How Does A Consumer Proposal Work?
A consumer proposal is a legally binding agreement between you and your creditors to repay a portion of the money you owe over a certain period. Your consumer proposal administrator will work with you to develop a budget and propose an appropriate repayment plan to your creditors. If your creditors agree to the terms of the consumer proposal, the agreement is binding on all of them, even if some creditors voted against the proposal.
A consumer proposal can provide a fresh start when you are struggling with debt. This legal process gives you time to catch up on payments while protecting you from creditors. When considering a consumer proposal, it is important to understand the process and what it entails. This guide will provide an overview of consumer proposals, how they work, and what you need to do to file one.
To file a consumer proposal, you must:
1-Not able to repay your debt
This means that you cannot make the minimum payments on your debts or that you will not be able to pay off your debt within a reasonable period.
2- Owe less than $250,000
This is the maximum amount of debt that can be included in a consumer proposal.
3- Have some disposable income
This means you have enough money left over after paying your reasonable monthly expenses to make payments on a consumer proposal.
4- Work with a Licensed Insolvency Trustee
A Licensed Insolvency Trustee is the only type of professional who can help you file a consumer proposal.
5- Attend Credit Counselling
Before filing a consumer proposal, you must attend credit counseling with a government-licensed agency.
During the credit counseling session, you will:
- Review your financial situation
- Discuss your debt repayment options
- Receive information about money management and budgeting
If you qualify and decide to file a consumer proposal, you must work with a consumer proposal administrator. A consumer proposal administrator is a licensed insolvency trustee who will:
- Meet with you to review your financial situation and explain the consumer proposal process
- Help you develop a budget and propose an appropriate repayment plan to your creditors
- File the necessary paperwork with the court
- Notify your creditors of the consumer proposal
- Manage the payments under the consumer proposal agreement
If your creditors agree to the terms of the consumer proposal, the agreement is binding on all of them, even if some creditors voted against the proposal. The terms of the consumer proposal will stay in effect for some time that you agree to, typically between three and five years.
During the term of the consumer proposal, you will make monthly payments to your consumer proposal administrator, who will then distribute the payments to your creditors. If you make all of the required payments under the consumer proposal, your debt balance will be discharged at the end of the term.
You will no longer owe money to your creditors and can start fresh with a clean slate. When it comes to a debt consumer proposal, it’s important to understand how they work before deciding to file one.
A consumer proposal is a viable debt relief option for people struggling to repay their debts, but it’s not right for everyone. If you’re considering a consumer proposal, speak with a licensed insolvency trustee to get all the facts and ensure that a consumer proposal is the best option for you.