Pro’s and Cons’ of Consumer Proposal that you May Need to Know

Individuals and businesses in Canada have many options to deal with their financial problems. Out of many solutions, one option to manage the debts in a better way is by using Consumer Proposal. It’s a legal option mandatorized by the Federal Government that enables the debt holders to settle their debts.

Usually, people use this when they have much less income, presently, than the amount, they had at the time of credit. The reasons behind this can be loss of job or business, accident, divorce, etc. Another scenario is a situation where an individual is paying only the minimum amount of the debt, without having reasonable capability to pay the whole debt amount.

Let us discuss some pro’s and con’s of consumer proposal that might help you in making your decision.

Pro’s

• The person who is liable to pay the debt can pay only a small portion of the debt. This can be done by negotiating with the administrator or the trustee, asking to propose a lesser amount instead of the already proposed one. Creditors usually agree for the said amount if it is more than the amount they will receive from your bankruptcy.
  

• You can pay the agreed amount in minimum 60 monthly instalments and maximum until the completion of 5 years.
   
• Your monthly amount will not be increased even if your total monthly income is higher. This will be specified in your proposal.
  
• There is a possibility of immediate stoppage of your interest charges.
  There will be end to creditor’s collection calls. 
• All kind of legal actions that took place against you will come to rest, immediately. If the creditor has filed any kind of lawsuit against you, that will be stopped too. 
• You can retain your asset/property. 
• There will be much less damage than filing a bankruptcy. Through this, you can easily come out of your bank debts without having much hassle.  

Con’s

• If your credit score is good, it will suffer when Consumer Proposal is listed on your bureau file.
  
  
  

• Although, it may not be as damaging as bankruptcy, you will get a tough time in getting approvals for any future unsecured credit.

• It is important to know that even if you are entering in a long time repayment cycle; your credit rating will be affected.

• You cannot approach the creditor who is part of your proposal for credit (until you do not repay them).

• There will be minimum 2 credit counselling meetings.

 A consumer proposal is an exceptional program where individuals, families and partners can solve their debt related problems. It also reduces the hardship that the affected person has to bear. On the other hand, it helps the debt holder(s) to safeguard their property/asset. The overall loss, which the debt holder pays, is shifted to a reasonable amount. Through this proposal, it becomes easier for the liable party to repay the amount.