How to qualify for a consumer proposal

Posted on 24 October 2022

Written by Chris Galea

If you have arrived at this page, you are likely considering filing a consumer proposal. Perhaps you are struggling with unmanageable debt, and are desperately seeking out a form of debt relief to help you and your circumstances. In this article, we will explain what a consumer proposal is and how to qualify for a consumer proposal. We also share how you can go about filing a consumer proposal if you meet the eligibility criteria, and your alternative options if you do not qualify for a consumer proposal. At Spergel, we have been helping Canadians become debt free for over thirty years, and we are here to help you too.

What is a consumer proposal?

A consumer proposal is a form of legal debt settlement in line with the Bankruptcy and Insolvency Act laid out by the Canadian government. It is an affordable method of gaining debt relief from payments including credit card debtpayday loans, and tax debt. Consumer proposals can reduce your debt by up to 80% while allowing you to keep your assets, meaning you do not need to worry about losing your home or car. It is a formal deal entered into with your creditor, negotiated on your behalf by a Licensed Insolvency Trustee. Licensed Insolvency Trustees are the only professionals in Canada legally able to file all forms of debt relief, and so they are best positioned to advise you on the best form of debt relief for your financial circumstances. Your Licensed Insolvency Trustee will work with you to establish an affordable monthly repayment on your debt. They will then work to strike a deal with your creditors. Advantages of consumer proposals include protection from your creditors via a stay of proceedings, and a reduced impact on your credit report than bankruptcy. At Spergel, we have helped over 100,000 Canadians become debt free, and we are here to help you too. Unlike other firms, you will be assigned your own Licensed Insolvency Trustee who will walk you through the entire consumer relief process from end to end, instead of passing you from person to person.

How to qualify for a consumer proposal

In order to qualify for a consumer proposal, you need to meet a number of eligibility criteria. These include:

  • Being an individual, as opposed to a business, in order to file a consumer proposal
  • Being insolvent, and unable to pay your debts when they are due
  • Having debts worth less than $250,000, excluding your mortgage
  • Having a stable income so that you can make your monthly payments
  • Having no prior consumer proposal that is still open

It is possible to file a consumer proposal even if you have filed bankruptcy already. You may want to consider doing so if your situation changes in bankruptcy, as it may actually reduce your monthly payments by extending the repayment period. This can make your payments much more manageable.

How to file a consumer proposal if you are eligible

If you meet the eligibility criteria for filing a consumer proposal, it is possible to file a consumer proposal. Consumer proposals work best for individuals who have the funds to make monthly payments to their creditors, and who have assets they would like to keep. In order to file a consumer proposal, you must first of all find an experienced Licensed Insolvency Trustee. They will work with you to review your financial circumstances and explain to you how a consumer proposal works. They will then help you to establish an affordable repayment plan for your debts. This will depend on factors including your income, assets, and overall debts. On your behalf, they will negotiate with your creditors in order to reduce your debt, and they will file your consumer proposal with the government, sorting the associated administration. At this point, a stay of proceedings will offer you protection from your creditors and you will no longer need to pay any unsecured debts. Your creditors will be informed of your consumer proposal, and they will be given a window of time to review your proposal and ask for a meeting if needed. If your consumer proposal is accepted, all you need to do is make your agreed monthly payments on time and attend two obligatory credit counselling sessions. Once your payments have been made in full, you will have completed your plan and are free to enjoy a life after consumer proposal.

What if you do not qualify for a consumer proposal?

At Spergel, your Licensed Insolvency Trustee is there to support you through your entire debt relief process. The first step of assessing the right form of debt relief for each individual is to examine your financial circumstances and see what makes sense for you. There may be instances where a consumer proposal is not appropriate. If you have very little income and next to no assets, bankruptcy may make more sense. If you want a limited impact on your credit report, an alternative option like a debt consolidation loan may work better for you. Debt consolidation loans are new loans taken out to condense other separate loans into one, simplifying your payments and often reducing or clearing your interest rate. Typically, creditors would rather accept the terms of a consumer proposal as they will receive more repayment than they would in a bankruptcy, and at Spergel, we have a 99% acceptance rate on any consumer proposals we file. Occasionally, however, consumer proposals can be rejected by creditors. If yours is rejected, your Licensed Insolvency Trustee will contact your creditors to see if they are open to negotiation. Usually, most creditors will accept a slight increase in their monthly payments to allow the consumer proposal to go ahead. An alternative to filing a consumer proposal is to file bankruptcy for a fresh financial future. Your Licensed Insolvency Trustee will support you through this process.

Want to know how to qualify for a consumer proposal? Book a free consultation with a reputable Licensed Insolvency Trustee at Spergel. We have over thirty years’ experience of helping Canadians gain financial freedom. We will assess your financial circumstances and recommend the best form of debt relief for you, from debt consolidation to bankruptcy.

Chris Galea

Chris Galea

Chris Galea is a Chartered Accountant and Insolvency and Restructuring Professional with over 20 years’ experience as an LIT (Licensed Insolvency Trustee). He is also our resident expert on tax debt, COVID debt, and the region of Saskatchewan, Canada. When he’s not at the office educating people about bankruptcies and consumer proposals, Chris is playing pick-up hockey with his friends, spending time with his family, and learning Spanish!

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