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