a bankruptcy, you report your income each month to the trustee. If your financial situation improves, your payments could increase.
The right option for you depends on your personal household circumstances. If you have questions about consumer proposals or bankruptcy, the best thing to do is consult Douglas Loiselle and Associates, a Licensed Insolvency Trustee firm, for more information. Visit www.dldebthelp.ca or call us today at 1-877-732-5457.