Consumer Proposal London
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Written by Kale Havervold
Best Consumer Proposal London (Online) January 2021
Whether we like it or not, borrowing money is a part of our lives. Things like vehicles, homes, and even a college education cost thousands of dollars, which most of us do not just have lying around in our bank accounts. As a result, we need to borrow money from banks or other lenders to help out and get by.
However, keeping up with payments is not always easy. Many consumers can afford high payments and eventually get themselves out of debt, but others cannot. While the first thought many have in this situation is to file for bankruptcy, there is another option. That option is to consider filing for a consumer proposal in London.
Do you know what a 100% consumer proposal is? Find out here.
What is a Consumer Proposal?
So what exactly is a consumer proposal and how can it help your financial situation and debt problems? A consumer proposal is a legal process in which an individual agrees to pay back a portion of what they owe to their creditors. The actual amount that is repaid through a consumer proposal will depend on a variety of different factors including your income and your total amount owing.
Normally, a consumer proposal will result in you needing to pay back a lesser amount. You will work with your creditors to come up with a sufficient repayment amount and a repayment period of five years or less.
However, in order to actually file a consumer proposal, you will need to work with a Licensed Insolvency Trustee. A Licensed Insolvency Trustee is a professional who is educated and experienced in the filing of bankruptcies and consumer proposals. They are officers of the court and can work as a part of a firm or on their own. The laws and regulations they must adhere to are outlined in the Bankruptcy and Insolvency Act (click here for more information).
The Consumer Proposal Process in London Ontario
Now you know what a consumer proposal is, it’s a good idea to familiarize yourself with the consumer proposal process. The process begins first by finding the right Licensed Insolvency Trustee. Your area will likely have many of them, so be sure to go with one that has a good track record, is professionally trained, and one you are comfortable working closely with.
Once you have successfully selected your trustee, it’s time to meet with them and create a proposal to send to your creditors. Remember, the proposal needs to be something that works for you but one that also makes sense for your creditors. Making them a low ball offer that they would never accept is nothing but a waste of time. Instead, look at how much you owe, your income, and your overall financial situation and come up with a fair proposal that makes sense for everyone.
Once the proposal is finished, your trustee will send it to your creditors. Next, you will need to wait to hear back from your creditors. In order for your proposal to be accepted, the creditors that hold the majority of your debt must be willing to accept it. Once accepted, you will have a maximum of 5 years to pay back the agreed upon amount according to the schedule that you came up with.
How long does it take for your consumer proposal to be accepted? Click here for more information.
Consumer Proposal vs. Bankruptcy
When most people think they need to file for bankruptcy, a consumer proposal in London may actually be a better choice. The two are quite similar in that they get your debts forgiven and will hurt your credit score and rating, but there are many differences between the two as well. First of all, a consumer proposal is much less severe and extreme than bankruptcy. Your assets are not at risk (like they are in bankruptcy), and the effect on your credit won’t be as negative.
Also, consumer proposals have fixed monthly payments, while bankruptcy payments are usually variable and can be more difficult to predict and plan for. Bankruptcy is often used by those who want a traditional quick form of relief and start from scratch, while consumer proposal is for someone who wants to mitigate the damage to their finances and credit, but is okay with a longer process, most of the time.
Of course, be sure to speak with your Licensed Insolvency Trustee about which option works best for you and your situation. Of course, feel free to reach out to Loans Canada or another expert in your area, as well.
Click here for a detailed look at how a consumer proposal affects your credit score.
How Will Filing For a Consumer Proposal Affect Your Credit?
While filing a consumer proposal in London is less harmful to your credit than bankruptcy, it will still negatively affect it. In Canada, all credit accounts receive a rating between one and nine, with one being the best. A bankruptcy takes you right to a 9, while a consumer proposal only takes you to a 7. Your credit rating will stay at a 7 for three years after you finish making your proposal payments.
Thankfully, there are plenty of different things that you can do to rebuild your credit after a consumer proposal. This includes:
- Checking your credit report for errors and making sure any issues are fixed and dealt with
- Using a secured credit card to build credit without the risk of missing payments, and also get you in the right mindset to use credit responsibly again
- Make all payments on time and in full every single month
- Avoid unnecessary and excessive spending if possible
- Create and stick to a budget so you know how much you can afford to spend in any given month
Doing these things won’t get your credit back to perfect overnight, it is a process that will take time and sacrifice. But over time, your credit can certainly improve and all of the sacrifices and changes you made will be worth it.
When Does a Consumer Proposal Make Sense?
So when is it a good time to get a consumer proposal and how will you know? Well to understand when it is the right time to file a consumer proposal, you need to know whether you can even qualify. In order to qualify for a consumer proposal, there are a few things you need to consider. These include:
- You have debts over $5,000, but less than $250,000 (not including mortgage)
- You cannot afford to pay back all of your creditors in full
- You have a well-paying job and can afford to make consistent monthly payments
- You have so much debt that not even a debt consolidation loan will help your situation
- If bankruptcy is not something you’re comfortable with
If you check off these boxes and are ready to get out of debt, a consumer proposal in London might be the right choice for you. If not, there are plenty of other debt-relief options worth checking out such as debt consolidation, debt settlement, and credit counselling. However, always consult with a trusted expert before ultimately making your decision.
Can you pay off your consumer proposal early? Click here to find out.
Can All Debt Be Included in a Consumer Proposal?
Lastly, it is important to know what kinds of debt can be included in a consumer proposal in London. In general, two different types of debt cannot be included in your consumer proposal and the first is student loan debt. While a consumer proposal can make it so you aren’t required to make your student loan payment, the interest will still accrue, which could leave you with more student loan debt than you had initially.
The other type of debt that can’t be added to a consumer proposal is secure debt. This includes mortgages, car loans, and any other type of secured loans that you may have. In some cases, you might even need to sell this asset off to keep up with your proposal payments. The Licensed Insolvency Trustee you meet with should be able to help you figure out whether the debts you have qualify to be included or not, so don’t worry.
The Right Consumer Proposal For Your Needs
If you are looking for more information about consumer proposals in London or wherever you are or want to get one, don’t hesitate to reach out to Loans Canada. We are confident we can help and answer any questions you might have. We look forward to hearing from you.