Myths and Facts about Consumer Proposal That You Should Know

When looking for viable options that offer relief from insolvency or debt payments, consumer proposals offer the required aid. A consumer proposal can be defined as a legal binding that is, in turn, supervised by a LIT i.e. Licensed Insolvency Trustee. In this process, the LIT will work out a solution with the debt holder so that a percentage of what is owed to the creditor can be paid or the payment deadline can be extended.

In simple words, LIT will make a proposal on the debtor’s behalf to the creditor so that both the parties can benefit in one way or the other.

However, there are many myths that are generally associated with a consumer proposal that need to be busted.

Myth 1:

Consumer Proposals Are Costly

Fact: Consumer proposal only appear to be costly, but it is an investment worth your time and money. The basic advantage of choosing a consumer proposal is that the interest payments related to the debts get completely null and void. And, moreover, the debt gets settled in small and affordable installments.

This saves the debtor from bankruptcy and other hefty fines that would be otherwise imposed, making consumer proposals a worthy investment.

Myth 2: Consumer Proposals do not Offer aid from debts coming from Government Bodies

Fact: This myth is far from reality. In fact, consumer proposals offer the best solution for settling debts from government bodies that too without any interest payments. Either one can pay the debt in full or in installments, a consumer proposal is flexible enough to offer a suitable reimbursement solution.

Whether it is an income tax debt, MSP premium payments or even a student loan, all types of government debts can be easily consolidated under a consumer proposal.

Myth 3: Consumer Proposals Leave Your Credit Ratings Devastated

Fact: Credit ratings are one major attribute that makes future credit processes easier. But people think that a consumer proposal would ruin their credit ratings and prevent them from taking further debts. However, this is not the reality.

One is completely eligible to file for new debts once their earlier debts have been settled as a consumer proposal implements a “reset” on the credit history. And, also counseling sessions are conducted when a proposal process is undergoing so that solutions to enhance credit ratings can be drawn out.

Conclusion

A debt payment can be a nightmare. But with a consumer proposal, you can take a sigh of relief and avoid the side effects of not paying timely debts. With all the myths busted and facts stated, make a

Why Should You File a Consumer Proposal?

A consumer proposal is considered as one of the best alternatives to bankruptcy for its ultimate benefits. It is the only government approved debt settlement program. Because of this reason, today maximum of people is choosing it as their preferred debt relief solution.

If you file a consumer proposal, you will have several advantages. Such as,

• A negotiated debt settlement
• You will pay only a portion of your debt
• All payment will be made in installments in 5 months
• Interest is frozen when you file
• Legally binding for you and your creditor

Why Should You File a Consumer Proposal?

• You have consumer debt greater than $5,000 but less than $250,000
• You are able to repay a portion of your debts, but need more time than your creditors are offering
• You want to stop all interest charges, wage garnishments and threats of legal action
• You don’t want to lose your important assets due to your debt

5 Top Advantages of Consumer Proposal

Here 5 points that will clarify why consumer proposal is the best option for you.

Keep Your Assets Safe

One of the biggest advantages of a consumer proposal is that you are not going to lose your assets like in bankruptcy. All assets including tax refunds, investments, and equity in your home will be safe.

Avoid Surplus Income

Unlike bankruptcy where you pay extra if your income increases, consumer proposal includes a fixed payment that never increases.

Lower Monthly Payments

In this option, you negotiate to repay only a portion of your debt.

It is not abnormal to see debts reduced by as much as 60-70% of the real amount of debt. It is one of the best, and safest, debt consolidation options available. Once you file consumer proposal all interest stop which results in a significant saving over a debt consolidation loan.

Get Creditor Protection

As a legal process under the Bankruptcy & Insolvency Act, a consumer proposal provides creditor protection that stops threatening calls from your creditors.

Once your consumer proposal is permitted by the majority of your creditors, it binds all creditors and they can’t take any legal action against you.

Avoid Bankruptcy

Most of the creditors accept this proposal easily as they know it is a far better option than bankruptcy where they do not get much. If you offer your creditors more than they would receive in bankruptcy, they will certainly accept it.

How to File Consumer Proposal?

For filing a consumer proposal you need to take the help of a LIT (Legal Insolvency Trustee). LIT acts as a consumer proposal administrator and makes the things clear between you and your creditors.

Your trustee will prepare such plan that will decide how and when you will make the payments to your Creditor.

5 Ways to Rebuild your Credit Rating after a Consumer Proposal

A lot of people think that filing a consumer proposal will ruin their credit score. It’s a common fallacy that these legal practices permanently damage your credit. This isn’t correct. It is possible to rebuild your credit rating after filing a consumer proposal.

A note is placed on your credit report when your consumer proposal is accepted by the majority of your unsecured creditors. After the completion of the consumer proposal, this note remains for three years on your credit report. The note on your credit report can only make difficult to take loans and nothing else.

In order to rebuild your credit rating, some efforts are needed to be invested. Here are some tips which will help you to do that.

By Applying for a Secured Credit Card

The first and foremost way to rebuild your credit rating is by using a secured credit card. It can be useful for those who have filed a consumer proposal and are finding it hard to get a loan. With a secured credit card, you are required to make a deposit to the lender. The lender will hold that amount as security for as long as you have the card.

