A Consumer Proposal can only be arranged and administered by a bankruptcy trustee and costs about $1,500 to file. You pay an initial setup fee, and then, if it is accepted by your creditors, you will pay the remaining balance to proceed. In addition to this, the trustee will also retain 20% of your future payments as a fee for administering your Consumer Proposal. To be legally binding, the creditors who hold the majority of your debt must agree to the proposal. Once they do, you repay the agreed amount over a maximum of 5 years.
Advantages and Disadvantages of Filing for a Consumer Proposal
Consumer Proposals contain certain advantages and disadvantages. These can include the following:
It can reduce the amount of debt you need to repay your creditors by a considerable amount
It is one of the final ways of avoiding bankruptcy
It’s not private. A proposal is a permanent public record included on a searchable database
It’s more expensive than declaring bankruptcy
It must be approved by the Court
Creditors can reject the Consumer Proposal – if they do, you may have to offer them additional funds otherwise your proposal will not proceed
If you miss more than 2 payments you may need to file for bankruptcy
Student loans can’t be included if they are less than 7 years old
Secured debts aren’t included
Some assets (such as your home, vehicles, or investments) may need to be sold
The permanent record of your insolvency can put certain professional licenses at risk and may also affect future employment opportunities
It’s Okay to Ask for Help with Debt
“Life just happened. My debt got to the point where I started to feel like I was drowning. I didn’t feel like I could fix it on my own, and I wanted to start living my life as an adult without debt. I decided to reach out for help. Feeling relieved, I knew that everything was going to be okay – a lot of work – but okay. I had a plan to pay back my debt and continue doing the things I love to do like yoga and travelling.”
– Yasmine, Actual Client
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 Prevent Getting Ripped Off
Follow the tips outlined below, but start by speaking to a member of Credit Counselling Canada (a national association of non-profit credit counselling organizations who don’t work on commission). If a Consumer Proposal is a truly good option for you, one of their agencies will inform you and refer you to a reputable bankruptcy trustee for free.
Speak to a Non-Profit Credit Counsellor
Talk to a non-profit Credit Counsellor about your situation first. They’ll review your whole financial picture with you and help you look into and understand all of your options to resolve your debt problems and get your finances back on track.
Don't Pay Anyone But a Bankruptcy Trustee
Never pay money to anyone for Consumer Proposal services except a licensed bankruptcy trustee. According to the law, only a licensed trustee is allowed to do the work and charge for Consumer Proposals.
Watch Out for Commission Based Debt Consultants
Find out how the person helping you is compensated. A lot of people who want to advise you on your debts work on commission. Make certain that the “solution” they are recommending is in your best interest – not theirs.
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How Your Credit Will Be Impacted by a Consumer Proposal
Once you enter into a Consumer Proposal, a special notation is placed on your credit report in the public records section. Anyone who you allow to look at your credit report can see the public records section.
Additionally, it is possible that your creditors will report a “7” rating on any debt included in the proposal. This “7” rating means that creditors are receiving your payments through a third party. In this instance the third party would be your trustee. When you send a payment to your trustee, they distribute the agreed upon dollar amounts to all of your creditors once 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.
Contact Us for More Information About Filing for a Consumer Proposal in Kitchener, Ontario
There are quite a number of options between financial difficulty and bankruptcy. A Consumer Proposal might be one good option for some people, but it’s not the best option for everyone. To find out what other options you have, speak with one of our professionally trained Credit Counsellors today, in person or over the phone. Our appointments are free, non-judgmental, and completely confidential.
To ask us some questions or to make an appointment to speak with a Counsellor, phone us in Kitchener at 519-340-1013. You can also email or chat with us online right now.
Kitchener-Waterloo Office: 22 King Street South, Suite 300, Waterloo, ON N2J 1N8
Everyone made us feel supported and at ease. We received a lot of great, useful information. They helped us out...read moreEveryone made us feel supported and at ease. We received a lot of great, useful information. They helped us out a lot.read less
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These are the people you want to talk with 💯 I was worried about all the scams I had heard...read moreThese are the people you want to talk with 💯 I was worried about all the scams I had heard about from so many people... The Credit Counselling Society was a very professional, free consultation. When I left I had the information about what my options really truly were 👍 I am so grateful this non profit service exists . Thank you Sincerely Corey Essarread less
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While my situation didn't fit the bill of any scenario that would put me on a path to be debt...read moreWhile my situation didn't fit the bill of any scenario that would put me on a path to be debt free any quicker, it was comforting to get the feedback I'd already made the necessary changes on my own to get back on my feet. They were nonetheless, very professional and comforting and easily recommendable to anyone exploring all there options financially. Thanks kindly.read less
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Linda Hadel Delainey
We were treated with respect even though our money problems come at such an advanced age. The members...read moreWe were treated with respect even though our money problems come at such an advanced age. The members of Credit Counselling were there for us through the whole process of getting out of our money problems. There were no more horrible telephone calls from our creditors. Credit Counselling took care of all the creditors for us by making arrangements with them. I have recommended Credit Counselling to others who are in a dark place with money. Thank you so much Credit Counselling for getting us back on track.read less
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