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Consumer Proposal Surrey 2019

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In life, there will be many expenses that come your way, from credit card debt to car payments, rent cheques to groceries. Hopefully, the resulting debt from these expenses will not be too much for you to handle alone. Then again, living in Surrey can be relatively pricey compared to many other places in Canada.

When it comes to your debt, it’s always prudent to deal with them as swiftly as you can. Nonetheless, we know this is easier said than done and that a drastic solution is sometimes necessary when push comes to shove. In this case, we’re talking about filing a consumer proposal in Surrey.

The True Cost of BorrowingDo you know what the true cost of borrowing is? Find out here.

When to Consider a Consumer Proposal in Surrey

A consumer proposal is a legal procedure that, when accepted, allows you to pay back a portion of the balances you have owing to your creditors, rather than the full outstanding amount. The process itself will be regulated under Canada’s Bankruptcy and Insolvency Act and must be conducted by an officer of the court known as a Licensed Insolvency Trustee.

Once the proposal is filed, the situation will become a matter of public record and the overall goal would be to end any wage garnishment or other debt collection efforts that have been laid against you. This should leave you with a series of monthly payments, which you’ll make through your assigned trustee, who will send them to your creditors until your remaining balance is paid in full.

Click here for more information about Licensed Insolvency Trustees.  

Although this may sound simple enough, keep in mind that a consumer proposal is a serious procedure that’s reserved for cases of extreme debt. It should not be applied for on a whim, as a number of long-lasting financial consequences will follow.

Only consider filing a consumer proposal when you:

  • Have exhausted all other conventional debt payment methods (credit cards, debt consolidation loan, etc.)
  • Have between $5,000 and $250,000 of unsecured debt to pay off (court designated limits).
  • Can provide viable proof of your inability to pay your debts in full.
  • Have a good job and an income that will allow you to afford all payments, court fees, and other costs involved with the process.
  • Can handle the resulting financial damage, such as a lower credit rating.
  • Are financially stable enough to potentially live without credit products until the situation is resolved (this may take several years).

What happens when you can’t afford your consumer proposal? Find out here.

Want to pay off your consumer proposal and start building credit faster?

How a Consumer Proposal Differs From Bankruptcy

While there are many other debt management products and programs out there, a consumer proposal is one of the only options that involve a legally binding court process. The other of course is personal bankruptcy, which also needs to be conducted by an Insolvency Trustee to end any collection penalties against you. In both cases, the court is also likely to assign you a number of credit counselling sessions as part of your mandatory duties.

Despite their similarities, however, bankruptcy is very different from filing a consumer proposal in when it comes to the payment process, as well as the effect on your finances and personal life that will follow.

A bankruptcy, in essence, is far more serious to undertake and should only be considered when you have no other alternative. Below, we’ve included some of the key differences between the two options so you can decide which one is best for you.  

Designated Debt Limits

While there are specific limits for how much unsecured debt you can have before filing a consumer proposal in Surrey, you can technically declare bankruptcy with a minimum of $1,000. There is no maximum limit.

Your Payments

Generally, you will have a maximum of 5 years to complete all payments associated with a consumer proposal in Surrey. However, you may be discharged from bankruptcy in as little as 9 months, provided you adhere to any duties the court assigns you.

Rather than sending monthly installments to your creditors, you’ll have a series of payments to make toward the court itself. This will include a base contribution of at least $1,800 and as surplus income payments if your income is over a certain threshold.

Look here to know if you can pay your consumer proposal early.

Your Assets

During a consumer proposal, your assets (property, equity, etc.) will be safe from being seized. However, bankruptcy may result in the court extracting what you owe from those assets, meaning you could lose your car or house if you owe enough. Even your RRSP savings may be subject to seizure.

Read this to find out if you’ll lose your RRSPs during a bankruptcy.

