Are you in debt and weighing your alternatives to bankruptcy? You're not alone. Consumer proposals are a rising trend in Canada, with good reason. Not only do they provide debt relief, they give consumers flexibility that other debt repayment plans can't. So what is a consumer proposal and who are they beneficial for?

What is a Consumer Proposal and what does it do?

  • A consumer proposal is a legally binding (court approved) repayment plan negotiated by a consumer proposal administrator with your creditor(s)
  • During a consumer proposal a portion of unsecured debt is repaid (unsecured debt includes but isn't limited to: personal loans, credit cards, lines of credit, payroll loans) Yes, some Government debts can be included in a consumer proposal.
  • The signing of a consumer proposal means that creditors are immediately obligated to cease all direct contact with the client and must communicate with the consumer proposal administrator
  • A consumer proposal administrator is also a bankruptcy trustee
  • When a consumer proposal is filed, most wage garnishments will cease, interest will no longer accumulate, a client's assets are safe, and the program cannot exceed five years

Who does it benefit?

As with every financial repayment program, consumer proposals have benefits and drawbacks for the client and the creditor(s).

For a client, some benefits include:

  • Being responsible for a manageable portion of debt repayment (instead of the entire balance)
  • The impact on a client's credit rating is not as negative as a bankruptcy (typically an R7 versus an R9)
  • Your assets and surplus income are not in jeopardy, even if they increase during the proposal repayment

For your creditor(s), the main benefit is:

  • Recovering a portion of the debt, as opposed to bankruptcy (during which they would usually receive very little)

Consumer proposals have particular stipulations that the client must meet in order to be eligible – if you are wondering if your financial situation would benefit from entering into a consumer proposal, or if you're wondering which financial repayment option is right for you, please contact Solutions Credit Counselling Service Inc. today. We are pleased to be of service to you.