Consumer Proposal Canada: #1 Alternative to Bankruptcy
If you are struggling with debt and don't see a way out, consumer proposal Ontario may be the solution for you. A consumer proposal is a legal process that allows you to negotiate with your creditors to create a repayment plan that suits your budget. As a result, you may be able to settle your debts for less than what you owe and avoid bankruptcy.
Consumer proposals can help reduce and sometimes eliminate debt and stop wage garnishments, legal actions, and creditor harassment. If you are considering a consumer proposal in Ontario, speak to an experienced trustee who can help you get started. Risman Zysman Inc. is just around the corner if you need a professional guide to consumer proposals and dealing with debts the right way.
Table Of Contents
- What Is A Consumer Proposal?
- How Much Does a Consumer Proposal Cost?
- What Debts Are Included in a Consumer Proposal?
- Pros and Cons of Canada’s Consumer Proposal Plans
- Advantages of a Consumer Proposal
- Disadvantages of a Consumer Proposal
- How Does a Consumer Proposal Affect Your Credit?
- How Does a Consumer Proposal Work?
- Paperwork and Documentation
What Is A Consumer Proposal?
A consumer proposal is a formal, government-approved debt settlement plan that can help you get out of debt. It's an alternative to bankruptcy and is designed to help you repay your debts over time while minimizing the fees and interest charges.
A consumer proposal is a formal agreement between you and your creditors that allows you to repay your debts, usually three to five years. The terms of the agreement are negotiated by a Licensed Insolvency Trustee (LIT), who will work with both you and your creditors to come up with a payment plan that works for everyone.
Popularity Of Consumer Proposals in Ontario
The Office of the Superintendent of Bankruptcy says that in 2021, there were about 90,000 insolvencies in Canada. 30,000 of them were in Ontario. Out of the 30,000 filings in Ontario, 74% were consumer proposals. 96% of our office's consumer proposals were successful.
How Much Does a Consumer Proposal Cost?
A Consumer Proposal can be an excellent solution for those struggling with debt, as it allows you to repay what you owe while still maintaining some sense of financial stability. The proposal must be approved by a majority of your creditors and, once it is accepted, becomes legally binding. The advantage of a Consumer Proposal over declaring bankruptcy is that your assets are not seized, and you can keep your credit rating intact.
There are no upfront fees in a consumer proposal. The only cost is the monthly payment you make as part of the consumer proposal.
However, the cost of a local consumer proposal and the settlement amount will vary depending on the size of your income and assets. When you file a consumer proposal, an approved insolvency trustee will work with you to develop a repayment plan that is manageable and affordable for you. Your trustee will also contact your creditors and ask them to accept the proposed repayment plan. If most of your creditors agree to the plan, your bankruptcy filing will be annulled (meaning it never happened), and you will be given a fresh start.
What Debts Are Included in a Consumer Proposal?
A Consumer Proposal is a legal process regulated by the Bankruptcy and Insolvency Act of Canada. It is an alternative to declaring bankruptcy and can only be completed with the help of a Licensed Insolvency Trustee (LIT). In most cases, a consumer proposal will include the following debts:
- Credit card debt
- Department store credit debt
- Unsecured loans
- Outstanding bills
- Phone bill debt
- Medical bill debt
- Debt from collection agencies
- Bank loans and personal loans
- Payday loans
- Tax Debts
- Certain student loans
If you are unsure whether or not your debts would be included in a consumer proposal, it is best to speak with a licensed insolvency trustee. They will be able to review your specific situation and guide you in the consumer proposal process.
Secured debts are those that are backed by some form of collateral. For example, when you take out a car loan, the car itself is the collateral. This means that if you stop making payments on the loan, the lender can seize the vehicle to recoup their losses.
Other common examples of secured debts include mortgages, vehicle lease agreements, and home equity loans. The lender can seize the underlying asset if you stop making payments. This is why it's so important to carefully consider your options before taking out a secured debt - if you can't afford to make the monthly payments, you could lose your home or car.
