Consumer Proposals - One of Canada's Leading Bankruptcy
Note to readers: Consumer Proposals are one
of the best bankruptcy alternatives, but they
are a legal process only available to residents of
Canada. U.S. residents should consider a Chapter
13 Wage Earner Plan.
What is a Consumer Proposal?
A consumer proposal is a negotiated settlement
between you and the people you owe money to (your
creditors). It's a deal that you make with your creditors
as one of the alternatives to bankruptcy in Canada.
To file a proposal you need a licensed trustee to
act as the administrator of the proposal. The trustee
will review your debts and your monthly budget, and
work with you to determine what you can afford to
offer as a proposal.
A typical consumer proposal would involve monthly
payments, such as a payment of $300 per month for
up to five years. A consumer proposal may also include
a lump sum of money, such as from the sale of a house,
or the cashing in of an RRSP. The money is placed
in trust by the administrator, and then distributed
to the creditors.
At the end of the consumer proposal, all debts are
discharged, even if you have not repaid them in full.
What are the advantages and disadvantages of a consumer
The biggest advantage of a consumer proposal is that
most of your debts will be discharged. (Debts such
as child support payments or court fines are not discharged
in a consumer proposal). In most cases you end up
paying less than the full amount owing to discharge
Consumer proposals also have the advantage that there
are no interest charges; all interest is stopped when
the consumer proposal starts. Also, you are on a set
payment plan, so you know exactly how much you are
required to pay each month.
The biggest disadvantage of a consumer proposal is
that you now have a payment to make each month. This
payment is most likely a lot less than what you were
paying when you were trying to service all of your
debts, but it is still an obligation that must be
factored into your personal
budget each month. Don't start a consumer proposal
if you can't afford.
In addition, a consumer proposal will remain on your
credit report for three years after you have completed
making all of the payments. That means that a four
year proposal will remain on your credit report for
If you can afford it, and if you live in Canada,
a consumer proposal may be a great bankruptcy
alternative for you and your family. More information is available at the consumer proposal information site.