Your Credit

Unfortunately, both of these options will be listed in your credit report for several years, leading to a decreased credit rating for any accounts that are associated. Afterward, getting new credit will be more difficult because creditors will simply trust you less with their money, at least until your finances have had a chance to recover. That said, the overall effect of bankruptcy is worse than filing a consumer proposal in Surrey.  

For example, an account associated with a consumer proposal (or other special debt settlement procedure) will receive a rating of R7. A record of the event will also remain on your report for 3 years following the completion of your final payment. During and afterward, most lenders, especially prime ones, will not approve you for large amounts of new credit. However, you may still be accepted with a private or alternative creditor, albeit at a much higher interest rate.

To learn how you can get approved for a loan after a consumer proposal, check this out.

On the other hand, any credit account linked to bankruptcy will receive the lowest rating of R9 and your credit report will retain the information for 7 years after you’ve been officially discharged. During and afterward, 99% of creditors will consider you too risky to approve. Although you might be able to qualify for a small loan with a bad credit lender, your options will be far more limited, not to mention more expensive.

Canadian Credit ScoreTake a look at this infographic to learn more about what affects your credit score.

Debts That Are Eligible For a Consumer Proposal

Once a plan of action has been arranged, your Trustee will offer the proposal to the creditors that hold the majority shares of your unsecured debts. They’ll then have 45 calendar days to either accept or reject the offer. If they accept, the process can begin. If not, you and your trustee will have to make other arrangements.

As we mentioned, both consumer proposals and bankruptcies are meant to eliminate the ‘unsecured’ debt. This means any debt that does not involve collateral, as well as some debts from non-credit entities,  should be eligible for coverage.

However, any debt that’s ‘secured’ means a creditor still holds temporary ownership over one of your assets, which happens when you offer security in exchange for a better interest rate or a larger amount of credit. Since an outside party still has rights to the asset, the debt cannot be included in either a consumer proposal or a bankruptcy.

Eligible Debts

  • Credit cards
  • Unsecured loans and lines of credit
  • Unpaid income taxes
  • Non-federal student loans
  • Non-credit bills (cell phone, internet, utility, etc.)

Ineligible Debts

  • Mortgages and home equity products
  • Car and vehicle loans
  • Secured loans and lines of credit
  • Federal student loans
  • Legal judgements/charges (lawsuits, alimony, tickets, etc.)

What is a 100% consumer proposal? Find out here.

Reach Out to Loans Canada

Are you thinking of filing a consumer proposal in Surrey? Are you recovering from one or trying to avoid the process altogether? No matter what the case is, rest assured that Loans Canada is here to lend a helping hand. Contact us today for more information about consumer proposals or debt relief solutions in your area!


Will seeing a credit counsellor affect my credit score?

  • Meeting with a credit counsellor to discuss your credit building or debt relief options will not affect your credit score. But, if you enter into a certain type of debt relief program through your counsellor, that could have negative effect on your credit score.

What is the difference between unsecured and secured debt?

  • Secured debt is backed by collateral in the form of an asset, typically a vehicle or house. Collateral lessens the risk for the lender and sometimes allows a borrower to gain access to a larger loan or a lower interest rate. In the event that a borrower defaults on a secured loan, the lender has the right to seize the assets to recoup any losses. Unsecured debt, on the other hand, does not require any form of collateral or security.

What is insolvency?

  • Insolvency is the state of being unable to repay your debt. A borrower who is insolvent typically must seek professional help to deal with their debt issues.

Does the Canadian Government offer debt relief services?

  • The government of Canada does not offer any specific debt relief programs or products.

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Posted by
Bryan completed the Cinema, Video, and Communications program in Dawson College and holds a Bachelor’s Degree in English Literature & Creative Writing from Concordia University. Bryan covers a wide range of topics for Loans Canada, including credit improvement, debt management, and all things related to personal finance. In his spare time, he maintains a passion for editing, writing film and television screenplays, staying fit, and traveling the world in search of the coolest sights our plan...

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