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Being debt-free is something everyone strives for. Unfortunately, it is easier said than done. Especially since most Canadians have a mortgage, a car loan, student debt, and even credit card debt. As a result, it isn’t always possible to live debt-free.
This is especially true in places like Red Deer and the rest of Alberta, where the average debt per person (not counting mortgages) is just shy of $30,000. On the other end of the spectrum, the incomes are quite high in Red Deer as well. This allows many people to carry large amounts of debt without a lot of financial trouble.
However, this is far from the experience of everyone. There are many people in Red Deer struggling with managing debt. Thankfully, Red Deer has a wide range of different and high-quality debt relief solutions. One, in particular, is the consumer proposal.
Video: Understanding Consumer Proposals
What is a Consumer Proposal?
A consumer proposal is a legal process in Red Deer between you and your creditors to pay back a portion of what you owe. It is primarily for those in Red Deer who are unable to pay off their debts in full and feel they will never be able to. The amount that you’ll pay back in a consumer proposal will depend on things like your income or how much you owe.
In most cases, a consumer proposal will reduce the amount you need to pay back by a large margin, but it does have its consequences (more on that later). A consumer proposal is generally seen as a less-extreme debt relief solution in Red Deer when compared to bankruptcy, as your assets are not put at risk.
It is required by the law that a consumer proposal is carried out by a Licensed Insolvency Trustee (LIT). LITs are trained to assist individuals with filing either bankruptcies or consumer proposals in Red Deer and the rest of Canada. They are Officers of the Court and are the only people able to file these processes. They either work for themselves or as a member of a firm.
Can you get approved for a loan while in a consumer proposal? Find out here.
The Consumer Proposal Process in Red Deer
So what should you expect when you file a consumer proposal in Red Deer? The first step of the process is finding the right Licensed Insolvency Trustee to work and set up your first meeting. The LIT you work with should:
- Be knowledgeable and experienced in the space
- Have all of the necessary training
- Be someone you feel comfortable and confident working with
- Be willing to discuss other debt-relief options with you before simply filing a consumer proposal
Next, once you have found the right LIT in Red Deer, together you will begin to create a proposal based on what you owe, your current financial situation, and your potential financial needs in the future.
Once you and your LIT have come up with the right proposal, it is time to send it to your creditors. Now, there is no rule stating that creditors need to accept a consumer proposal, so be sure to make it work for both parties, not just yourself. Also, it is important to be aware that the creditor that holds the majority of your debt must agree to the proposal for it to be accepted.
If your creditors accept your consumer proposal, you will have five years to make regular payments to your creditors, eventually paying back the total amount you agreed upon.
Can you pay of your consumer proposal early? Click here to learn more.
How Does Filing a Consumer Proposal in Red Deer Affect Your Credit?
As you could imagine, filing a consumer proposal will have a negative effect on your credit. In Canada, all credit accounts listed on your credit report are given a credit rating between 1 and 9. The higher the number, the worse your credit rating for that specific account. A consumer proposal will get you a credit rating of 7. This rating will remain on your credit report for three years after you finish making all of your proposal payments. This is slightly less than bankruptcy, which will last for six years from the date of discharge.
Learn how to improve your credit rating after a consumer proposal, click here.
So as you can see, a consumer proposal is far less damaging to your credit score and credit report than bankruptcy. However, it will still do some damage and could take you a while before you get your credit in good standing again. But sometimes, it makes sense to take the hit on your credit and start rebuilding as opposed to simply continuing to miss payments and struggle with insurmountable amounts of debt.
Is a Consumer Proposal Right For You?
Are you in debt trouble and not sure if a consumer proposal is the right option for you in Red Deer? If you are, you should consider reaching out to Loans Canada. We will be able to answer any questions you have and help you figure out the best course of action to take consumer proposal or not.