Advantages of a Consumer Proposal in Canada

In Canada, a consumer proposal is considered the best bankruptcy alternative, and is the only government approved form of debt settlement. Consumer proposals allow you to reduce your debt by up to 80% via one fixed affordable monthly payment.

Consumer proposals offer all the benefits of major debt reduction while avoiding bankruptcy and its consequences. There are various advantages of filing a consumer proposal in Canada, all of which we will cover below.

Advantages of filing a consumer proposal in Canada

For Canadians that meet the eligibility criteria for a consumer proposal, there are a number of advantages over other forms of debt relief:

  • Avoid bankruptcy. Filing bankruptcy is often considered a last resort when it comes to debt relief options in Canada. Although bankruptcy is perfect for individuals in need of a fresh financial start, it has more severe consequences than a consumer proposal. For instance, a bankruptcy will remain on your credit report for longer, and it can prove problematic for some forms of employment and even securing a rental. Bankruptcy fees must also be paid, proportionate to your income and assets.
  • Keep your assets. Arguably the biggest advantage of filing a consumer proposal is the protection over your assets. Unlike bankruptcy, you can keep all assets as well as tax refunds, investments, and even equity in your property. You may keep both your home and your car, regardless of their value, provided you can stay current on your payments. You will likely find that your reduction in monthly payments will make it much easier to make your car loan and mortgage payments. Learn more about the differences between filing bankruptcy vs a consumer proposal.
  • Significant reduction in your debt. When you file a consumer proposal, your unsecured debts are reduced by up to 80%. You only repay a fraction of your debt, depending on the arrangement you and your Licensed Insolvency Trustee are able to make with your creditors. At Spergel, our experienced Licensed Insolvency Trustees have helped over 100,000 Canadians gain debt relief, meaning we are true experts in negotiating down your debt. Your payment is spread across a period of up to five years, allowing for one simplified, interest-free monthly payment that is affordable.
  • Avoid surplus income. In bankruptcy, you pay more the more you earn. When you file a consumer proposal, this is not the case. Should you see an increase in income or receive a raise, your monthly payments are fixed from the outset, allowing you to enjoy the additional funds you receive.
  • Protection from creditors. Once your consumer proposal is approved by your creditors, you will automatically receive legal protection from creditors. Also known as a stay of proceedings, a creditor is no longer able to contact you or pursue legal action like a wage garnishment against you. This is often a huge relief for many individuals, and one of the key advantages of a consumer proposal.

What are the disadvantages of a consumer proposal?

As with any upside of a debt relief solution, there is always a downside. Here are some of the disadvantages to consider before filing a consumer proposal:

  • The length of a consumer proposal. Consumer proposals typically take longer to complete than a bankruptcy. If, however, you have an increase in income, you can repay your consumer proposal early.
  • Your credit score will be impacted. Filing a consumer proposal will affect your credit, showing as a R7 rating and remaining for 3 years after completing your consumer proposal. This is not as severe as the credit score impact of a bankruptcy. 
  • The requirement to stick to your proposal terms. You will need to make all your consumer proposal payments and fulfil any requests of your Licensed Insolvency Trustee in the terms of the agreement. Should you fall behind on payments, your consumer proposal terms will be ended and you will regain any associated debt.

If you do not have a significant income, or assets that might be seized, a consumer proposal may not be the best option for you. We recommend booking a free, no obligation consultation with an expert Licensed Insolvency Trustee at Spergel. Our trustees will review your unique financial circumstances and recommend the best pathway to debt relief for you.

What is the success rate of a consumer proposal?

At Spergel, we have a 99% acceptance rate on any consumer proposals we file. This means you have a 99% chance of receiving a reduction of 80% on any unsecured debt that you have. Book a free consultation with one of our Licensed Insolvency Trustees today to get started.

How much does a consumer proposal save you?

We regularly file consumer proposals that see individuals enjoy a reduction in their debt of up to 80%. Try using our debt calculator to see how much you could save when filing a consumer proposal compared to other forms of debt relief. Our Licensed Insolvency Trustees can also arrange a free consultation at your convenience, across Canada or online.

How do I file a consumer proposal?

If you are interested in filing a consumer proposal, the first thing to do is to find a Licensed Insolvency Trustee that you can trust. Licensed Insolvency Trustees are the only professionals in Canada legally able to file a consumer proposal. When you arrange an appointment, you can discuss your personal financial circumstances and get advice on the best pathway to debt relief for you. Unlike other bankruptcy firms, at Spergel you are assigned your very own Licensed Insolvency Trustee to walk you through the entire debt relief process, instead of passing you from person to person.

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At Spergel, we have over thirty years’ experience of explaining the advantages of consumer proposals and helping Canadians become debt free. We will discuss your financial situation and help you decide if a consumer proposal is right for you. Book a free consultation today.

Eli’s Path to Debt Freedom

After cashing out an RRSP to pay for his wedding. Eli received an unexpected tax bill. With his other debts he could not afford to pay and eventually the debt grew. CRA decided to initiate a wage garnishment. We helped Eli avoid bankruptcy with a Consumer Proposal. Debt consolidation saved Eli’s pay cheque and his Consumer Proposal taught him to plan for unexpected expenses in the future.

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