Understanding Consumer Proposals in Alberta

What is a Consumer Proposal?

A consumer proposal in Alberta is a legally binding agreement between you and your creditors to repay a portion of your debts. It serves as an alternative to bankruptcy, offering a structured way to manage and reduce your financial obligations over a specified period, usually up to five years. A licensed insolvency trustee (LIT) administers the proposal, ensuring both parties adhere to the terms.

How Does a Consumer Proposal Work?

When you file a consumer proposal, you negotiate a manageable repayment plan with your creditors through an LIT. Your payments are consolidated into a single monthly amount, often significantly lower than your original debt total. The LIT evaluates your financial situation, negotiates with creditors, and oversees the administration process.

Steps Involved in Filing a Consumer Proposal in Alberta

Consultation: Meet with a licensed insolvency trustee to discuss your financial circumstances and determine if a consumer proposal is suitable for you.
Proposal Draft: The LIT drafts a proposal outlining your repayment plan, which is then presented to your creditors.
Creditor Meeting: Creditors review and vote on the proposal. If the majority accept it, the proposal becomes legally binding for all.
Payments: Begin making the agreed-upon payments to your LIT, who disburses the funds to your creditors.
Completion: Once all payments are made and obligations fulfilled, you are released from the remaining eligible debts.

Benefits of a Consumer Proposal

A consumer proposal in Alberta offers several benefits for those struggling with debt:

Debt Relief: Significantly reduces the total amount of debt to be repaid.
Asset Protection: Unlike bankruptcy, you get to keep your assets.
Single Monthly Payment: Consolidates multiple debts into one manageable payment.
Interest Freeze: Stops all interest charges on your unsecured debts.
Legal Protection: Prevents legal actions such as wage garnishments and collection calls.

Eligibility for a Consumer Proposal in Alberta

To be eligible for a consumer proposal in Alberta, you must:

Owe between $1,000 and $250,000 (excluding a mortgage on your primary residence).
Have enough income to make regular payments.
Be insolvent, meaning you cannot pay your debts as they come due.

Differences Between Consumer Proposal and Bankruptcy

While both are debt relief options, a consumer proposal in Alberta differs from bankruptcy in several key ways:

A proposal allows you to keep your assets, whereas bankruptcy may require their liquidation.
Proposals typically have a lesser impact on your credit score than bankruptcy.
Bankruptcy is often quicker but more severe, whereas a proposal provides a structured, extended repayment plan.

Finding Help with Consumer Proposals

If you’re considering a consumer proposal in Alberta, it’s essential to work with a licensed insolvency trustee. They will guide you through the process, ensuring your proposal meets legal requirements and offers the best chance for acceptance by creditors. Contact a local LIT today to explore your options and take the first step towards financial stability.

See if you qualify for debt relief