By Jasmin Brown

BDO Debt Solutions

Consumer Proposals Explained

May 29, 2023 | 10:32 AM

“The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of Pattison Media and this site.”

Many people get concerned when they hear the word bankruptcy.

For many, it has a negative stigma, so it is not uncommon for people to want to avoid bankruptcy as a debt solution.

However, bankruptcy is not the only option when it comes to dealing with your debt. There is another solution, known as a consumer proposal, that provides the same protection, and the same outcome, but without filing a bankruptcy.

A consumer proposal is a legally binding agreement that is regulated by the Office of the Superintendent of Bankruptcy. It is a very common solution used to resolve problems with debt. Filing a consumer proposal often results in repayment of only 30-70% of what you owe, through negotiation with your creditors.

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Types of Debt that can be Included

A consumer proposal is meant to deal with your unsecured debt (debt that is not attached to an asset). Some examples include:

· Credit card debt;

· Bank loans or lines of credit;

· Payday loans;

· Income tax debt;

· Medical bills;

· Old bills that have gone to collections;

· Student loans (within some parameters).

A consumer proposal does not include debts secured to an asset. However, you are able to keep those assets throughout the proposal, so long as you are able to continue making the payments. Should you wish to surrender assets that are attached to debts, a consumer proposal can also be used to deal with the resulting shortfall.

Key Advantages to Filing a Consumer Proposal

A consumer proposal is an alternative to filing a bankruptcy. It has several advantages:

· Provides immediate relief from unmanageable debt;

· Protects you from wage garnishees and legal action by your creditors;

· Reduces and consolidates your debt repayment into one manageable payment;

· Usually costs less than other types of debt repayment options;

· Gives you a fresh financial start.

Qualification and Who Can Help

There are certain criteria that must be met in order to file a consumer proposal:

· You must be insolvent (debts are greater than your assets OR you can no longer keep up with your debt payments);

· You can’t afford to pay all of your debt back plus interest, but you can afford to pay a portion of it back;

· Your debt is less than $250,000 (excluding your mortgage). There are other proposal options if your debt is higher than $250,000;

· You are a Canadian resident, or you have property in Canada.

A Licensed Insolvency Trustee (LIT) is the only professional licensed and authorized to file a consumer proposal on your behalf. An LIT is the most qualified to help you understand your financial situation and the different options for dealing with debt. A LIT will sit with you in a non-judgmental environment, go through your situation with you, and help you decide the best course of action.

If you are having trouble making ends meet each month, finding the right debt solution can help. Visit the BDO Debt Solutions website for more information about bankruptcy, or call 1 855 BDO DEBT to book a free, no obligation consultation.

Jasmin Brown is a Senior Vice President overseeing the insolvency practice in Saskatchewan. She is committed to providing creative and practical debt solutions with empathy, understanding and professionalism to help people overcome their financial difficulties.