A consumer proposal can help people who have secured debts because the proposal will usually involve making monthly payments to the creditor. This will help to keep the individual in good standing with the creditor and stop any legal action from being taken. In addition, a consumer proposal will also prevent any wage garnishments or asset seizures from taking place.
A consumer proposal can also cover student loans, provided that you are out of school for seven years. A consumer proposal helps with Student Loans by consolidating the debts into one monthly payment. This makes it easier for the person to manage their finances and stay current on their Student Loan payments.
A consumer proposal helps with Student Loans by stopping wage garnishments and creditor calls, freezing interest rates, and creating a manageable monthly payment plan.
CRA And Tax Arrears
The Canada Revenue Agency (CRA) is a government agency responsible for administering tax laws in Canada. Tax arrears are past due taxes and have not been paid to the CRA.
If you have unpaid taxes, the CRA may take enforcement action to collect the debt. This could include garnishing your wages, seizing your assets, or placing a lien on your property. On the other hand, if you are unable to pay your taxes in full, you may be able to arrange a payment plan with the CRA.
A consumer proposal helps with CRA And Tax Arrears by providing a negotiated settlement of your debts. This can be an attractive option for those who cannot pay their debts in full, as it allows you to pay back what you owe over some time while also stopping any interest or penalties from accruing. Additionally, a consumer proposal will stop the CRA from garnishing your wages or seizing your assets. This can be a huge relief for those struggling to make ends meet, as it gives them some breathing room and allows them to focus on getting back on their feet financially.
Payday Loan Cycle
Most of our consumer proposal clients are under the payday loan cycle, and most of them are connected to multiple loans. A consumer proposal will help stop the calls and harassment from payday loan companies and the wage garnishments. It will also help to lower your interest rates and could result in a lump sum payout at the end of the process.
High-Interest Installment Loans
High-interest installment loans are short-term, high-interest loans that allow you to borrow a fixed sum of money over a specified period. Unlike payday loans, which must be repaid in full on your next payday, high-interest installment loans allow you to repay the loan over time in fixed installments. This makes them a more affordable option for borrowers who need to borrow money for a more extended time.
High-Interest Installment Loans can be helpful for people who need money quickly but don't want to borrow money from family or friends. They can also be helpful for people who have bad credit and are unable to get a loan from a bank. However, as the name suggests, these are loans with high-interest rates. They typically charge between 39% and 48% interest.
If you are struggling with high-interest installment loans, it is important to seek help as soon as possible. A consumer proposal is one option that may be available to you and can provide relief from your debts.
Are There Typical Consumer Proposal Terms?
No two consumer proposals will ever be the same, just as no two people's debt issues are the same. The motivations underlying how a consumer proposal is negotiated, however, do adhere to a consistent pattern. Let's learn all about them in this article.
Each Person's Debt is Different
Every consumer proposal will be unique because of the size of the debts, the types of creditors involved, and the circumstances under which you accrued the debt. One can get into debt in various ways and for many reasons.
A person may file bankruptcy due to a threat of legal action, a large debt, or a sudden change of circumstances. These circumstances can include loss of income, a divorce, or a severe health issue.
Common Proposal Requirements
Individuals in financial distress and unable to make their monthly payments submit consumer proposals. An insolvent debtor can only offer a consumer proposal. A licensed trustee must file consumer bankruptcy proposals in Canada and follow the guidelines outlined in the Bankruptcy and Insolvency Act.
All consumer proposals must offer creditors a better deal than they would in bankruptcy. Creditors should not approve a consumer proposal if they received a more significant repayment in a bankruptcy proceeding.
A trustee experienced in filing consumer proposals with many different creditors gets to know what individual creditors are looking for and what will work. Because of this, almost all creditor proposals filed with Risman Zysman Inc. are approved.
The variables used to calculate the price of a consumer proposal are standard. The final number may vary depending on your assets and income. How much you're willing to offer can change.
Consumer Proposals: Tailoring Them For Success
In some cases, consumers may be given a proposal with a term of up to five years. Many people use this to spread payments over the longest possible period. Some may choose to pay off their consumer proposal early. Nothing stops a proposal from being offered over a shorter time.
