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2015-09-23 19:25:25

What is a Consumer Proposal?

What is a Consumer Proposal?

A consumer proposal is an alternative to declaring personal bankruptcy. It’s an arrangement that’s negotiated with your creditors through a consumer proposal administrator who is also a licensed bankruptcy trustee. A legally binding agreement is put in place to provide you with immediate protection from creditors/debt collectors and arrange for a partial repayment of your total unsecured debt that is owed. When you file a consumer proposal you agree to pay a portion of what you owe, and your creditors agree to forgive the balance.

 

What happens when I file a Consumer Proposal?

-   Most wage garnishments cease immediately

-   Interest stops accumulating from the date you file

-   Collection companies and creditors can no longer contact you for payment

-   You are not in jeopardy of losing your house or other assets, as in bankruptcy

-    You repay only a portion of your debt owing, with a maximum repayment period not exceeding 5 years.

 

Facts about Consumer proposals

  • A consumer proposal filing is done by a trustee in bankruptcy.
  • The trustee makes an offer to the creditors to accept a portion of the amount of unsecured debt (i.e. excluding mortgages and car loans).
  • Trustee submits a proposal to the creditors.
  • If creditors who are owed a majority of the debt agree, the proposal will be binding on all unsecured creditors.
  • Once the proposal is accepted, all unsecured creditors are required to stop collection efforts.
  • Proposals can last up to five years, but three-year plans are generally more successful.
  • Unlike a bankruptcy filing, your assets will not be liquidated but the presence of the proposal will be noted in the credit report.
  • Fees are regulated by government.