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Smythe Insolvency Offers Consumer Proposal Guidance
Incurring debt is part of being a consumer. Whether through a mortgage, car loan, or credit card, we often need to borrow money, especially for large purchases. Some of the most trustworthy people incur debt that becomes unmanageable due to hardships such as unemployment, health issues, divorce, or a tax filing mistake. Smythe Insolvency offers guidance on the consumer proposal process in British Columbia – a debt relief program that reduces the amount of debt owed while providing a timeline for paying back creditors. Read on to learn more about consumer proposals. If you’re interested in discussing your financial situation further, book a free consultation to meet with a Licensed Insolvency Trustees (LIT) at one of our 11 convenient office locations across the lower mainland and Vancouver Island.
What is a Consumer Proposal?
When the amount of debt a person has increased to the point where it’s difficult to pay creditors and debt continues to accumulate, they end up in a state of insolvency. Insolvent individuals are those who owe at least $1,000 to creditors and are unable to pay bills when they come due. Licensed Insolvency Trustees work with them by providing access to federally-regulated insolvency options such as debt consolidation, personal bankruptcy, credit counselling, and consumer proposals. As the name implies, a consumer proposal is essentially a “proposal” by the debtor to either pay creditors a percentage of the debts they owe, extend the timeline allowed to pay off the debt, or a combination of both. No matter what terms are agreed upon, the debt must be settled in five years or less.
What You Need to Know About Consumer Proposals
In order to file a consumer proposal, you must meet specific criteria, such as the amount of debt you owe and your ability to pay back at least a portion of the debt to creditors. The main points involved in a consumer proposal filing include:
- Debt can be as little as $1,000 but when exceeding $250,000 (excluding mortgage), different rules apply.
- You can retain assets such as a house, vehicle, and RRSPs
- Monthly payments will be fixed until the proposal is completed
- Interest payments stop
- Debt is paid off in five years or less
- No garnishment of tax refunds or credits
- Can continue to act as a director of a limited company
- No income or expense reporting is required
- R7 credit rating – affects credit for payment period plus an additional three years
Advantages of Consumer Proposals
- 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.
Differences Between Consumer Proposals & Bankruptcy
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. |
Facts About Personal Bankruptcy
Personal bankruptcy provides the protection from creditors that a consumer proposal does and is a viable option for those not meeting the debt criteria mentioned above. The key points to personal bankruptcy are:
- Anyone with debt over $1,000 with no upper limit can file
- Retain some exempt assets
- Clothing for yourself & your dependents, no limit
- Household items up to $4,000
- One vehicle up to $5,000 (or $2,000 if you owe child support payments).
- Work tools up to $10,000.
- Equity in your home up to $9,000 (or $12,000 in Greater Vancouver or Victoria)
- Medical aids, no limit
- Payments are based on monthly income
- Monthly payments can increase if income increases
- All tax refunds and/or GST credits must be surrendered
- Can be self-employed but cannot act as a director of a limited company
- All income and expenses must be reported to a trustee monthly
- R9 credit rating – affects rating for the period of the bankruptcy plus six years after
To find out how to submit a consumer proposal to your creditors watch this video below:
Consult with a Licensed Insolvency Trustee
If the amount of debt you’re in is keeping you awake at night and you’re afraid of answering the phone because it might be a debt collector looking for money, you don’t have to continue living this way. Even with full-time employment and a history of good credit, financial problems can mount up quickly through unforeseen circumstances and issues out of our control. Fortunately, the Licensed Insolvency Trustees at Smythe Insolvency can guide you through the process of filing a consumer proposal in British Columbia. We’ve helped many satisfied clients turn their finances around and get out of debt with our services. If a consumer proposal isn’t right for you, we can also guide you through personal bankruptcy. Contact our dedicated and licensed professional team today to schedule a free, no-obligation consultation. Let’s discuss how we can get you out of debt and back on stable financial ground.
To download our helpful consumer proposal information sheet click here.
