Ontario Consumer Proposal – The Ins and Outs
With Canadian consumer debt levels continuing to climb, year after year, it is no surprise that many Canadians are turning to alternative repayment methods in an effort to get out of debt. However, some organizations have taken advantage of individuals without a full understanding of debt, and offer solutions that are less than acceptable.
We strive to help individuals with debt problems with honest and realistic options that can eliminate financial stress. In this blog, we attempt to answer some of the most common questions regarding one of these very popular methods – consumer proposals – and provide you with some important information to help you make an informed decision.
Firstly, what is a consumer proposal exactly? A consumer proposal is a legally binding arrangement negotiated between you and your creditors (though an administrator – a licenced bankruptcy trustee) which arranges for a partial repayment of your total unsecured debt. Essentially you promise to repay a portion of your debt, and your creditors will forgive the remaining amount.
What does this mean? After meeting with a consumer proposal administrator and filling out the required forms, a proposal will be presented to all of your creditors (you can’t pick and choose here), who then have to respond and accept the agreement. If more than 50% reject it, you have to amend or adjust and refile. Once the proposal is accepted, you are required to pay a monthly payment to your administrator, who then pays your creditors.
There are a number of substantial benefits of filing a consumer proposal:
- Most wage garnishments will immediately stop.
- Interest stops accumulating on your current debt from the date you file.
- Collection agencies and creditors can’t contact you for payment – it is against the law!
- Your home or other assets are protected – creditors can’t touch them.
- You are only required to pay back a portion of your debt.
The downside: a consumer proposal does not include secured debts, such as a mortgage – only unsecured debts are covered. Furthermore, once you have filed a consumer proposal, your credit rating is going to be impacted. That being said, if you are in the position that makes a consumer proposal a valuable debt relief option, your credit has likely already been compromised. Consumer proposals typically mean an R rating on your credit report – but in many cases the benefits far outweigh the negatives.
If you are in over your head and are looking for a debt relief option, a consumer proposal can be a very advantageous strategy. They are complex though, and can’t be conducted by anyone but a licenced bankruptcy trustee, and so seeking some assistance is essential. Bear in mind however that it may not be advisable to go directly to a trustee since he by law acts for the creditors as well as the debtor, and his fee is a percentage of the debt being repaid. Accordingly, there is an incentive for the trustee to maximize the amount being paid to the creditors in the proposal. An independent advisor, such as DebtCare Canada, acting in your interests only, can help you to structure your proposal before approaching a trustee.
Want some more information about the ins and outs of a consumer proposal, or any other realistic debt relief method? Call DebtCare Canada today – we can help you out: 1-888-890-0888.