Consumer Proposals Offer Newmarket & the GTA a Debt Consolidation Option

In September 2009, changes were made to the Bankruptcy & Insolvency Act (BIA), the federal law that regulates the debt settlement profession in Canada. The end result of these changes was that it became more expensive to file a personal bankruptcy as a means to solve debt and financial trouble in Canada. As a result, fewer Canadians have been going bankrupt since this date, with 2010 seeing an 11% drop in the number of personal bankruptcies signed in Canada. Those with debt and financial troubles have, instead, been looking for other alternatives to solve their debt problems. Of particular interest have been consumer proposals, which have seen an increase in use since the law changes in September 2009.

As many are unfamiliar with the consumer proposal, this debt help option needs some explanation. A consumer proposal is a formal and legal binding debt settlement agreement that is set into law by the BIA. The consumer proposal allows a person with debt problems to make an offer to all creditors at once, with one plan and one monthly payment, to settle all outstanding debts in five years or less. The amount offered to be repaid to creditors is usually less that the total outstanding debt. More importantly, interest on the debts is eliminated (interest stops accumulating effective the date of signing the consumer proposal), any legal actions (such as wage garnishees, or liens on a house) are immediately ‘stayed’, or lifted and all assets are kept.

A consumer proposal can be used to solve debt problems ranging from $1,000 to $250,000 for individuals and up to $500,000 for joint proposals. Such joint proposals can be used when the majority of the debts in question are joint responsibilities, such as with married or common-law couples.

As consumer proposals settle several debts with one plan and one payment, many confuse these with debt consolidation loans. Unlike a debt consolidation loan, however, a consumer proposal is a debt consolidation that works with your cash-flow (there is no cash advanced to you); therefore, you must be employed or have a source of income. Debt consolidation loans are just that – loans that give you money up front to repay your debts and then charge you interest as you repay the loan. The similarity between the approaches occurs in the sense that both options are consolidating all unsecured debts into one monthly payment. The difference is that payments made on a consumer proposal come from your monthly income, they are interest free and they will not exceed a 5 year term. In addition, consumer proposal payments are open – meaning that, if possible, you can pay the agreed settlement amount earlier than the anticipated completion date.

If this is something that has sparked your interest we encourage you to make that call to a BDO Trustee. The initial consultation is free and there is no obligation to file. According to the OSB, more Canadians chose BDO more than any other firm for their debt solutions. BDO has been a trusted source holding more than 50 years experience and holding 95 offices throughout Canada. With all the information available out there today, it’s easy to fall prey to an advertising gimmick. Rest assured that when you contact a BDO representative you’ll be meeting with a professional that will conduct a financial assessment that will present ALL available options to you – from budgeting and counselling, to consolidations, to potentially contacting your creditors and making arrangements with them; in addition to consumer proposal and bankruptcies. What do you have to lose – but all the debt and the interest?