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Understanding Consumer Proposals in London, Ontario

An illustrated cityscape of London, Ontario, with icons representing money, legal documents, and a handshake, symbolizing a consumer proposal agreement.

Understanding Consumer Proposals in London, Ontario

When faced with insurmountable debt, individuals in London, Ontario have a legal option to consider before declaring bankruptcy: the consumer proposal. This debt relief solution, governed by the Bankruptcy and Insolvency Act of Canada, is gaining momentum due to its flexible and less severe implications compared to bankruptcy. Understanding the ins and outs of consumer proposals can empower residents to make informed choices about managing debt.

What is a Consumer Proposal?

A consumer proposal is a legally binding agreement negotiated between a debtor and their creditors through a Licensed Insolvency Trustee (LIT). The agreement allows the debtor to pay back a part of the debt owed, based on their income and assets, over a period of up to five years. Upon successful completion, the debtor is released from the debts included in the proposal, making it an appealing alternative to bankruptcy.

The Process of Filing a Consumer Proposal in London, Ontario

Filing a consumer proposal begins with consulting a Licensed Insolvency Trustee, the only professional authorized to administer these proposals in Canada. The LIT evaluates the debtor’s financial situation, advises on whether a consumer proposal is the best option, and helps craft a proposal that is fair and feasible. This proposal is then presented to the creditors, who have 45 days to accept or reject it. If the majority of creditors (by dollar value) accept the proposal, it is legally binding on all parties. Debtors can retain their assets, like a home or car, which is a significant advantage over bankruptcy.

Advantages of a Consumer Proposal

  • Debt Reduction: You only repay part of your total debts.
  • Interest Freeze: Once the proposal is filed, interest stops accumulating on your debts.
  • Asset Retention: It allows you to keep your assets, including your home and car.
  • No More Creditor Calls: Upon filing, all legal and collection actions, including wage garnishments, are stopped.
  • Fixed Monthly Payments: The amount you pay does not increase if your income goes up.

The Impact of a Consumer Proposal on Credit

While a consumer proposal is a positive step towards debt recovery, it does affect your credit rating. A note indicating that you have filed a consumer proposal will remain on your credit report for three years after you complete your payments. While this impact is less severe than bankruptcy, which can stay on your report for up to seven years, it’s important to consider the long-term implications on your ability to obtain future credit.

Rebuilding Credit After a Consumer Proposal

Rebuilding credit after filing a consumer proposal in London, Ontario, requires a diligent and proactive approach. Starting with small, manageable credit products like a secured credit card, and consistently making timely payments, can help rebuild your credit score over time. Budgeting and financial management courses can also provide valuable insights into managing finances more effectively.

Conclusion

Filing a consumer proposal can offer a lifeline for those drowning in debt, providing a structured way out with fewer repercussions than bankruptcy. However, its success depends on a thoughtful consideration of all factors involved, including its impact on your credit and long-term financial health. By consulting with a Licensed Insolvency Trustee in London, Ontario, individuals can gain the insights needed to navigate this process effectively and start on the path to financial recovery.

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