An 80% debt reduction through a consumer proposal is a common claim. A person with no assets and a low income may gain from such a substantial reduction. Still, a person with a moderate or high income may be expected to agree to a significant percentage of their debt.
Creditors' preferences will also be considered when determining the repayment amount in a consumer proposal. Some creditors might be willing to accept less than full repayment if the alternative is to file for bankruptcy and receive nothing at all. Sometimes, creditors may refuse to accept a consumer proposal unless they receive one-third, half, or two-thirds of the debt.
A consumer proposal's most advantageous factor is how it could quickly adapt to your scenario. Contact us immediately for a no-cost consultation if you need help getting out of debt.
Pros and Cons of Canada’s Consumer Proposal Plans
The Consumer Proposal plans in Canada have both pros and cons. On the one hand, they offer an excellent way for people to get out of debt without declaring bankruptcy. They can help people keep their homes, cars, and other possessions while getting their finances back on track. However, Consumer Proposals also come with some drawbacks. For example, they can be expensive to set up and maintain, and they may not be available to everyone.
Overall, consumer proposals can be helpful for some people in difficult financial situations. However, it's important to understand the pros and cons that come along with it.
Advantages of a Consumer Proposal
- No upfront fees! Our initial consultation is free, and so is the filing of your consumer proposal
- Creditors will no longer be able to harass you
- Bank accounts will no longer be frozen
- Wage garnishments will stop
- You can reduce the total amount of debt you owe by up to 80%
- You will only have one low monthly payment each month
- You get to keep all of your assets
Disadvantages of a Consumer Proposal
There are a few disadvantages to consumer proposals. First, they are not as well-known as debt consolidation loans or bankruptcy, so some people may not be aware of them. Second, they can be more time-consuming and complicated to set up than other options. Finally, they are only available to people who have a steady income and good credit score.
Other disadvantages include:
- A consumer proposal will damage your credit score and remain on your credit report for up to seven years. This will make it more challenging to obtain a car loan, mortgage, or even a cell phone plan in the future.
- All of your assets become part of the proceedings when you file for bankruptcy. With a consumer proposal, you are able to keep some of your assets (depending on how much money you owe).
- If you have a particularly large debt that you cannot pay off within five years, a consumer proposal may not be the best option for you.
Consumer Proposal Process in Toronto
- If you're struggling with debt, contact a Licensed Insolvency Trustee for a free consultation.
- The LIT will go over your debts and assets and come up with a proposal for how to pay off your creditors.
- Sign some documents, including the offer proposal.
- Your LIT files the paperwork with the court, which starts the stay of proceedings and puts an end to all collection efforts.
- Your creditors have 45 days to decide whether or not to accept your proposal.
- If your proposal is accepted, the court will approve it within 15 days. If the court does not accept your proposal, your LIT will work with you to improve it and submit it again.
- If you agree to the terms of the loan, you need to start making your payments on time.
- You start rebuilding your credit by attending two credit counselling sessions.
- Once you have made all your payments and met the conditions, you will receive a Certificate of Completion. This will prove that you have completed the program and are now legally released from the debts you included in the proposal.
How To Qualify For A Consumer Proposal?
In order to file a consumer proposal, you will need to meet certain requirements. These include:
- Your total unsecured debts are between $5,000 and $250,000
- You have the income to afford a lower monthly payment
- You are insolvent, which means that your total debt exceeds your assets
- You want to avoid bankruptcy because it can protect important assets like your home
- You are a Canadian resident or property owner
Filing A Consumer Proposal in Toronto
Filing a consumer proposal is a process that the government regulates. This process includes several steps that you have to follow.
To start, you need to book a free consultation with one of our trustees. They will go over your debts and assets with you. If you can't pay off your debt through other means, such as debt consolidation, a consumer proposal may be an ideal solution if you meet the legal requirements.
