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📅 Last Updated: June 11, 2024
✏️ Written By Lisa Rennie
🕵️ Fact-Checked by Caitlin Wood

Thousands of residents in Newfoundland and Labrador currently struggle with their debt. It’s a growing issue that’s having a direct effect on consumer finances and is one that cannot be ignored.

With mounting debt comes the increased difficulty of not being able to make timely payments, which can result in serious financial consequences that leave many Newfoundland and Labrador consumers in precarious situations.

In Newfoundland and Labrador, the average amount of consumer debt currently stands at $23,314. That puts the province relatively close to the national average of $22,125. Newfoundland and Labrador residents seem to have trouble handling this hefty number given the recent explosion of delinquencies seen in the province. People in Newfoundland and Labrador are increasingly struggling to ensure that their payments are made on time and in full, even more so than in other provinces across the country.

So, what can Newfoundlanders do to ease their debt woes? Luckily, there are a number of options to choose from, including consumer proposals in Newfoundland and Labrador.

What Are Consumer Proposals in Newfoundland and Labrador?

Consumer proposals essentially give consumers in Newfoundland and Labrador the chance to propose a “deal” with their creditors to have their outstanding debt amount reduced. They may also negotiate to have their interest rate lowered or have their deadline to pay off their balance extended. Such proposals are all made in an official consumer proposal that is drafted and filed by a Licensed Insolvency Trustee.

Like bankruptcies, consumer proposals are governed under the federal Bankruptcy Insolvency Act. This regulation stipulates how Newfoundland and Labrador consumer proposals are to be handled and what the consumer’s and trustee’s duties and obligations are in order to lawfully carry out the process.

What Does the Consumer Proposal Process Entail?

Before you begin the consumer proposal process, you must get in touch with a Licensed Insolvency Trustee. Consumer proposals in Newfoundland and Labrador can only be handled by these professionals who act on your behalf. Your trustee will look over your financial situation and make recommendations about which option is best for your particular situation.

If a consumer proposal is chosen, the process may start by having the proposal drafted up and distributed to your creditors, who then have the option of approving or rejecting your proposal. Essentially, the creditors have 45 days to make their decision, but during which time you may cease any further applicable debt payments.

If any creditors who own a minimum of 25% of your debt load have a problem with your proposal, they may request a meeting of all the creditors. Should this meeting be called, all of the creditors involved will take a vote on whether or not to accept your proposal. Your trustee will be there to represent you if this meeting takes place.

Your consumer proposal in Newfoundland and Labrador needs to be accepted by a minimum of 51% of your creditors in order for the courts to approve it. At that point, you will be required to start making your payments to repay the new debt amount negotiated.

Once you file a consumer proposal, you can expect a number of benefits:

  • Threats of lawsuits will stop
  • Collection calls will stop
  • Your wages will not be vulnerable to being garnished
  • Interest stops accumulating
  • You won’t be at risk of losing your assets
  • You only pay a percentage of the total debt you owe
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What Qualifications Do I Need to File a Consumer Proposal in Newfoundland and Labrador?

In order to be eligible to have a Newfoundland consumer proposal filed, you must meet certain criteria:

  • Have non-mortgage debts more $5,000, but not exceeding $250,000 ($500,000 for married couples)
  • Have a steady job and be able to make monthly payments
  • Cannot afford to pay your current debt load in full at your current interest rates
  • Cannot qualify for debt consolidation because your debts are too high
  • You want to avoid bankruptcy

In addition to the eligibility requirements to file a Newfoundland and Labrador consumer proposal, you will also have a number of duties that you will be obligated to carry out after the consumer proposal has been approved by your creditors:

  • Attend at least two credit counselling sessions
  • Continue to make all of your monthly payments on time and in full (three missed payments will result in default).

Once you’ve met the terms of your consumer proposal process and you’ve made your final payment, your trustee will file the necessary paperwork that will release you from any of your outstanding debts. At this point, you will be able to start rebuilding your credit and improve your overall financial situation.

Why Choose Consumer Proposal Over Bankruptcy?

Bankruptcy is typically a last resort when faced with mounting debt that has proven to be difficult or impossible to manage. There are certain advantages of Newfoundland and Labrador consumer proposals over bankruptcy:

Your payments won’t increase – With bankruptcy, you could be faced with increased payments if your income ever goes up. This is known as “surplus income” and will require that you make extra payments as a result. Consumer proposals don’t have such a stipulation, which means your payments stay the same until you’ve fulfilled your obligations.

Your assets are not at risk – Bankruptcy often entails surrendering many of your valuable assets or at least a large portion of their equity. A consumer proposal, on the other hand, will not place your assets at risk, so you should still be able to retain your home car, and any other asset that you deem valuable.

Your credit score won’t be as negatively affected – Filing a consumer proposal will certainly have a negative effect on your credit score, but it shouldn’t be as bad as it would with bankruptcy. Consumer proposals usually leave consumers with an R7 rating on their credit reports, while bankruptcies leave them with a rating of R9, which is the worst you can get.

Recently filed for bankruptcy? Click here to learn how you can rebuild your credit.

Final Thoughts

The decision to file a consumer proposal is not an easy one and should not be made in haste. All options should be assessed to ensure that the decision being made is a sound one. It’s important to discuss your situations and your options with a credit counsellor or Licensed Insolvency Trustee to determine if a consumer proposal is right for you. If it is, you can begin the process of your consumer proposal and finally alleviate all the debt problems that you’ve been plagued with for so long.

Looking For Help?

If you’ve been thinking about filing a consumer proposal in Newfoundland and Labrador, but aren’t sure where to start, Loans Canada can help!

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