What Is a Consumer Proposal?

A consumer proposal is a formal, legally-binding process designed to help Canadians address debt issues. It involves negotiating an agreement with your creditors to repay a portion of what you owe, typically over a period of up to five years. This option is an alternative to declaring bankruptcy and can be a more manageable way to handle your finances.

Benefits of a Consumer Proposal

Avoids Bankruptcy

One of the primary benefits of a consumer proposal is that it helps you avoid the severe consequences of bankruptcy. While both options aim to provide debt relief, a consumer proposal generally has a less damaging impact on your credit rating.

Fixed Monthly Payments

By opting for a consumer proposal, you can consolidate your debts into a single, affordable monthly payment. This fixed payment schedule simplifies budgeting and provides predictability in managing your finances.

Interest-Free Debt Relief

Once a consumer proposal is accepted by the majority of your creditors, all interest charges on your existing debts stop accruing. This means you pay back only the original debt without any additional interest, significantly reducing the overall amount owed.

The Consumer Proposal Process

Consultation With a Licensed Insolvency Trustee

The first step in the consumer proposal process is to consult a Licensed Insolvency Trustee (LIT). The LIT will assess your financial situation and help you understand if a consumer proposal is the right solution for you. They will also assist in drafting the proposal details to present to your creditors.

Proposal Submission and Creditor Voting

Once the proposal is drafted, it is submitted to your creditors. They have 45 days to accept or reject the terms of the proposal. If the majority of creditors accept the proposal, it becomes legally binding for all parties involved.

Repayment and Completion

After acceptance, you will begin making the agreed monthly payments to the LIT, who will distribute the funds to your creditors. On successful completion of the repayment plan, you are released from the debts outlined in the proposal.

Your Path to Financial Freedom

Understanding what a consumer proposal is can empower you to choose a viable option for managing overwhelming debt. By consulting professionals and adhering to the structured process, you can achieve financial stability and work towards debt-free living.