Consumer proposal what is

In some situations, you can also make changes to your proposal and submit it again to you creditors. The amount of a mortgage loan on your main residence is not included in this amount. You must also be either bankrupt or insolvent. Being insolvent means that you meet all of these conditions:. A trustee will examine your financial situation and help you draw up a list of your debts. The trustee then prepares a reasonable proposal for your creditors and helps you write it.

The trustee is also responsible for bringing the relevant creditors if necessary , sending them a copy of the proposal and paying them once the consumer proposal has been accepted. You will therefore pay for these services as you pay off your other debts. But a note will be added to your credit report indicating that you have used a consumer proposal to settle your debts.

Your creditors will then vote whether or not to accept your proposal. In most proposals, the amount you have to pay is made in monthly payments to your LIT over an agreed-upon period of time that is no longer than five years. However, you can make a lump-sum payment or a combination of a lump-sum payment and monthly payments. You cannot file a consumer proposal by yourself. You must file with a LIT and you can book a free, no-obligation consultation in order to determine if a consumer proposal is the right debt solution for you.

Watch the video to learn about the process of filing a consumer proposal, from meeting a LIT for the first time, to submitting a proposal to your creditors, all the way to meeting the terms of your consumer proposal and being discharged. Video transcript : Meet Mary. Mary took a job right out of college, but recently, she has had to take a lot of time off to care for her sick husband Paul.

With reduced income and their debts mounting, they are now considering bankruptcy. A consumer proposal starts with you filing a proposal to your creditors, and your creditors vote whether to accept or reject your offer. They are motivated to participate in the process if they will receive more in a consumer proposal than if you filed for bankruptcy.

Your creditors have 45 days to review your proposal and they have the ability to accept or reject the offer. If creditors are not satisfied, you can modify the proposal and submit it again. However, if your proposal is rejected, you must look at other debt help options, which might include declaring bankruptcy.

Your unsecured debts are included in a consumer proposal. Unsecured debt unlike a mortgage that is secured by a house or a car loan secured by a car can be included in a consumer proposal. Types of unsecured debts include but are not limited to :. Normally, secured creditors are not affected by a consumer proposal. In most instances, you will continue to make payments to the secured creditors as per your usual arrangements.

In this guide to consumer proposals, we tell you what you need to know to determine if a consumer proposal may be a good option for you. A consumer proposal is a legally binding debt settlement agreement, filed with a Licensed Insolvency Trustee, to repay your creditors a percentage of what you owe in exchange for full debt forgiveness.

If you are struggling with monthly debt payments, a consumer proposal plan provides debt relief while avoiding bankruptcy. Becoming more popular, Canadians now chose a consumer proposal more often than bankruptcy as a way out of debt. In , two-thirds of all insolvencies in Canada were a consumer proposal.

Your payment terms are based on a negotiation between what your creditors expect to receive and what you can afford to repay. Acting as a consumer proposal administrator, your Licensed Insolvency Trustee will meet with you to review your financial situation and help you determine how much to offer. Settlements of 30 cents on the dollar are not uncommon however every debt proposal is different.

The cost of a consumer proposal and ultimate settlement amount depends upon your income and what you own. Every proposal to creditors is unique. Proposal payments can be spread out over a maximum of 5 years and are interest free. To compare possible payments in a consumer proposal with other options, try our consumer proposal calculator. A consumer credit proposal deals with unsecured creditors and can eliminate almost all unsecured debts including:.

Secured creditors : A consumer proposal does NOT affect secured debt including the mortgage on your principal residence or a secured car loan. As long as you maintain your monthly loan payments, a secured creditor cannot change the terms or conditions of an existing loan if you file a consumer proposal. If you are having difficulty paying for your home or car, talk with your trustee. Student loans : If you have been out of school for seven years, you can include your student loan in your proposal.

If you have not been out of school long enough, your trustee can help you decide if it is better to file now to eliminate other debt like credit card debt to improve your budget sufficiently to afford these payments, or to wait until the student loan limitation period expires.

CRA and tax obligation : Since a consumer proposal is a federal government program, it has jurisdiction over government debts including income tax debt, unpaid HST or GST tax payments, and payroll withholding taxes. If you are struggling with high-interest debt, a consumer proposal can be a way to erase that debt and start fresh.

A consumer debt proposal is the only debt settlement program sanctioned by the Canadian government. This makes it a safer debt settlement solution than informal options through a debt consultant or credit consolidation company. If you are having financial difficulties with accounts in collections or are in arrears on payments, a consumer proposal pr prevents creditors from continuing to pursue you for payment. As the 1 alternative to filing bankruptcy a debt proposal provides several benefits over other debt relief options:.