What is a Consumer Proposal?
A consumer proposal is a formal, legally binding agreement between a debtor and their creditors, designed to help individuals manage their debts. It is a popular debt relief option for those who find themselves in financial distress but wish to avoid declaring bankruptcy. The process typically involves offering a reduced amount to repay the debts, which creditors may accept instead of pursuing bankruptcy proceedings.
Key Features
- Legally Binding: Once accepted, all creditors must adhere to the terms.
- Reduced Payments: Consumers can propose a lower payment to settle their debts.
- Professional Assistance: A licensed insolvency trustee assists in the process.
Benefits
The primary benefits of a consumer proposal include the halting of creditor actions, reduced financial stress, and the opportunity to rebuild credit after settling debts. Unlike bankruptcy, a consumer proposal allows individuals to retain their assets while providing an orderly way to deal with financial obligations.
Eligibility
To qualify, individuals must have unsecured debts, such as credit cards or personal loans, totaling less than $250,000 (excluding mortgage debt). The proposal must offer creditors at least what they would receive in a bankruptcy scenario.
Conclusion
A consumer proposal can be a viable solution for individuals seeking debt relief who want to avoid the long-term consequences of bankruptcy while still finding a manageable way to address their financial obligations.