Build your Savings

A significant way to rebuild your credit score is to avoid taking an unmanageable debt in the upcoming. Make sure you are making regular monthly payment with your credit card and paying off that sum each month timely. By building a history of regular payments, you can definitely improve your credit score.

Never miss any Payments

Making regular payments on your consumer proposal can be the first step to getting your credit score back on the trail. If you pay all of your payments regularly, you will develop a habit that you can continue to apply in the future. Once all your payments on the consumer proposal are completely paid, you can then initiate rebuilding your credit rating.

Don’t forget your Retirement plans

It’s important not to neglect savings for your future. One should have enough savings in order to cover their retirement lifestyle. If you have enough money saved for your future, then there will be no need to depend on your credit report after you stop working.

Say No to Credit Repair Firms

Stay away from the companies that promise to help you improve your credit. Only your creditors are capable to modify this information. Therefore, you need not pay a third party to make changes to your credit score.

Conclusion

So, filing consumer proposal in Ontario will not ruin your credit rating. In fact, it can put you on the correct track to rebuilding your finances. Now, you can easily rebuild your credit rating by fo

Why Consumer Proposal is Right for You?

A consumer proposal is a legal document that is negotiated with your creditors by Consumer Proposal administrator. It is a great alternative to bankruptcy. How? Well, there are several benefits attached to consumer proposal.

The proposal is a legal binding that is put in place to provide you immediate protection from debt collectors. It also arranges for a partial repayment of your total unsecured debt owning. By filing a consumer proposal you agree to repay a certain amount of money what you owe. And the rest of the amount is forgiven by the creditors.

Outcomes After Filing Consumer Proposal   

As you file a consumer proposal:

1. Garnishments cease immediately

2. Accumulation of interest stops there and then

3. No jeopardy of losing your home like bankruptcy

4. Calls from collection companies and creditors stop

5. You only pay a portion of debt owing within a repaying period of 5 years. 

Why is Consumer Proposal is Better Than Bankruptcy?   

The best important thing is consumer proposal is that ‘surplus income’ is not a consideration like bankruptcy.

The assets you have will not be surrendered similar to bankruptcy. Your assets will not be at risk once you propose the agreement.

Further, after filing the consumer proposal, your payments will not increase as your income increases. You will not owe anything more than the amount agreed upon the terms of your proposal. This means as your payment will not increase as your income increases.

The negative effect on the credit score is less severe as in bankruptcy. Usually, consumer proposal typically produces R7 rating whereas, from bankruptcy on gets R9 rating. Bankruptcy produces the lowest rating. Therefore, choosing bankruptcy is not a wise decision.

After filing a consumer proposal, you get the opportunity to repay some portion of the debt. As you get the sense of control, you get outstanding improvement in your self-esteem.

Why Creditors Accept Consumer Proposal?   

Of course, most creditors do not want to go bankrupt. And, with consumer proposal, they get at least some amount rather than nothing at all. A consumer proposal offers them more than what they expect from bankruptcy.

Qualifications to File Consumer Proposal

The consumer proposal can be a viable solution if:

1. Your debts exceed $5000 but not more than $250,000

2. You can afford to repay a certain amount on regular basis

3. You cannot repay everyone with full interest

These are a few reasons why consumer proposal is the right solution for you. Unlike bankruptcy, it has several benefits because of which people choose consumer proposal. If you have a job that provides a steady income, consumer proposal is the right option for you.

Consumer Proposal: How It Differs from a Debt Management Plan!

Both consumer proposal and management plan are good alternatives for the debts issues. Both can provide you relief from the debt at their places. But, still, there are some differences between them.

Let’s discuss in detail!

How Much Will You Repay?

In debt management plan, you will have to pay your full debt at zero interest. On the other side, consumer proposal makes it possible to pay less than the full amount. However both the options allow you to make payments for up to 5 years, only consumer proposal permits you to repay less than the full amount.

 Who Prepares Plans On Your Behalf?

 A consumer proposal is prepared by a Legal Insolvency Trustee, whereas management plan is prepared by a credit counselor. A consumer proposal is approved by the court where management plan has no government license. But in management plan credit counselors are the members of a professional organization and are subject to annual accreditation reviews.

To be eligible to file a consumer proposal your total debts must be between $1,000 and $250,000 per person. In case of debt management plan, there are no limits.

What Is Included?

In both the processes, you are not going to lose your valuable assets. Standard bank debts and credit cards are included in both processes. But government debts, payday loan, and other debts are included only in a consumer proposal.

If you have debts with Canada Revenue Agency filing a consumer proposal will be a right option. Payday loan companies will not agree to a debt management plan.

In a consumer proposal, if the majority of your creditors agree, all creditors will accept your proposal. But the same does not go with the management plan.

What Can Your Creditors Do?

A consumer proposal comes with a full legal protection.

Once your proposal is accepted by your creditors, they can't take any legal action against you. They will stop calling you and threaten you for their payments.

A debt management plan does not offer any legal protection. Creditors may agree to the plan, but there is not any legal guarantee that they will not take any action against you.

Make a Choice According to the Situation!

Both the options are good. A management plan is a good option if you have a small amount of debt to pay. And consumer proposal is a better option if you have a large amount of debt. A consumer proposal is also a good alternative if you want to make payments in installments.

In consumer proposal, you make the payments according to your comfort and monthly income. Amount of your monthly installment will never increase if your monthly income increases. You will have to pay a fixed amount every month that has been decided with your creditors in agreement earlier.