Frequently Asked Questions on Consumer Proposals

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Frequently Asked Questions on Consumer Proposals

A consumer proposal is an offer to your creditors to settle debt with your creditors without any further interest and often at a significantly reduced amount.

A consumer proposal is a formal, legally binding agreement between you and your creditors that is administered by a Licensed Insolvency Trustee.

How do I file a consumer proposal?

Should it be determined that a consumer proposal is the best solution for you, the necessary paperwork will be prepared and filed, and any legal action will be immediately stopped.

Does a consumer proposal ruin your credit?

Any time you miss payments to a creditor, stop paying or negotiate a payment arrangement with your creditor, it will negatively impact your credit rating. With a consumer proposal, you are compromising the debt by settling with your creditors and asking them to take less than what you owe and no further interest. This means that your credit rating will be impacted, however, there are ways to work on rebuilding your credit and our knowledgeable staff can navigate you through this process.

How does a consumer proposal work?

A consumer proposal begins by filing a consumer proposal to your creditors with the help of a Licensed Insolvency Trustee. It is then sent to creditors and they have 45 days in which to receive, review and vote on whether or not they want to accept the proposal or decline the proposal. In order for the proposal to be accepted, a majority in dollar value must vote in favour. Once approved by the creditors, 15 days later it is deemed approved by the court and becomes a legally binding agreement between you and your creditors to settle the debt.

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Is a consumer proposal better than bankruptcy?

A consumer proposal is often better than bankruptcy for various reasons, including:

1. You can keep your assets and tax refund in a consumer proposal.

2. Bankruptcy payments can be significant if you’re a high-income earner, a consumer proposal allows for a fixed payment over a longer period of time, having a positive impact on your cash flow.

3. Consumer Proposal is a simpler process than bankruptcy. Your only obligations are to make the payments as agreed and to attend the mandatory counselling sessions.

4. You can start to rebuild your credit rating sooner than in bankruptcy.

How long to rebuild credit after a consumer proposal is filed?

Once your consumer proposal has been accepted by your creditors, you can once again apply for credit and start the process of rebuilding your credit score. Because your credit score has been impacted negatively by filing the consumer proposal, you will likely need to start by applying for a secured credit card. A secured credit card is where you give the financial institution a security deposit and they extend credit to use and pay as you would with a regular credit card. This is not to be confused with a prepaid credit card, which does not report on your credit bureau.

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D. Thode & Associates Inc. wants to help you find debt solutions that last.

Schedule a Free Consultation today to discuss all your alternatives.

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