Understanding Calgary Consumer Proposals: A Guide

Understanding Calgary Consumer Proposals: A Guide

In Calgary, as in the rest of Canada, individuals facing financial hardship have a debt relief option that can offer a fresh start without resorting to bankruptcy. This option, known as a consumer proposal, allows debtors to work with their creditors to settle debts under more manageable terms. In this guide, we will delve into the process, benefits, and considerations of filing a consumer proposal in Calgary, providing a comprehensive understanding to those seeking financial relief.

What is a Consumer Proposal?

A consumer proposal is a legally binding process regulated by the Bankruptcy and Insolvency Act (BIA) of Canada. It is essentially an agreement between you and your creditors where you propose to pay a portion of your debts over a period of time, or sometimes offer a lump sum payment. The process is administered by a Licensed Insolvency Trustee (LIT), who acts as the mediator between the debtor and creditors.

The Process of Filing a Consumer Proposal in Calgary

The first step in filing a consumer proposal in Calgary is to consult with a Licensed Insolvency Trustee. The LIT will assess your financial situation to determine if a consumer proposal is the best course of action. If it is, they will work with you to develop a proposal that offers reasonable and manageable payments to your creditors, while also allowing you to keep your assets, such as your home or car.

Once the proposal is prepared, the LIT will file it with the Office of the Superintendent of Bankruptcy Canada, and your creditors will have 45 days to accept or reject the proposal. If the majority of your creditors by dollar value accept the proposal, it becomes legally binding on all parties. Creditors must then stop all legal action against you, and the interest on your debts will cease to accumulate.

Benefits of a Consumer Proposal

Filing a consumer proposal comes with several benefits. Most notably, it allows individuals to avoid bankruptcy, which can have a more significant impact on one’s credit report and future financial opportunities. Other benefits include:

• Reduction in the total amount of debt owed.
• Consolidation of debts into a single monthly payment.
• Protection of assets from seizure.
• Stoppage of interest accumulation on debts.
• Relief from harassing calls from creditors, as they must communicate through the LIT.

Considerations Before Filing a Consumer Proposal

While a consumer proposal can offer a way out of overwhelming debt, it’s important to understand the implications. Your credit rating will be affected, receiving an R7 rating, indicating that you have made a settlement with your creditors. This rating will remain on your credit report for three years after you complete your consumer proposal payments. Furthermore, the proposal is recorded in various credit and public record databases, which may affect your ability to obtain credit in the short term.

Another consideration is the requirement to attend two financial counseling sessions, designed to help you manage your finances better in the future. Lastly, not all debts can be included in a consumer proposal. Debts such as student loans (less than 7 years old), child support and alimony obligations, and court fines or penalties cannot be discharged through a consumer proposal.

Final Thoughts

A consumer proposal in Calgary presents a viable debt relief option for those who find themselves overwhelmed by debt but wish to avoid bankruptcy. By understanding the process, benefits, and considerations involved, you can make an informed decision about whether this is the right path for you. Consulting with a Licensed Insolvency Trustee is the first step towards regaining financial control and embarking on a path towards a debt-free future.