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Having too much debt on your plate can not only be financially challenging, but it can also be extremely stressful. Luckily, there are plenty of programs available that are specifically designed to help consumers whittle down their debt and help them achieve financial freedom sooner rather than later
One such program is a 100% consumer proposal. So, what exactly is this program, and what does it entail?
Is it better to have a good credit score or be debt-free? Find out here.
What is a Consumer Proposal?
A consumer proposal is a type of debt relief program that is designed to help consumers significantly reduce their debt. If other means of reducing debt have been exhausted – such as creating a budget, cutting back on spending, and focusing on paying down high-interest debt – a consumer proposal may be a viable option. It’s often a step taken before resorting to filing for bankruptcy.
Consumer proposals are drafted up with the help of a Licensed Insolvency Trustee who will also negotiate with your creditors. They will help you come up with an agreement whereby you pay back your debts for an amount smaller than what you originally owed.
These arrangements can help you drastically reduce your debt, even by as much as 80%. Unlike bankruptcy, you won’t risk losing your assets, as long as you make your payments as stipulated in your agreement.
Click this link to know if you can pay off your consumer proposal early.
What is a 100% Consumer Proposal?
If you are a homeowner and have some equity built up in your home, you may be able to use that equity to pay down your debt, especially high-interest debt like credit cards. But in many cases, homeowners are unable to access their home equity and may still be unable to make their payments when they come due.
In cases like these, a 100% consumer proposal might help. While a traditional consumer proposal involves reducing the amount of debt that you owe your creditors, a 100% consumer proposal does not actually reduce your debt level. However, it will help extend the amount of time that you have to repay your full debt, giving you a lot more leeway in terms of making all payments toward paying down your debt.
Read this to learn how much debt you need to file for a consumer proposal.
Generally speaking, 100% consumer proposals end up requiring full repayment of debts owed over a five-year time period. Through a 100% consumer proposal, you agree to repay your entire debt during this time frame.
Even if you have enough equity in your home to cover the cost of all your current debt, you still may not be able to strike a deal with your creditors. But if you can’t get at your equity, you’ll be stuck. That’s where a 100% consumer proposal comes into the picture.
This type of consumer proposal arrangement might be a better alternative to taking out a second (or even third) mortgage because it allows you to access your equity, keep your home safe from repossession, consolidate your debt into one payment, and may even help you save money.
When is Filing a Consumer Proposal The Right Choice?
While a consumer proposal might be a great way to reduce your debt load, make it easier to repay what you owe, and avoid bankruptcy, it’s not always the right option. Whether you decide to opt for a consumer proposal or not will depend on your exact financial situation.
Consumer proposals require certain criteria to be met. In order to qualify for a consumer proposal, you must:
- Be able to afford to repay at least a portion of your debts
- Be able to make monthly installment payments
- Not have unsecured debt in excess of $250,000 (excluding your mortgage)
A consumer proposal might make sense for you if your situation sounds like any of the following:
- You’re looking to alleviate the stress from your mounting debt
- You don’t want to risk losing your assets as you would with a bankruptcy
- You earn enough money that would make you have to declare high surplus income payments if you had filed for bankruptcy
- You want to avoid bankruptcy
Before you decide if a consumer proposal is the right program for you, be sure to speak with a Licensed Insolvency Trustee. The consultations are free, no obligation, and confidential.
Here’s what happens to your debt once you’ve filed for a consumer proposal.
When is a 100% Consumer Proposal The Best Option?
A 100% consumer proposal might be a viable option for you if:
- You have at least 20% equity in your home
- You’re unable to gain access to that equity
- You’re able to repay your debt but just need more time
- You have too much debt on the books
- You have bad credit and a history of late payments
If any of these scenarios apply to you, then a 100% consumer proposal might work. That said, you may still want to speak with a Licensed Insolvency Trustee to make sure there aren’t other options that may serve you better.
Working With a Licensed Insolvency Trustee
If you decide that a 100% consumer proposal is the right path to take, you will need to work with a Licensed Insolvency Trustee. They are licensed by the federal government to perform services under the Bankruptcy and Insolvency Act, such as consumer proposals.
They will deal directly with your creditors for you in order to negotiate a more workable arrangement that you are more financially comfortable with. This can include reducing the amount of debt you owe, reducing the interest rate, extending the time period that you have to repay your debt, or help you consolidate your debt.
Once your creditors are dealt with, the collections calls will stop and no legal proceedings will continue.
It’s necessary to deal with a Licensed Insolvency Trustee when filing a consumer proposal because they are the only professionals who are authorized to carry out insolvency proceedings that are government-related, such as consumer proposals.
Read this to learn how long it takes for your creditors to accept or reject your consumer proposal.
Considering a Consumer Proposal?
Whether you’re looking to file a consumer proposal or 100% consumer proposal, you’ll want to go through the proper channels. In this case, you may want to consult with Loans Canada in order to be put in touch with the right Licensed Insolvency Trustee agency that can ensure that your best interests are upheld when you’re trying to alleviate your debt load. Call Loans Canada today and finally rid yourself of all that mounting debt.
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