If you look at recent statistics about the consumer debt in Canada by province, you will see that Quebec is doing quite well with an average debt of under $5,000 per person, which is far lower than many other provinces in Canada. However, it should be noted that the impressive number you just saw is the average and there are still many people in Quebec who are struggling with debt.
If you are struggling with a lot of debt, but don’t want to file for bankruptcy, a consumer proposal might be right for you. With that in mind, this article will be taking a closer look at consumer proposals in Quebec. We will not only look at what they are, but also how they work, how to know if you need one, and much more.
What is a Consumer Proposal?
Before going any further, we need to make sure everyone knows what a consumer proposal is.
A consumer proposal a legally-binding and formal process that could lead you to only having to pay off a portion of the debt you owe. These proposals require a Licensed Insolvency Trustee (LIT) to help you out and facilitate the deal. The LIT you are working with will help you come up with a proposal and ensure that the terms and details are fair not only to you but also the creditors. If they don’t accept the terms, the deal doesn’t go through, so the proposal needs to be fair and make compelling points and arguments as to why you cannot pay off your full debts.
Want to know the difference between a debt management program and a consumer proposal? Look here.
How Does it Work and What to Expect?
Now that you know a little about what a consumer proposal is, how does it work and what should you expect during the process?
First, let’s look at how it works. A consumer proposal in Quebec only works if the creditors agree to the terms that you and the LIT have outlined in the proposal. Once your LIT has submitted your proposal to the creditors, they will have 45 days to decide whether to accept it or reject it. Also, you should be aware that if you owe a substantial amount of your debt to more than one creditor, they will have a vote on whether to accept your terms or not.
If accepted, you will follow the guidelines set out in the proposal, which will often include a payment plan or lump sum payment. Also, you will need to attend a couple of financial counselling sessions, which will hopefully keep you out of debt in the future as they will arm you with the knowledge necessary to better manage your finances. If the proposal is denied, you will have to make changes and try again, or opt to try out a different debt relief option.
How To Know If You Need a Consumer Proposal?
This is a tough one, as there is no right or wrong time to file a consumer proposal in Quebec. It is all up to how comfortable you are with debt and paying it off. Some people will be totally fine paying off five figures of debt, while some will struggle to pay off a few thousand. So to answer this question, there is no real way to know if you need one. The decision is up to you and should be based on your unique situation.
Can a consumer proposal be amended? Find out here.
Consumer Proposal Requirements
If you are in over your head with debt and feel there is no way you will ever be able to get out of it on your own, it might be worthwhile to talk to an LIT and see what they would recommend. Also, there are a few criteria that need to be met in order for you to be able to actually get a consumer proposal in Quebec.
Max Debt Allowed
First, you must have over $5,000 (but under $250,000) of total consumer debt. If you are over $250,000, it will be very tough to get a consumer proposal. The same goes for debts under $5,000. There are other debt relief options available for those who cannot qualify for a consumer proposal.
Another criterion that must be met is that you need to be able to make some payments each month, which often means you will have to have a suitable job in order to file for a consumer proposal. You also need to be realistically unable to pay back everyone you owe in full. This means that if you want to pay off less of your debts just because you think it’ll be easier, you cannot opt for a consumer proposal, as it is an option reserved for those who truly do need the help.
If after reading this, if you feel you may qualify for a consumer proposal, you should reach out to a LIT and see what they think. They will be able to provide you with a lot more information about the topic of consumer proposals and other debt relief options. They will speak about the benefits, your responsibilities with each option, the consequences, and you will also be able to ask them a number of different questions.
What To Look for in a Licensed Insolvency Trustee?
If you live in or near a fairly large city like Montreal or Quebec City, there are likely dozens of potential LITs that you can choose from, so how do you know which one to work with? Well, there are a few things you can do to ensure you select the right one.
First of all, you need to make sure that they are knowledgeable, educated, and experienced on the topic of consumer proposals. They should be able to answer any questions you have and do everything professionally, by the book. Of course, they also need to be someone you can trust with your personal information. You need to be comfortable speaking and working with them. If you feel “off” about them at all, you should look elsewhere.
While your first meeting with many LITs will be free, most will not offer their entire service for free. Because of this, it is also important to consider the costs and prices of each LIT to ensure you are getting a good value for the service.
Here’s what you should expect during the consumer proposal initial assessment.
Online reviews, ratings, and testimonials can also help you figure out which LITs have been successful for people like you and which you should avoid. The choice is ultimately up to you, so you should visit a few different ones to ensure that you are making the right choice.
Filing for Bankruptcy vs Filing a Consumer Proposal in Quebec
If you are in a lot of debt and don’t see a reasonable way to escape the debt, the two main options are filing a consumer proposal and filing for bankruptcy. Bankruptcy is essentially signing over your assets to a LIT who, in exchange, will eliminate your debts by giving/selling the assets to pay off your creditors. Of course, there are some rules, exceptions, and caveats about what is surrendered and what you get to keep.
Look here to find out what can and can’t be included in a bankruptcy.
Both a consumer proposal and bankruptcy are common debt relief options, but bankruptcy is generally the “last resort”, as your assets are not only at risk, but your credit will also take a massive hit for several years. A consumer proposal will still affect your credit, but not as bad, and you won’t have to lose your assets.
For this reason, a consumer proposal is generally the better option, unless you don’t have a decent job and/or don’t meet the other criteria necessary for qualifying for a consumer proposal in Quebec. Sure, bankruptcy might be less work and is generally a quicker solution, but it certainly comes with its own set of consequences.
Click here for more information about the bankruptcy process in Quebec.
While Quebec is a province that is generally successful when it comes to dealing with debt, that’s not the case for everyone. Hopefully, this article has shed some light on consumer proposals in Quebec and all elements that go along with them. If you’re interested in more information or want to be matched with a debt professional, we can help.