A consumer proposal or debt settlement arrangement is an offer made by a person to creditors to reduce the amount of payment owed on the balance of the account. Generally, it is a proposition to pay the creditors a percentage of what is owed while stopping the interest. It can be made by a person owing less than $250,000.00 (excluding mortgage on a personal residence) and never having filed a proposal previously with the same debts.

Advantages/Disadvantages:

A consumer proposal offers flexibility as arrangements are in line with available income. Once approved, it applies to all creditors who do not hold collateral security including such creditors as CCRA (Income Tax), other government debts, credit cards, loans and others. It immediately stops garnishments, wage assignments and court judgements. Assets not under lien are kept and while a proposal has an impact on your credit rating, it is reflected differently from a bankruptcy by the credit reporting agencies.

The main disadvantage to a consumer proposal is the length of time necessary to fulfill the terms of the agreement (up to 60 months) and the monetary commitment to paying for an extended period of time. Although the credit rating is less impacted than if a bankruptcy had been filed, it is still reflected for a period of 3 years from the date of completion of the proposal and will affect the ability to borrow in the future.

Credit Rating:
Your credit rating is made up of several factors including job and residence stability, marital status and income. If you file a proposal, the Credit Bureau will keep a record of your proposal for a 3 year period after you have met the full terms of the proposal.

Cost
Proposal costs are set by legislation and usually come out of the payments that you make on the settlement.

Basic Conditions for a Successful Proposal: A proposal or debt settlement requires that you have some surplus income in your budget to allow for a single monthly payment and that your family income is stable. The payments are then divided among your creditors. You may also make a lump sum payment in settlement of all your debts.

Please contact our offices in Toronto, Whitby, Kingston and Brockville for further information.