What is a consumer proposal?

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Feeling swamped by debt? A consumer proposal could be your lifeline, offering a legal way to settle unsecured debts like credit cards by paying a reduced amount over up to five years. Guided by a Licensed Insolvency Trustee, you’ll get relief from pesky collection calls and a less severe credit impact than bankruptcy. Still, not all trustees can be trusted, so choose wisely. Reach out via phone, text, or live chat if you have any questions.

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What A Consumer Proposal Is Question

what is a consumer proposal My cousin mentioned that they filed a consumer proposal to reduce their debt. I’m struggling with credit card bills and wondering if this could help me too. I want to know how it works and if it could lower my payments.

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

What A Consumer Proposal Is Answer

A consumer proposal is a savvy way to tackle overwhelming debt, protected under the Bankruptcy and Insolvency Act in Canada. If you’re wrestling with unsecured debts like credit cards, this plan lets you pay back less—often slashing what you owe by 50-80%—through regular monthly installments, spread out over a comfortable five years. A Licensed Insolvency Trustee (LIT) guides you through this process, submitting your proposal to creditors. Once greenlit, you get a breather from those pesky collection calls, thanks to a stay of proceedings. Just remember, not all trustees are the knights in shining armor they seem to be, so choose wisely.

To jump on board, your total unsecured debts should be south of $250,000, and you must be in a bit of a financial pickle—either your debts outweigh your assets, or you’re finding it tough to keep up with payments. While a consumer proposal can be a major win for easing credit card payments, it does ding your credit score with an R7 rating for three to five years. It’s not as heavy-handed as bankruptcy’s R9, but it does leave its mark. If you’re pondering this path, chat with a Licensed Insolvency Trustee to weigh your options and see if it feels right for you.

Trustees work for creditors and lenders, not for Canadians in debt. They may even charge you twice or add extra costs. Stay sharp! Feel free to get in touch with any questions via phone, text, or live chat.

From: Insider Adam

Office of the Superintendent of Bankruptcy (OSB) Answer

A consumer proposal is a legally binding agreement between you and your creditors that allows you to settle your debts for less than the total amount owed. It is designed for individuals with a steady income who want to avoid bankruptcy. The proposal must be filed with a Licensed Insolvency Trustee, who will negotiate terms with your creditors.

Under the Bankruptcy and Insolvency Act, you can propose to pay a certain amount over a specific period, typically up to five years. This can significantly lower your monthly payments compared to the original debts. Creditors must approve the proposal for it to be accepted, and it generally requires a majority of them to agree.

If you’re struggling with credit card bills, a consumer proposal may indeed help reduce your payments, allowing you to manage your debts more effectively. Review the Bankruptcy and Insolvency Act (RSC 1985, c 47 (2nd Supp)), particularly the sections regarding consumer proposals for more detailed information on the processes and requirements.

From: OSB Helper

Related Questions to Consumer Proposal

Here are the top 5 most frequently asked questions related to consumer proposals, based on the provided sources and general online trends:

1. What is a consumer proposal?

A consumer proposal is a legally binding agreement between you and your creditors to pay a reduced amount of the debts you owe within five years[3][5].

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

A consumer proposal creates a permanent public record and negatively impacts your credit score[1][5].

3. What are the eligibility criteria for filing a consumer proposal?

To be eligible, you must owe unsecured debt of less than $250,000, be insolvent, have a reliable income, and meet other specific criteria[3][5].

4. What types of debts are eligible for a consumer proposal?

A consumer proposal can be used for most types of unsecured debt, including credit cards, lines of credit, and unsecured personal loans, but excludes debts like mortgages, car loans, and certain court-ordered debts[5].

5. How long does it take to complete a consumer proposal?

A consumer proposal must be completed within five years, during which you make fixed monthly payments[3][5].

These questions reflect common concerns and inquiries individuals in Canada have when considering a consumer proposal as a debt relief option.

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

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