Are you struggling with multiple loans and experiencing difficulties paying your bills on time? If you find that your debt burden is increasing under the weight of heavy payment penalties and high-interest fees, it might be time to consider a consumer proposal to help you reduce your debt.

What Is a Consumer Proposal?

A consumer proposal is a legal way to manage your debt and involves working with a licensed insolvency trustee to negotiate new terms with your creditors. These negotiations aim to lower your debt so you can pay what you can afford instead of the balance owed.

Should I File a Consumer Proposal?

A consumer proposal is useful to pay off any unsecured debts when:

  • Your debt amounts to less than $250,000
  • You don’t qualify for a debt consolidation loan
  • You have enough income to make the new monthly payments

What Are the Benefits of a Consumer Proposal?

While there are several options to help manage your debt, including taking out a debt consolidation loan and filing for bankruptcy, a consumer proposal offers the following advantages:

  • If creditors are currently garnishing your wages to recover the debt, negotiating a consumer proposal will stop this.
  • By negotiating a consumer proposal, your assets and investments are protected instead of filing for bankruptcy.
  • You are not affected by bankruptcy on your credit report, so your access to credit is not limited.

Consumer Proposal FAQ

Can I Handle a Consumer Proposal by Myself?

You need help handling a consumer proposal. A consumer proposal is a legal process under the Bankruptcy and Insolvency Act, which a licensed insolvency trustee must set up.

What Debts Can Be Reduced With a Consumer Proposal?

A consumer proposal can be used to reduce any unsecured debts. These debts include credit card debt, overdrafts, lines of credit, personal loans, payday loans and student loans. If you have secured debt such as a mortgage or car loan, you cannot reduce the debt with a consumer proposal.

How Do I Start the Process for a Consumer Proposal?

Your licensed insolvency trustee will examine your current financial situation to assess whether you can pay off your debt. They will then determine how much you can afford to pay and make a proposal to each of your creditors to lower your debt.

How Much Can My Debt Be Reduced?

While the amount that your debt can be reduced varies depending on the creditor, it is possible to reduce your debts by up to 80%. Your proposal may also include lengthening the payment period, making it easier to pay back your debt.

What If I Don’t Have Enough Money to Make the Monthly Payments?

If you can’t make any monthly payments, a consumer proposal won’t work. In this case, it might be time to consider declaring bankruptcy instead. Credit counselling with a licensed insolvency trustee will help you decide if that is the best solution for you.

What Happens If I Default on My Newly Negotiated Payments?

If you default on consumer proposal payments, your unpaid debt may be subject to high-interest fees. Missed and late payments will also have a negative impact on your credit score, making it difficult to secure a loan in the future.

Set Up a Consumer Proposal in Edmonton

If you want to learn more about a consumer proposal, speaking with a licensed insolvency trustee is best. They can discuss your financial situation and determine how to manage your debt best. Book your free consultation today.