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

1. Consultation: Meet with a licensed insolvency trustee to discuss your financial circumstances and determine if a consumer proposal is suitable for you.
2. Proposal Draft: The LIT drafts a proposal outlining your repayment plan, which is then presented to your creditors.
3. Creditor Meeting: Creditors review and vote on the proposal. If the majority accept it, the proposal becomes legally binding for all.
4. Payments: Begin making the agreed-upon payments to your LIT, who disburses the funds to your creditors.
5. 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