What is a consumer proposal?

February 6, 2017

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“I know I can file a bankruptcy with a Licensed Insolvency Trustee (“LIT”) but I don’t like that option. I’ve heard about a sort of consolidation an LIT can also help me file called a consumer proposal. What is that exactly?”

What is a consumer proposal?

If you are having some financial trouble and are unable to keep up with your payments, you may require professional help.  The Bankruptcy and Insolvency Act provides two options for consumers: filing a bankruptcy or a consumer proposal. Both must be filed with the help of an LIT. Consumer proposals have become a very useful tool to protect a person and take affirmative action to repay excessive debt.

In short, a consumer proposal is a formal and legally binding agreement—a contract—that you make with your creditors. You agree to pay them back a portion, and in some cases 100%, of what you owe them.  Interest charges stop when the proposal is filed, and instead of juggling payments to several creditors each month, you make only one monthly payment to your LIT. The LIT in turn pays out the funds to your creditors in accordance with the consumer proposal terms.

The main benefits of a consumer proposal are that consumers find it easier to manage one monthly payment within their budget and that creditors and collection agencies stop harassing them. Reducing debt stress is another key benefit that will have a positive effect on your mood, relationships, ability to focus at work and help you sleep better. Once your proposal is paid out, you are completely debt free except for perhaps a mortgage and car loan if you have decided to keep your home and vehicle.

Because a consumer proposal falls under the Bankruptcy and Insolvency Act, it must be administered by an LIT. No one else is authorized (despite what certain advertisements might tell you) to file a consumer proposal on your behalf – and nothing less than a properly filed consumer proposal will stop your creditors from collecting overdue accounts.  Be aware and be careful, and don’t be afraid to ask questions! An LIT will help you prepare a budget and will be more than happy to discuss all options available to you.

Proposal terms will vary depending on your circumstances. At Doyle Salewski, we have helped clients pay as little as 1% of their total debt or 100% depending on their wishes, intentions and circumstances. Every case is different and must be crafted accordingly.  Your LIT will work with you to negotiate a reasonable arrangement with your creditors, taking into account your age, income, living expenses, family responsibilities, and all other relevant factors. This means your consumer proposal will be tailored to fit your specific situation. All information shared with the LIT remains confidential.

In our next column, we’ll look at some of the requirements for filing a proposal to see whether it might be an option for you. In the meantime, if you feel your financial situation is critical, contact us now for a free consultation. At Doyle Salewski, we’re here to help.

If you are burdened with debt stress, asking for sound advice is a sign of strength and the smart thing to do.  Asking sooner rather than later is always better. Try our debt reduction calculator and call Doyle Salewski today for your free, no obligation consultation. You’ll be glad you did.

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