The Advantages & Disadvantages of Filing a Consumer Proposal in Ontario
There are definitely advantages and disadvantages to filing a Consumer Proposal. Here are some that are important to be aware of:
- It can substantially reduce the amount of debt you are required to pay your creditors
- It can be an effective way of consolidating debt in Haileybury, Ontario if:
- You cannot afford to pay back all the debt you owe
- You have steady income
- Your budget has enough money in it for you to make monthly payments
- Has the potential to be a good option if:
- Will put active collection of student loan payments on hold
- It is one of the final ways of avoiding bankruptcy
- It’s not private. A proposal is filed as a permanent public record and is included on a searchable database
- It costs more than going bankrupt
- The Consumer Proposal must be approved by a Judge
- It can be rejected by your creditors. If they reject it, you may have to offer them more money for to
- Missing more than 2 payments may mean that you need to file for bankruptcy
- Not all debts can be included (like secured loans)
- If you stopped being a student less than 7 years ago, your student loans can’t be included
- Depending on the type of assets you have, some might need to be sold
- It may affect future employment opportunities, and the permanent record of your insolvency can put certain professional licenses at risk
Beware of the Big Debt Rip-Off
Consumer Proposals have unfortunately become the latest way for an increasing number of debt relief companies and their sales people to take advantage of vulnerable, unsuspecting consumers. Make sure you don’t let this happen to you! Many of these companies are now claiming to offer Consumer Proposals as an effective way to deal with debt. But there’s a problem. In Canada, only a licensed bankruptcy trustee is legally allowed to deal with Consumer Proposals. These debt relief agencies charge thousands of dollars in fees but then refer you to a bankruptcy trustee who then charges his or her own legitimate fees.
How to Keep from Getting Ripped Off
Follow the three suggestions below and begin by talking to an accredited member of Credit Counselling Canada (Canada’s national association of not-for-profit credit counselling organizations who never pay their employees commission). If the agency you speak to believes that a Consumer Proposal would truly be one of your best options, they’ll let you know and refer you to a reputable bankruptcy trustee in your area for free.
Speak to a Non-Profit Credit Counsellor
Only Pay a Trustee for a Consumer Proposal
Watch Out for Consultants on Commission
How Your Credit Will Be Impacted by a Consumer Proposal
When you make payments on a Consumer Proposal, there is a note on your credit report in the public records section that you have filed a proposal. Anyone who has your consent to see your credit report will see the public records section as well.
In addition, your creditors may report a “7” rating on the debts included in the proposal. This means that they are receiving payments through a third party. The third party is your trustee. When you make a payment to your trustee, they disburse the agreed upon amount to each of your creditors after all applicable fees have been paid.
If you are paying secured creditors, like those who hold your car loan, outside of your Consumer Proposal, those creditors will report your payments on those debts separately. Creating and maintaining a realistic budget will make it easier to keep these debts paid up to date.
If you are able to show a good payment pattern on a secured debt while you’re making all of your proposal payments, you’ll be that much further ahead afterwards when you want to re-build your credit.
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