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Can a consumer proposal help me get out of debt?
If you think you can pay off part of your debts, you might want to file a consumer proposal instead of bankruptcy. You can only file a consumer proposal with the help of a Licensed Insolvency Trustee.
A consumer proposal is a legal agreement between you and your creditors. The consumer proposal tells creditors what you plan to do about the debt you owe them, and asks them to change the terms of your repayment. Your creditors could agree to:
- give you more time to pay back the debt
- reduce the amount of your payments
- stop charging interest on your debt
- agree to accept a lower amount than the total owing
For example, in a consumer proposal, if you owe $100, you can ask a creditor to accept $50 instead. Many creditors would rather have you pay back some of the money you owe. If you file for bankruptcy, your creditors might get no money at all.
For a consumer proposal to be accepted, the creditors that you owe more than half of your debts to must agree to it. If those creditors agree, the other creditors who did not agree will still have to accept the consumer proposal.
A consumer proposal only helps you settle your unsecured debts. An unsecured debt is a debt that does not have collateral. This means that the creditor does not have anything they can take from you if you don’t pay your debt, like a house or car.
A consumer proposal is different from a debt repayment plan because a debt repayment plan is not a formal legal process.
There will be a note in your credit report that you have filed a consumer proposal. The note will be there for 3 years after your consumer proposal is completed. Having a consumer proposal on your credit report can make it hard to get credit later.