Consumer Proposal BC - Straight Facts, Pros & Cons, and Other Options

What is a consumer proposal and is it the best option for me?

Filing a Consumer Proposal in BC is a debt repayment option that allows some people to consolidate their debts. It is a legal process between you and your creditors to repay a portion of what you owe, and it is governed by the Bankruptcy and Insolvency Act. To a large extent, the amount of debt you repay to your creditors is based on your income and what you own.

  Find out if filing a Consumer Proposal in BC, Canada is the right option to consolidate your debt and help you avoid bankruptcy.
  Every financial decision has pros and cons. Consumer Proposals aren't any different. An accredited Credit Counsellor can help you figure out if a proposal or another alternative is in your best interest.

A Consumer Proposal can only be arranged and administered by a bankruptcy trustee and costs about $1,500 to file. You pay an initial setup fee, and then, if it is accepted by your creditors, you will pay the remaining balance to proceed. In addition to this, the trustee will also retain 20% of your future payments as a fee for administering your Consumer Proposal. To be legally binding, the creditors who hold the majority of your debt must agree to the proposal. Once they do, you repay the agreed amount over a maximum of 5 years.

Advantages and Disadvantages of Filing a Consumer Proposal

There are some clear advantages and disadvantages of filing for a Consumer Proposal. They include the following:

Advantages

   


Beware of the Big Debt Rip-Off
 

Consumer Proposals have unfortunately become the latest way for an increasing number of debt relief companies and their sales people to take advantage of vulnerable, unsuspecting consumers. Make sure you don't let this happen to you! Many of these companies are now claiming to offer Consumer Proposals as an effective way to deal with debt. But there's a problem. In Canada, only a licensed bankruptcy trustee is legally allowed to deal with Consumer Proposals. These debt relief agencies charge thousands of dollars in fees but then refer you to a bankruptcy trustee who then charges his or her own legitimate fees.


How to Prevent Getting Ripped Off

 

  1. Talk to a non-profit Credit Counsellor about your financial and debt situation first. They will review your whole financial picture with you and help you look into and understand all of your options to resolve your debt problems and get your finances back on track.
  2. Never pay anyone for Consumer Proposal services except for a licensed bankruptcy trustee.
  3. Find out how the person helping you is compensated. A lot of people who want to advise you on your debts work on commission. Make certain that the "solution" they are recommending is in your best interest - not theirs.
  4. Credit Counselling Canada is a national association of non-profit credit counselling agencies who do not pay their staff commission. They’ll help you figure out if a Consumer Proposal is one of your best options. If it is, they'll refer you to a reputable, local bankruptcy trustee for free.

 

 
       
  • It can significantly reduce the amount of debt you have to repay your creditors
  • It can be an effective method of debt consolidation in BC if:
    • You can't afford to repay all of what you owe
    • You have stable income
    • You have enough money in your budget to make monthly payments
  • It will pause active collection on student loan payments
  • Can be a good option if:
  • It is one of the last ways to avoid bankruptcy

Disadvantages

  • It's not private. A proposal is a permanent public record included on a searchable database
  • It's more expensive than declaring bankruptcy
  • It must be approved by the Court
  • Creditors can reject the Consumer Proposal - if they do, you may have to offer them additional funds otherwise your proposal will not proceed
  • If you miss more than 2 payments you may need to file for bankruptcy
  • Student loans can't be included if they are less than 7 years old
  • Secured debts aren't included
  • Some assets (such as your home, vehicles, or investments) may need to be sold
  • The permanent record of your insolvency can put certain professional licenses at risk and may also affect future employment opportunities

How a Consumer Proposal Can Impact Your Credit

Once you begin making payments on a Consumer Proposal, a note is placed in the public records section of your credit report that states that you have filed a proposal. Anyone who you have given permission to see your credit report can also see the public records section.

Your creditors may also report a “7” rating on any debt included in your proposal. This rating indicates that they are receiving your payments through a third party. In this case, your trustee is the third party. Your monthly payment on your Consumer Proposal is remitted to your creditors once all applicable fees have been paid.

If you are paying secured creditors, like those who hold your car loan, outside of your Consumer Proposal, those creditors will report your payments on those debts separately. Creating and maintaining a realistic budget will make it easier to keep these debts paid up to date.

If you are able to show a good payment pattern on a secured debt while you’re making all of your proposal payments, you'll be that much further ahead afterwards when you want to re-build your credit.

Contact Us for More Information About Filing for a Consumer Proposal in BC

There are quite a number of options between financial difficulty and bankruptcy. A Consumer Proposal might be one good option for some people, but it's not the best option for everyone. To find out what other options you have, speak with one of our professionally trained Credit Counsellors today, in person or over the phone. Our appointments are free, non-judgmental, and completely confidential.

To ask us some questions or to make an appointment to speak with a Counsellor, phone us in BC at 1-888-527-8999. You can also email or chat with us online right now.

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Related Links

Best choice before visiting a bankruptcy trustee in BC - Canada. Featured online & in the media.

The Credit Counselling Society is an award winning, non-profit credit counselling service provider in BC with 24 offices in communities across Canada.

 

 

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