how consumer proposals work

How Do Consumer Proposals Work

When you are determined to live a debt-free life, but you need more time to pay it all, you may want to try this arrangement program. Have you ever heard the term consumer proposal?

A consumer proposal is a formal, legal debt repayment arrangement between you and your creditor as well as administered by a LIT or Licensed Insolvency Trustee Red Deer professional. The LIT is the only professional recognized by the Canadian government to work on this arrangement. He or she will be the Consumer Proposal Administrator on your behalf. Through this legal arrangement, you have agreed to pay off the percentage of what you owe. On the other hand, your creditors will grant the total elimination of your total debt once you have completed the said proposal. 

If you are facing any of the following situations:

•  You owe more than $5,000 but less than $250,000

•  Don’t want your property or house to be used as payment for these debts

•  You needed more time to pay what you owe since you have just paid,  partially

Excluding your mortgage, if you are facing any of the above, you are eligible to seek for a LIT assistance and file for the consumer proposal. Here are the following basic stages that you will be going through in this legal process:

1. Assessment & Payment Plan – 

The trustee will be looking into your income as well as your assets. This is to determine the amount that you will be paying if in case you were to file bankruptcy. He or she will also discuss things concerning your budget.  Your monthly cash flow will be reviewed, excluding your current unsecured debt payments, as this may hinder the proposal. This will then help the trustee to determine the amount that you can afford to pay monthly. 

              With this in mind, he will determine a payment plan. These proposed payments can be divided over a maximum of five years. If you can afford to pay more per month, this will be better as this will shorten the proposal term.

2. Filing & Voting

the trustee can now file for the consumer proposal. Once it is electronically filed with the government, you now gain protection from creditors. All the legal actions and wage garnishments will be stopped – which means that you will no longer make payments to your creditors.

              Your creditors will also be receiving the same documents that you have signed as well as your proposal terms. They will review the contents of the proposal and decide whether to accept, do nothing, or reject your terms. In some cases, if creditors rejected your terms, they will be asking for a meeting, and a simple voting is held.

3. Make Proposal Payments

at this stage, you have two duties; (1) make all the needed payments, and (2) attend credit counseling sessions. If you can, you can also pay off your debt early and there is no need for you to prepare income reports unlike when you file bankruptcy. Take note that you can only defer up to two payments; if you fall three payments, your proposal will be annulled, your debts will be reinstated, and you will lose your protection from creditors.

4. Completion of Debt & Credit Repair

after completing your payments, you will be receiving a “Certificate of Full Performance.” At this stage, your debts have been eliminated, and the government will be the one to forward your debt completion to various credit bureaus.

If you still have questions with the process and other options that you can take. It would be best for you to talk to a Licensed Insolvency Trustee Red Deer about it. Our office is open Monday through Friday. Feel free to call our Red Deer office during normal business hours.