Consumer Proposal Simcoe, Ontario – Straight Facts and Other Options
What is a consumer proposal, and is it the best option for me?
One option to consolidate your debts is to file a Consumer Proposal in Simcoe. It is a legal process under the Bankruptcy and Insolvency Act between you and your creditors to repay part of what you owe. The amount you repay is largely based upon your income and what you own.
A Consumer Proposal can only be arranged and administered by a licensed bankruptcy trustee and it costs approximately $1,500 to file. You pay an initial setup fee to begin, and then, if the arrangement is acceptable to your creditors, you then pay the balance to continue the process. The trustee you work with will additionally hold back 20% of your future payments as an administration fee. For the Consumer Proposal to be legally binding, your creditors who own the majority of your debt must agree to the proposed repayment plan. If they do, you then have to repay the agreed amount over a maximum repayment period of 5 years.
The Advantages & Disadvantages of Filing a Consumer Proposal in Ontario
There are some clear advantages and disadvantages of filing for a Consumer Proposal. They include the following:
- 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 Simcoe, Ontario if:
- You don’t have the ability to repay all the debt you owe
- You have consistent income
- You’ve put together a monthly budget, and you can afford to make monthly payments
- Could be a worthwhile option if:
- You aren’t able to get approved for a debt consolidation loan
- If you have debts (like a large government debt) which can’t be paid through a debt management program
- Will stop active collection activity on student loan payments
- It is one of the last methods of avoiding personal 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
There’s a Way Out of Debt with Help
“I had just come to the point where I had given up hope – that there’s no way I could ever repay my debt. A friend of mine suggested I reach out, and I thought I’d get some condescending person on the phone lecture me about money, but my counsellor was the most compassionate, caring person who became sort of my own personal cheerleader.”
– Charis, Actual Client
Beware of the Big Debt Rip-Off
Consumer Proposals have become the latest method for a growing number of for-profit companies and their sales people to take advantage of vulnerable, unsuspecting consumers. Don’t let this happen to you! Many debt relief companies are now claiming to offer Consumer Proposals as an easy way to get out of debt. There’s a problem. Only a licensed bankruptcy trustee is allowed to file paperwork for a Consumer Proposal. The debt relief companies charge thousands in fees only to refer you to a bankruptcy trustee who then charges his or her own fees.
How to Keep from 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.
Talk with a Non-Profit Credit Counsellor
Only Pay a Trustee for Consumer Proposal Services
Watch Out for Commission Based Debt Consultants
How a Consumer Proposal Impacts Credit
Once you begin making payments on a Consumer Proposal, a note is placed in the public records section of your credit report that states that you have filed a proposal. Anyone who you have given permission to see your credit report can also see the public records section.
Your creditors may also report a “7” rating on any debt included in your proposal. This rating indicates that they are receiving your payments through a third party. In this case, your trustee is the third party. Your monthly payment on your Consumer Proposal is remitted to your creditors once all applicable fees have been paid.
If you are making payments to secured creditors, like for a car loan, outside of your Consumer Proposal, those creditors will report on those debts separately. Creating and sticking to a realistic budget will make this easier.
If you are able to maintain a good payment history on a secured debt while you’re making your proposal payments, this can help you re-build credit afterwards.
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 Simcoe at 1-888-527-8999. You can also email or chat with us online right now.
Here are some related topics that may be useful for you.
Debt Consolidation Options & Alternatives
How Does a Debt Management Program Work?
Consumer Proposal vs Bankruptcy - The Differences
Putting Your Interests First
Our goal is to always put consumers first and look out for their best interests in everything we do. One way we do this is through transparency and accountability. We are held accountable to the most rigorous standards in our industry.
- The Office of the Superintendent of Bankruptcy for Ontario
- List of Licensed Bankruptcy Trustees
- Glossary of Terms Used in Insolvency
- Credit Counselling Society Ontario office locations
The Credit Counselling Society is an award winning, non-profit credit counselling service provider in Simcoe, Ontario with