If you are looking to consolidate your debts, one option available is to file a Consumer Proposal in Toronto. This is a legal process governed by the Bankruptcy and Insolvency Act between yourself and your creditors to pay back a portion of the debt you owe. The amount of debt that you repay is mainly based on your income and what assets you own.
A Consumer Proposal can only be setup by a bankruptcy trustee and costs around $1,500. You’ll pay an initial setup fee, and if it is accepted by your creditors, you will pay the balance to proceed. In addition, the trustee will keep 20% of your future payments as your Consumer Proposal administration fee. For the proposal to be legally binding, the creditors who own the majority of your debt must agree to the arrangement. If they do, then you will be required to repay the agreed upon amount over a maximum term of 5 years.
Advantages and Disadvantages of Filing for a Consumer Proposal
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’s not a private matter. A Consumer Proposal is filed as a permanent public record and is included on a searchable database
It costs more than filing for bankruptcy
The Court must approve it
Creditors can choose to reject the proposal. If they do, you may need to offer them additional funds to convince them to proceed
You might need to sell some of your assets (such as a vehicle, your home, or investments)
You may need to file for bankruptcy if you miss more than 2 payments
Secured debts cannot be put into a proposal
Student loans less than 7 years old can’t be included
It can put certain professional licenses at risk, and the permanent record of your insolvency may also affect some future employment opportunities
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 three tips below plus start by speaking with a member of Credit Counselling Canada (an association of non-profit credit counselling agencies who do not work on commission). If a Consumer Proposal is truly one of your best options, one of their agencies can let you know and refer you to a reputable bankruptcy trustee for free.
Talk with a Non-Profit Credit Counsellor
Speak to an accredited, non-profit Credit Counsellor about your financial situation first. They will go over your whole situation with you and take the time to help you explore and understand all your options to resolve your debt problems.
Only Pay a Trustee for a Consumer Proposal
Never pay money to anyone for Consumer Proposal services except a licensed bankruptcy trustee. By law, they are the only ones allowed to provide these services and receive payment for their services.
Watch Out for Commission Based Debt Consultants
Ask how the person helping you is compensated. Many people who will seek to advise you on your debts work on commission. Make sure the “solution” they are suggesting is in your best interest – not theirs.
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How a Consumer Proposal Can Impact Your 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.
Contact Us for More Information About Filing for a Consumer Proposal in Toronto, Ontario
Between financial difficulty and bankruptcy there can be many options. While a consumer proposal may be a good option for some, it isn’t the best option for everyone. To find out what options you have, call one of our professionally certified Credit Counsellors today. You can speak with a Counsellor in person or over the phone. Appointments with them are free, non-judgmental, and completely confidential.
For more information or to speak with a Counsellor, contact us in Toronto at 647-776-0485. You can also email or chat with us online right now.
Feel at ease with them, they are very professional but also human and kind
I met with Henrick Van Lent (Rick) for the second time in a few years. Very efficient, Rick had the...read moreI met with Henrick Van Lent (Rick) for the second time in a few years. Very efficient, Rick had the information from our first meeting at hand and I was able to update him easily with the latest set of events in my financial story. I was once again very impressed with the advice and professionalism of this counsellor. He imparted no judgment and I felt fully supported. I have a difficult situation to resolve as I am on disability now, and was feeling very distressed about how to resolve my situation when I don't have the income to do it. I left feeling calm and fully understanding my responsibility to resolve my financial woes. It is easier having a Counsellor to guide you and help correct budgeting and overspending habits. Rick is a godsend. Thank you Credit Counselling Society! What an excellent agency and resource.read less
I read about this program online and connected with them right away. I was very nervous to get started as...read moreI read about this program online and connected with them right away. I was very nervous to get started as I was feeling extremely anxious and embarrassed about my financial situation. When I met with my counselor I was immediately put at ease and validated in my situation. I felt completely comfortable talking about money and never once felt judged for where I was financially. It was so easy to get everything sorted out and get started with the program. The financial workshops they offer are great and every month when I get my summary statements I feel such a sense of relief and accomplishment seeing how much debt has been paid off so far! that relief totally motivated me to stay firm in my budgeting every month and always stay on top of where my finances are. There is ALWAYS a way out of whatever crazy financial station you find yourself in!read less
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Very good response time, and the agent was so helpful and understanding! I have a very clear idea of my...read moreVery good response time, and the agent was so helpful and understanding! I have a very clear idea of my options now, and I didn't feel judged at all.read less
Carolyn R. Schmidt
I felt that they genuinely wanted to help, and they never made me feel like a failure for getting into...read moreI felt that they genuinely wanted to help, and they never made me feel like a failure for getting into debt due to unforeseen circumstances in my life. Thank you!!!read less
These wonderful people gave me hope & direction!!!.....I was at the end of my rope !!!..... An incredible Organization !!!......Bless...read moreThese wonderful people gave me hope & direction!!!.....I was at the end of my rope !!!..... An incredible Organization !!!......Bless you all !!!!.....read less
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