What is a consumer proposal and is it the best option for me?
One option to consolidate your debts is to file a Consumer Proposal in Saskatchewan. It is a legal process under the Bankruptcy and Insolvency Act between you and your creditors to repay part of what you owe. The amount you repay is largely based upon your income and what you own.
|All financial decisions have advantages and disadvantages. Consumer Proposals are not any different. A professionally certified Credit Counsellor can help you determine what is in your best interest: a proposal or another option.|
A Consumer Proposal can only be setup by a bankruptcy trustee and costs around $1,500. You'll pay an initial setup fee, and if it is accepted by your creditors, you will pay the balance to proceed. In addition, the trustee will keep 20% of your future payments as your Consumer Proposal administration fee. For the proposal to be legally binding, the creditors who own the majority of your debt must agree to the arrangement. If they do, then you will be required to repay the agreed upon amount over a maximum term of 5 years.
Advantages and Disadvantages of Filing for a Consumer Proposal
There are some clear advantages and disadvantages of filing for a Consumer Proposal. They include the following:
- It can be an effective method of debt consolidation in Saskatchewan if:
- You cannot afford to pay back all the debt you owe
- You have steady income
- Your budget has enough money in it for you to make monthly payments
- Has the potential to be a good option if:
- Will put active collection of student loan payments on hold
- It is one of the final ways of avoiding bankruptcy
- It's not a private mater. A Consumer Proposal is filed as a permanent public record and is included on a searchable database
- It costs more than filing for bankruptcy
- The Court must approve it
- Creditors can choose to reject the proposal. If they do, you may need to offer them additional funds to convince them to proceed
- You might need to sell some of your assets (such as a vehicle, your home, or investments)
- You may need to file for bankruptcy if you miss more than 2 payments
- Secured debts cannot be put into a proposal
- Student loans less than 7 years old can't be included
- It can put certain professional licenses at risk, and the permanent record of your insolvency may also affect some future employment opportunities
How a Your Credit Will Be Impacted by a Consumer Proposal
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 making monthly payments to secured creditors (like paying for a vehicle loan) outside of your Consumer Proposal, those debts will be reported separately by the creditors that you are paying. If you can create and stick with a realistic budget, then it should make this easier.
If you are able to keep up a good payment history on any secured debts while you are paying off your proposal, this can assist you in re-building your credit more quickly afterwards.
Contact Us for More Information About Filing for a Consumer Proposal in Saskatchewan
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 Saskatchewan at 1-888-527-8999. You can also email or chat with us online right now.
Related Articles of Interest
- Consumer Proposal Canada
- Debt Consolidation Option 8 - Filing for a Consumer Proposal
- Attend a budgeting workshop or a webinar to avoid defaulting on a Consumer Proposal
- The Office of the Superintendent of Bankruptcy in Saskatchewan
- List of Bankruptcy Trustees
- Insolvency Glossary
- Credit Counselling Society Saskatchewan office locations
The Credit Counselling Society provides not for profit credit counselling services in Saskatchewan and is recognized as one of Canada's leading debt relief services with 24 offices in communities across the country.