- You are a Canadian citizen or own property in Canada
- Are in a state of insolvency
- You have less than $250,000 in unsecured debt
- You have the income to make monthly payments for a long period of time
- You don’t have other insolvencies in progress/li>
Your trustee drafts the proposal and payment terms. You sign the necessary documents. The trustee files your consumer proposal with the Official Receiver and notifies your unsecured creditors. Once the papers are filed, you are safe from all collection efforts, including wage garnishments and debt collector calls.
The trustee sends copies of your proposal to your creditors and they have to respond within 45 days. If they don’t respond within that time, the Official receiver accepts the proposal. If the creditors respond on time, they may request a creditor meeting. Your creditors can vote to accept or reject your proposal during this meeting.
If the creditors agree to your consumer proposal, you will start making monthly payments. Once you have made all the payments, you will receive a Certificate of Full Performance which proves that you completed the proposal and your debts are forgiven.
How Much Does A Consumer Proposal Cost?
The cost of a consumer proposal varies depending on your unique situation. You will pay:
- A filing fee of $100 to the OSB
- You will need to pay two mandatory credit counselling fees, each of which costs $85
- A $1,500 proposal fee to your trustee plus 20% of the creditor distributions
- 5% of the creditor distributions to the OSB
We at Risman Zysman Inc. don't charge you any additional taxes, like up-front or set-up fees. When you let us help you with your consumer proposal, you don't have to pay anything until we file the proposal with the government.
Why Are Consumer Proposals Rejected?
If your creditors think that the amount you offer in your consumer proposal is too low, they may reject it. But usually, they will make a counter-proposal for you to consider. You can either accept the proposal or come up with a counter-proposal of your own.
Our financial experts have a lot of experience creating proposals that creditors cannot refuse. That's why 95% of the proposals we file are accepted.
What Debts Can Be Included In Consumer Proposal?
A consumer proposal can include more than one type of unsecured debt.
- Personal loans
- Payday loans
- Credit cards
- Lines of credit
- Unpaid utilities
- Store cards
- Income taxes
- Student loans
- Mortgage or car loan
- Highway or bridge tolls
How Does A Consumer Proposal Affect Credit Score?
If you file a consumer proposal, your credit score will be lowered to R7 for up to six years from the date of filing.
Where To Get A Consumer Proposal in Toronto?
If you're struggling with debt, the Licensed Insolvency Trustee at Risman Zysman Inc. can help. We'll work with you to create a consumer proposal, which is a plan to repay your debts. Together, we can help you move toward a debt-free future.
Consumer Proposal Alternatives
There are many different debt solutions that we can recommend to you. Other solutions we can advise you on include:
- Personal bankruptcy
- Debt consolidation loan
- Debt management plan
Please book a free consultation with one of our experts to see which solution is right for you.
Why File a Consumer Proposal? Is it Better Than Bankruptcy?
If other options to pay off your debt, like a debt consolidation loan or a debt management plan, don't work for you, you can try a consumer proposal. This is a way to pay off your debts without going bankrupt. Consumer proposals are usually less expensive than bankruptcy.
There are several reasons why you might choose to use a consumer proposal instead of bankruptcy to eliminate debt:
- If you have to file for bankruptcy, you might have to give up some of your assets. This includes your equity in your home and any money you have saved in an RESP.
- If you earn more than the government-mandated minimum threshold in a bankruptcy, you will have to make higher monthly payments. A proposal allows you to spread these payments over a longer time, reducing your monthly costs. This is like having an extension on your mortgage or loan to reduce your monthly payments, except that a proposal is also interest free.
- You can repay what you can afford. Many people don't want to file bankruptcy. A proposal allows you to offer what you can afford to pay while reducing your overall debt burden.
- You can pay off a consumer proposal early if you want. But bankruptcy has a mandatory length, so you can't finish it any sooner.
- If you are in a consumer proposal, it is often easier to get a credit card than if you were bankrupt.
How Does a Consumer Proposal Affect Your Credit?
If you are considering a consumer proposal in Ontario to deal with your debt, you may be wondering how this will affect your credit.
