Is consumer proposal bad?

_{consumer proposal bad, if consumer proposal is bad, British Columbia}

No, it’s not. Exploring a consumer proposal can be insightful. It offers perks like protecting assets and reducing debt payments by settling a portion of unsecured debts. Payments remain stable despite salary increases, and creditors are stopped from contacting you. Choose your trustee wisely though many charge more than they should and double bill you! Reach out via phone, text, or chat with any questions.

Show Table of Contents

_{Consumer proposal: a smart choice for effective debt management.}

Consumer Proposal Bad Question

Is consumer proposal bad? I’ve heard mixed things about consumer proposals and want to know if they’re actually bad for me.

From: Anonymous Question
Location: Burnaby, British Columbia (BC)
Category: consumer proposal

Consumer Proposal Bad Answer

Exploring a consumer proposal can be insightful. It offers nifty perks like keeping your stuff safe and cutting down those pesky debt payments by allowing you to settle just a slice of your unsecured debts. Unlike some plans, if you strike gold with a salary bump, your payment stays the same—no extra deductions to worry about. Plus, it throws a shield over you, stopping creditors from pestering you and freezing the interest while the proposal is in action. But, let’s face it, there are a few catches. You’re looking at a longer ride, sometimes as long as 5 years. And it’s a bit of a dent on your credit score, leaving you with an R7 rating for a few years post-completion. You need to stick to payment rules because slipping up might land you in a bankruptcy puddle. Also, it doesn’t touch those secured debts like your home or car loans. And remember, picking the right trustee is crucial since not all of them can be a knight in shining armor.

If you’re weighing your options, you’ve got a few. Bankruptcy might suit those juggling a lot of secured debt, while debt consolidation could bring down the interest on your bundled debts. Or consider debt counseling for chipping away at less intense financial situations. Eligibility for a consumer proposal often requires having unsecured debts under the $250K mark, plus a stable income. Take a good read on your finances to see if a consumer proposal is your golden ticket.

Trustees get paid by the lenders and creditors and don’t advocate for Canadians in debt. LITs can also double bill you or charge you extra. Beware!

Don’t hesitate to reach out via phone, text, or chat if you have any queries!

From: Insider Scott

Office of the Superintendent of Bankruptcy (OSB) Answer

A consumer proposal is not inherently bad, but it has both advantages and disadvantages that you should consider. According to the Bankruptcy and Insolvency Act (RSC 1985, c. B-3), a consumer proposal is a formal agreement between you and your creditors to settle your debts for less than what you owe (Section 66.1).

Pros include the protection from creditor actions during the proposal process (Section 69.3), and that you may only pay a portion of your debts rather than the full amount. Additionally, unlike personal bankruptcy, you can keep most of your assets.

However, it can have a long-term impact on your credit rating, as it will remain on your credit report for up to three years after you complete your proposal (Regulations, C.R.C., c. 369, Section 22). This could affect your ability to secure credit in the future.

In essence, a consumer proposal can be a viable solution for managing debt, but it is important to weigh its potential impact on your credit and future financial opportunities. Consulting with a licensed insolvency trustee can provide further personalized guidance.

From: OSB Helper

Related Questions to If Consumer Proposal Is Bad

Here are the top 5 most frequently asked questions related to the query “Is a consumer proposal bad?” based on common concerns and search trends:

1. How does a consumer proposal affect my credit score?

A consumer proposal will negatively affect your credit score, but it is generally less damaging than bankruptcy[1][4][5].

2. What debts can be included in a consumer proposal?

A consumer proposal can include up to $250,000 in unsecured debt, excluding secured debts and certain student loans[1][2][5].

3. How long does a consumer proposal last?

A consumer proposal can last up to five years, although it is possible to pay it off earlier[1][2][5].

4. Do I lose any assets with a consumer proposal?

No, a consumer proposal allows you to keep all your assets, including your home equity, vehicles, investments, and personal belongings[2][4][5].

5. What are the costs associated with a consumer proposal?

The costs of a consumer proposal are based on a negotiated debt settlement with creditors, typically starting at 20% of your total debt, and include fixed monthly payments[2][4][5].

If you have a question about debt see our debt questions or ask your own debt related question.

References

_{Table of article references}