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How Does a Consumer Proposal Work?

Are you intrigued by the consumer proposal and the potential it offers for helping you get out from under your heavy load of consumer debt without surrendering your assets? If so, then you’ll want to find out more about the consumer proposal process and what will happen every step of the way during your application. We’ve put together this guide to explain the basics of the process.

Qualifying for a Consumer Proposal

Not everyone with a significant amount of consumer debt will qualify for the consumer proposal in Canada. You must have at least $1,000 in unsecured debt and no more than $250,000 ($500,000 for married couples). Those with debt levels higher than these maximum thresholds will qualify for bankruptcy, but not for a consumer proposal. In addition, you will be able to offer a consumer proposal only if you have enough income to make some, but not all, of your monthly debt payments.

The Consumer Proposal Process

Putting together a consumer proposal that creditors will accept is a process that involves these steps:

1. Contact a licensed bankruptcy trustee and schedule an assessment.
2. During the assessment, answer all of the questions that the trustee asks of you as honestly and completely as possible.
3. If your trustee determines that you do qualify for a consumer proposal, review the advantages and disadvantages of this debt relief option concerning other possibilities such as debt settlement, debt consolidation, and consumer credit counselling.
4. With the help of the trustee’s recommendations, make the final decision as to whether or not the consumer proposal is the best option for you.

What Your Trustee Will Want to Know

In order to determine whether or not the consumer proposal is the best option for your needs, your bankruptcy trustee will need to know certain information, including:

• your normal household expenses and income
• all of your liabilities
• all of your assets
• your marital status

Each of these factors will directly impact whether or not the consumer proposal is the best choice for you. If your debts do not outweigh your assets, for example, your trustee will not recommend filing a consumer proposal with your creditors.

Preparing the Proposal

If you and your trustee determine that a consumer proposal is better for your financial situation than bankruptcy or any other debt relief option, you and your trustee will begin to craft a settlement offer. Based on your income and expenses, you and your trustee will determine the amount of money that you can reasonably offer towards the consumer proposal. Using that figure, a proposal will be drawn up that tells your creditors how much you can pay each month and makes an offer for debt principal reduction. Your trustee will also put together an Assessment Certificate for you. This is a legally required document indicating that all the right information was collected, and proves you learned of consumer proposal alternatives and that you have agreed to the proposal.

Then What?

Once the proposal is prepared, it will be submitted to your creditors. If they accept it, it will go into effect on the date specified. As long as you make your payments on time, you will not have to worry about an annulment of the proposal that will impact your finances severely.

Look at Other Debt Relief Options

While the consumer proposal offers many advantages, it is not right for everyone. Another debt solution such as a debt settlement program may be a better choice for you. Visit the debt relief page and fill out the form to learn more.

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