If you are experiencing financial difficulties, having problems making ends meet, and your debt is getting out of hand, you will want to consider all possible solutions to help you get back on your feet. If you’ve already tried budgeting or credit counselling, a consumer proposal could be the solution you are looking for.
Filing a consumer proposal is a common path to take when a person reaches insolvency because it allows an individual to avoid bankruptcy. The proposal is a legally binding agreement between a debtor and their creditors to tackle the debts owed. Instead of paying the amount owed in full, the proposal asks that creditors accept a lowered amount.
In this situation, a debtor will offer to make a monthly payment for a maximum of five years to reach that lowered amount. When the goal is reached, the entirety of debts from the named creditors is cleared. The burden gets lifted from the debtor’s shoulders.
If you’re in a difficult financial situation, and you can’t seem to get yourself out of debt, you should consider filing for a consumer proposal in Ontario. The solution may sound intimidating, but multiple advantages come with this debt relief method. The licenced insolvency trustees at David Sklar & Associates specialize in filing consumer proposals and are committed to helping you achieve debt relief.
The Benefits Of A Consuming Proposal
At David Sklar & Associates, we want you to understand how consumer proposals can work for you. By successfully following the Consumer Proposal process, you can:
- Avoid bankruptcy
- Keep your assets
- Avoid having any further interest charges
- Reduce the total amount of unsecured debt owed
- Pay off your current unsecured debt in five years or less
- Get some “breathing space” so that you can continue to pay your secured creditors (like your mortgage or car loan/lease) without the additional stress of paying the full amount of your outstanding unsecured debt
- Stop collection calls by unsecured creditors
- Stop garnishment of wages by unsecured creditors
- Stop legal actions taken and contemplated by unsecured creditors
- Learn how to stay out of debt problems
You Will Be Supported Every Step Of The Way
You’re not alone in your debt struggle, and our licensed insolvency trustees will walk you through every step of the consumer proposal process.
The reality is that plenty of people are dealing with the same struggles you are. Statistics show that the average Canadian household spends 14.9% of disposable income on their debt. From a local perspective, personal debt levels in Toronto have reached record highs.
According to the Canada Mortgage and Housing Corporation, Toronto residents have a debt-to-income ratio of 208%. While a portion of this debt is related to housing, outstanding credit balances also contribute to these concerning numbers. The only city in the country with a higher debt ratio is Vancouver, British Columbia.
You’re not the only person we’ve helped with filing a consumer proposal and won’t be the last. Have peace of mind knowing that we’ve handled this before and can help you get through this. We work with you to help you come out on the other side with a weight lifted off your shoulders.
A Consumer Proposal Provides More Protection Than Consolidation Loans
One of the main advantages of consumer proposals is that they protect debtors from creditors. Consolidation loans do not provide this protection. For a consumer proposal to be accepted, the majority of the creditors have to agree to the terms.
If the majority agrees, then all of the creditors are bound by the terms. This is where a consumer proposal has the most significant advantage over debt consolidation loans. A proposal helps the debtor get a fresh start and start over again to take control of their finances and embark on the path to rebuilding their financial future.
Your Total Debt Will Be Significantly Reduced
you get to experience debt relief. You no longer have to stare at a mountain of debt and wonder how you are ever going to pay it off. The proposal will leave you with only a portion of that debt, making it a smaller hill to climb. This is a goal you can achieve.
The lowered debt amount also makes it easier for you to manage other costs in your life, like rent/mortgage payments, car insurance and utilities. You can cover your essentials and tackle your financial trouble at the same time. As long as you make your monthly payments on time, you can repay your debts to creditors. It will take a maximum of 5 years to complete, and then you can celebrate.
Your Assets Are Protected
With a consumer proposal, the debtor can keep all of their significant assets as long as they continue making their payments. Houses/rental properties, vehicles, RRSPs, tax refunds and other assets are completely separate from the proposal experience.
This is not the case with bankruptcy. Personal bankruptcy doesn’t protect all assets, as many of them are surrendered to settle debts. There are exemptions, such as household furniture, personal clothing, trade tools and a motor vehicle (up to a specific value).
Payments Are Agreed Upon Ahead of Time
There are no interest rates, hidden fees or penalties that will change your monthly payment plan. The terms are set ahead of time, and there should be no surprises when it comes to repayment.
Collection Calls End
One term that creditors have to follow is that they are no longer allowed to make collection calls. You don’t have to feel tense every time your phone rings.
Collection calls can be very troubling for many that are having issues paying their debts. Once you file for bankruptcy or file a consumer proposal, the collection calls should stop.
Your trustee will notify your creditors of your consumer proposal or bankruptcy within five days of your filing. They will send this information via mail, email or fax, so how the notice is sent will determine when the creditors receive the information.
Once you file for bankruptcy or a proposal, collection agencies and creditors will not be able to continue or start any collection action. All communications will be dealt with through your bankruptcy or proposal, and all creditors will be required to follow the appropriate steps.
