How does a Consumer Proposal Work?

Consumer proposal, one of the most popular bankruptcy alternatives in Toronto, is a way to negotiate a debt settlement with your creditors.

How does it work? You approach a bankruptcy trustee (you must file the paperwork with a trustee; you cannot do it yourself) who works with you to come up with a plan. After looking at what you owe, who you owe money to, and your monthly cash flow, the trustee can tell you if a consumer proposal is suited for you. If so, the plan is sent to your creditors for approval. If the majority of them accept your proposal, you have a deal. The creditors in the minority are forced to go along with the majority.

We like to look at a consumer proposal as a good deal for everyone involved: you make one monthly payment that you know you can afford, and your creditors get more coming to them than if you had filed for bankruptcy. It is a win-win situation, and that is why a proposal to creditors is one of the most popular bankruptcy alternatives in Toronto.

Consumer proposals can run anywhere from 1 and 60 months. In the Toronto area the typical consumer proposal usually lasts for 36 to 48 months.

What are the benefits of a consumer proposal?

There are many benefits for you in filing a consumer proposal:

• Interest on all your credit cards is frozen as of the date you file your consumer proposal
• Most wage garnishments are immediately stopped
• Your creditors cannot take any more collection actions against you
• You can even include amounts you owe to the Revenue Canada on account of income taxes in your consumer proposal
• The credit bureaus will report your consumer proposal as an R7 – as opposed to an R9 that comes with a bankruptcy
• Even better, unlike debt help offered by unlicensed companies, s consumer proposal is a legally binding procedure that is administered for the courts by a licensed trustee in bankruptcy. Once it’s accepted, your creditors cannot change the deal

By filing a consumer proposal you also have the satisfaction of knowing you presented the best offer you could to your creditors in a repayment plan.

How can you tell if a Consumer Proposal is the correct option for you?

You live in the Toronto area and, for a variety of reasons, you have more debts than you can pay for in full. You have the ability to make some monthly payments towards your creditors and you don’t want to file for bankruptcy. The key ingredient here is cash flow; after paying for all your housing, transportation and living expenses, there is some money left over to pay to your creditors (the people you owe money to), but not enough to pay them all that they are asking for.

Does this sound like you? If yes, then filing for a consumer proposal might be the way to go. But, since you live in the Toronto area, why don’t you make an appointment to meet with us to explore whether or not a consumer proposal is a bankruptcy alternative to your situation. Our initial consultation is free.

You can reach us anywhere in Toronto by dialing 310-PLAN (no area code required), or e-mail our trustee in Toronto to ask your questions or to set up a consultation.

Our consumer proposal professionals will review your financial situation, go with you thru all available bankruptcy alternatives, and help you work out a plan that’s right for you. If you are interested in a fresh start, let’s get started.