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Consumer Proposal Advice

Why choose a consumer proposal?

Why Choose a Consumer Proposal? Consumer proposals are one of the most common methods used by Canadians to consolidate their debt, outside of a consolidation loan. A consumer proposal is a federally legislated debt repayment program that will see all of your debt combined into one payment and can often reduce the amount that you have to pay back. It’s one of the most popular repayment methods because of the fact that it is federally regulated by the Bankruptcy & Insolvency Act. Now don’t be scared by that statement. In no way are you filing for bankruptcy when you file a consumer proposal. They are two completely different repayment proposals. 

Other than Bankruptcy no other program in Canada has as high of a success rate and Consumer proposals can handle almost any type of account. Loans, credit cards, payday loans, lines of credit, Canada Revenue Agency, they can all be included. You can protect yourself from wage garnishments, collection activity, judgments, you name it. A consumer proposal can take the stress away. 

What happens in a Consumer Proposal? 

Consumer proposals can often be confusing and seem scary but the reality is, they’re pretty straight forward when you know what happens. First, you need to contact a licensed insolvency trustee to file a proposal. Don’t get fooled by other institutions that claim they can file it for you. They do nothing more than collect documents and pass you onto a licensed insolvency trustee, after charging you extremely high retainers of course. You should never pay a firm thousands of dollars in upfront fees to file a consumer proposal. 

Upon signing with a licensed insolvency trustee they will file the proposal with the superintendents office and send it out to your creditors. As soon as the proposal has been filed your creditors are given 45 calendar days to review and respond to the proposal. Typically there are three responses from your creditors. One, they accept the proposal and everything moves along as planned. Two, they decline the proposal (not very likely) and finally, they can decline the proposal and offer a counter offer. In any case, a proposal will pass if you can get 50% of the dollars owed to accept plus one dollar. Essentially making it a majority rules situation. You can run into a situation where some creditors decline but are forced to go along with it if the majority of the votes were a yes. 

Once the proposal has passed you have 60 months (5 years) or less to complete your payments at which time the proposal is deemed completed. 

 What is the success rate of a Consumer Proposal? 

One word, HIGH. Outside of Bankruptcy there is no other debt repayment program that can match the success rate of a consumer proposal. According to Stats Can. a staggering 98% of consumer proposals are accepted leaving only 2% that are not successful. This is one of the biggest factors for consumers when they are contemplating their options. Simply put, it’s very rare that a consumer proposal is declined. 

Who can offer a Consumer Proposal? 

Ultimately, as stated above, the only professionals that have the ability to file a consumer proposal are Licensed Insolvency Trustees. Anyone other than a Licensed Insolvency Trustees cannot file a proposal for you. There are plenty of institutions that state they will help you through the process of a proposal but they often charge thousand of dollars in upfront fees. These institutions try to justify their retainers but at the end of the day they are simply charging large upfront fees to collect documents and pass then onto a Licensed Insolvency Trustees. 

Do you have to pay an upfront fee for a Consumer Proposal? No, a Licensed Insolvency Trustee will never charge you an upfront fee to file a consumer proposal. If the institution you are working with asks you to pay thousands of dollars in upfront fees stop working with them. 

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