A consumer proposal is a legal process that is administered by a Licensed Insolvency Trustee (LIT). It is an alternative to filing for bankruptcy and can provide relief from your unsecured debts. The impact a Consumer Proposal has on your credit score will vary depending on several factors, including the particulars of your case and your overall credit history. However, in general, filing for bankruptcy (including through a Consumer Proposal) will have a negative impact on your credit score.
While a Consumer Proposal can hurt your credit score, it is important to remember that this is often only temporary. As you make payments under your proposal and successfully complete the terms of the agreement, your credit score will gradually improve. This process can take several years, but eventually, you should be able to rebuild your credit and regain financial stability. In fact, many people find that their credit score improves after completing a Consumer Proposal.
If you are considering a Consumer Proposal vs bankruptcy, speak to a licensed insolvency trustee today to learn how it could affect your credit score and whether it is the right solution. With our help, you can make an informed decision about your financial future.
How Does a Consumer Proposal Work?
When you can't pay your debts, a trustee may be appointed to help you through a consumer proposal. A trustee is an impartial person appointed by the court to administer a consumer proposal.
A consumer proposal is a legal process where a person who is unable to pay their debts proposes a plan to their creditors to repay a portion of what they owe. The proposal must be accepted by at least two-thirds of the person's creditors (by dollar value), and the court must also approve it.
If the proposal is accepted, the debtor makes monthly payments to a licensed trustee, who then distributes the money among the creditors. The repayment period can be up to five years, and if all payments are made as agreed, any remaining debt is discharged at the end.
A consumer proposal is different from personal bankruptcy. A bankruptcy filing makes all of your debts go away, while a consumer proposal allows you to keep some or all of your debt and usually results in lower monthly payments.
When you file a consumer proposal, your trustee will work with you to create a repayment plan. This repayment plan will outline how much money you will pay back each month and when you will be done repaying your debt. Your trustee may also suggest alternative payment plans if they feel that the proposed repayment plan is not feasible for you. Ultimately, it is up to the court to approve your repayment plan. If the court approves your repayment plan, you will be required to pay your trustee each month. Once you have made all of the required payments, your debt will be discharged, and you will be free from your creditors.
Paperwork and Documentation
When you file for a consumer proposal, many paperwork and documentation are required. If you cannot provide some of the documents, your trustee can help you gather the necessary information. Remember, it is important to provide as much information as possible to help your trustee make an informed decision about your proposal.
The paperwork and documentation for a consumer proposal usually includes the following:
- A cover letter or proposal
- The consumer proposal form
- The statement of affairs
- A financial statement
- Proof of income (pay stubs, bank statements, T1 General)
- Proof of expenses (mortgage or rent payments, utility bills, credit card statements)
- List of creditors and balances owed to each creditor
- Any other relevant documents specified by the trustee
Stay of Proceedings
If you have filed a consumer proposal, the court may order a stay of proceedings. This means that your creditors cannot take any action to collect their debts from you while the proposal is in effect. The stay of proceedings also applies to any legal actions that might be taken against you.
Voting and Approval
When it comes to voting on a consumer proposal, there are three possible outcomes: acceptance, rejection, or continuation. In most cases, the vote will result in either approval or rejection after 45 days of creditors’ review. However, if there is a tie vote between accept and reject, the proposal will continue. This means that the creditors will have an additional month to consider the proposal and make a decision. If there is still a tie vote at the end of that month, then the proposal will be automatically rejected.
Payments and Duties
When you make a consumer proposal, there are certain payments and duties that you must follow. These include making monthly payments to your trustee, attending credit counseling sessions, and abiding by the terms of your proposal. If you do not make your monthly payments or follow the other requirements of your proposal, your trustee can terminate it, and you will likely have to declare bankruptcy.
You will receive a Certificate of Full performance once the proposal payments are complete. This means that your debts have been eliminated, and you can have a fresh start in your financial status.
If you’re feeling overwhelmed by debt and don’t see a way out, it might be time to consider a consumer proposal. This is a formal process where you work with a Licensed Insolvency Trustee to come up with a plan to pay back your debts over time. You can still keep your assets and there’s no need for bankruptcy. Contact us today for more information or to schedule a free consultation. We can help you get started on the path to financial freedom.