If you have filed for bankruptcy or a proposal and you are still receiving collection calls, simply let them know that you have filed and that they should be receiving the notice at any time. You can also let your trustee know so they can make sure the notice has been sent.
Wage Garnishment Stops
Wage garnishment is when your employer is court-ordered to withhold part of your paycheque so that they can send it to the creditors. When your creditors agree to the consumer proposal, they can no longer proceed with wage garnishment. They are not allowed to violate that agreement term.
It Provides Protection From Creditors
If collection agencies are threatening to pursue legal action against you, they will have to stop when the consumer proposal goes into effect. They can no longer go to court to obtain an order to garnish your wages, freeze your bank account or seize your assets.
It Will Not Affect Future Employment Opportunities
One of the disadvantages of filing for bankruptcy versus a consumer proposal is that it may affect your employment opportunities in the near future. For one, certain job applications will ask whether you’ve filed for bankruptcy in the past — it is not common practice to ask whether you’ve filed for a consumer proposal.
Admitting to bankruptcy can hurt your chances of getting the job. This is especially true when you’re applying for a job that includes employee bonding in their hiring process. They might see you as too much of a financial risk and reject you as an applicant.
Here are some positions that often require bonding:
- Financial officers
- Bank tellers
- Repair technicians
You Can Rebuild Your Credit Faster
Personal bankruptcy stays on your credit report for approximately six to seven years if it’s your first time filing. If it’s your second time, the period jumps to fourteen years. A consumer proposal will stay on your credit report for three years after you complete it. If you take the full five years to make all of the payments, it will mark your credit history for eight years, which is technically more prolonged than a bankruptcy. Still, there is a potential that you can finish it faster and have it removed from your report in less than seven years.
Your credit report is essential for big decisions like buying a house, renting an apartment, buying a car and even applying for a new credit card. Getting a debt relief label off of the report will boost your overall score and make it easier to reach these financial milestones.
You Can Increase Your Income
Your income doesn’t affect your monthly payments after you file a consumer proposal. So, if you increase your revenue or gain any assets over the five years, you don’t have to adjust your payment plan to accommodate the surplus. If anything, additional income or assets will make it easier to complete your payments. You could even pay the sum earlier than expected! Personal bankruptcy is not so accommodating for surplus income. Debtors that see an unexpected increase in revenue or assets will have to adjust their payment plan, resulting in an increased amount of money to repay and an extended period of bankruptcy.
You Can Ammend Your Application
If the majority of the creditors accept your consumer proposal’s terms, the agreement becomes legally binding, and you can move forward with the payment plan. If they don’t agree to the terms, you don’t have to admit defeat right away.
With a licensed insolvency trustee’s help, you can adjust the proposal terms to make them more appealing to the creditors. In the end, they could accept the amended version.
What to Know Before Filing A Consumer Proposal
It’s Only Meant For Unsecured Debt
A consumer proposal is only meant for unsecured debt (credit cards, utility bills, payday loans, etc.)
- It does not cover secured debt (mortgage, auto loans, etc.)
- It’s only available to people with less than $250,000 in debt
- You can include multiple creditors in the agreement
You Need To Work With A Licensed Insolvency Trustee
If you’re planning on filing a consumer proposal in Ontario to get out of a rough financial situation, you need to go to a licensed insolvency trustee.
This trustee will act as an intermediary between you and the creditors, ensuring that everyone respects the agreement’s terms. They also assist you through multiple steps of the process.
Here are some of the things that your licensed insolvency trustee will do to help you along the process:
- Assist you with the creation of the proposal
- File the proposal
- Negotiate with you and your unsecured creditors
- Receive and disburse the proposal plan payments to creditors
- Provide credit counselling
- File documents to legally release you from the unsecured debt once the proposal is complete
The Payment Process
After receiving the creditor’s acceptance, the payment process can begin. You will make monthly payments until you reach the proposal’s agreed-upon lump sum.
If you fall behind three months-worth of payments without filing an amendment to the proposal, the agreement will no longer be legally binding, and all benefits will be eliminated. After defaulting from the proposal, your main debt relief option may be filing for personal bankruptcy.
How Do You Get A Consumer Proposal?
If you’re interested in a consumer proposal, book a free consultation with one of our licensed insolvency trustees (formerly known as bankruptcy trustees). There are no upfront fees. The trustee will help you figure out if you’re the right candidate for this form of debt relief.
We are one of the largest filers of consumer proposals in the Greater Toronto Area. All of our trustees are licensed by the government and are highly-experienced in guiding clients towards more financially stable futures.
We have six different locations that you can visit. So, if you’re looking for an Etobicoke consumer proposal office, you can come to our Mississauga-Etobicoke site for help. Our Brampton location is not too far away and, if you live in Ajax or Whitby, you can drive over to our office in Pickering. If you’re living in Toronto, you can go to our office in the West End, Midtown or North York.
A consumer proposal may not sound like a great process to go through, but you can see that it brings many advantages to the table when you take a closer look. If you’re in a tough spot and don’t know what to do, you should consider taking this step toward debt relief and getting back to a place of financial stability.