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One of the most effective ways to get out of debt is through a consumer proposal. A consumer proposal is a legal agreement that is negotiated with your creditors, including the Canada Revenue Agency, that allows you to settle your debt for only a portion of what you owe. This involves making one affordable monthly payment over a period of no more than five years. Upon full performance of the proposal, you will be legally released from all debts included.
If you owe less than $250,000 (excluding your mortgage), have a steady income and are looking for an alternative to bankruptcy, a consumer proposal might be right for you.
Key Advantages
- Keep your assets, including your RRSPs, vehicles and home
- Stop collection calls
- Legal protection from your creditors (wage garnishments, legal actions, etc)
- Interest is frozen the moment you file
- Negotiate and repay only a portion of your debts in one monthly payment
- No additional fees beyond the negotiated payment
Only a Licensed Insolvency Trustee can provide access to federally regulated insolvency options, such as consumer proposals. It is against the law for anyone else to claim they can provide these services, so make sure you contact the right people to help you get started on your consumer proposal.
Below we explore the differences between consumer proposals and bankruptcy in order to help you make an informed financial decision:
| Consumer Proposal | Bankruptcy |
| Suitable for as little as $1,000 of unsecured debt to as much as $250,000 (excluding mortgage). | Suitable for anyone who has more than $1,000 of unsecured debt. No upper limit. |
| Keep your assets, such as your house, vehicle and RRSPs. | Keep up to $32,000 in “exempt” assets. |
| Fixed monthly payments until end of proposal (up to five years). | Monthly payments based on your income. |
| Keep all of your tax refund(s) and/or tax credits. | All tax refund(s) and/or GST credits must be surrendered (not including child tax credits). |
| Can continue to act as a director of a limited company. | Cannot act as a director of a limited company; however, you can be self-employed. |
| No income and expense reporting required. | Reporting of all income and expenses must be submitted to your trustee monthly. |
| R7 credit rating. Affects rating for repayment period plus three years after last payment. | R9 credit rating. Affects rating for the period of bankruptcy plus six years after discharge for a first bankruptcy. |
To find out how to submit a consumer proposal to your creditors watch this video below:
If you think a consumer proposal might be the best option for you, or if you would like to obtain more information on this alternative to bankruptcy, contact one of our Licensed Insolvency Trustees today.
To download our helpful consumer proposal information sheet click here.
