Consumer Proposal : Percentage of Pay Back

A consumer proposal is a common alternative to personal bankruptcy. With its many advantages, it is an option that suits many individuals seeking to resolve their financial problems. It reduces the financial burden and offers a path to financial recovery.

What is A Consumer Proposal?

A consumer proposal is a legal process in Canada, overseen by the Bankruptcy and Insolvency Act, and requires the support of a licensed insolvency trustee. This process aims to negotiate with your creditors to reduce the repayment sum, allowing it to fit into your budget.  During the consumer proposal process, the trustee protects the individual’s interests and makes sure their rights are upheld.

From the moment the proposal is filed with the Office of the Superintendent of Bankruptcy, the individual benefits from the law’s protection against seizure and other enforcement measures, offering a financial lifeline.

How Much do you Pay Back in a Consumer Proposal?

To make a consumer proposal, the trustee begins by calculating your debt in the event of bankruptcy. The debts included can be credit card debts, lines of credit, tax debts and so on.

The trustee then adds to the total amount an additional sum based on your monthly budget. The aim is to partially repay your creditors while offering them more than they would have received in bankruptcy.

By negotiating with creditors, it is possible to reduce debts by up to 70%, or even more in some cases. This amount is then spread over a monthly payment plan, adjusted according to your financial situation and budget.

The cost of a consumer proposal varies according to the financial situation and the debts included with the consumer proposal fees.

What are the Advantages of a Consumer Proposal?

Reduced Impact on Credit Score

When comparing the impact of a consumer proposal to that of personal bankruptcy, the impact on the credit rating is generally slightly less severe with a consumer proposal.

Debt Relief

By negotiating with creditors, it is possible to reduce the total amount of debt repayment. Sometimes, the proposal can reduce the debt by 70%, making payment terms more feasible.

Lump Sum Payments

Consolidated debts are repaid via a single monthly payment, simplifying financial management and avoiding multiple payments to different creditors.

Protection Against Collection

Once the proposal has been accepted by the creditors and filed with the Superintendent of Bankruptcy, the individual is protected from legal action and collection by the creditors included in the proposal.

End of Accumulated Interest

Interest on debts is frozen from the date the consumer proposal is filed. This process stops the accumulation of new interest for the duration of the process.

Alternative to Filing a Second Bankruptcy

Filing a consumer proposal is also considered when a person has already filed for bankruptcy in the past. Indeed, the minimum duration of a second bankruptcy is 2 years, and its impact on the credit file lasts 14 years.

If you’re struggling with debt, a consumer proposal could be the solution for you. Consider a consumer proposal as a viable solution to ease your financial burden. This option offers the possibility of reducing your debts and putting you back on the road to financial stability.

Contact the team at M. Roy & Associates for a free consultation. Our experts can guide you through the necessary steps and help you take control of your financial situation.