Consumer Proposal Meaning- What Is a Consumer Proposal?

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People often ask, what is a consumer proposal what is the consumer proposal meaning or definition and how similar is it to a debt consolidation loan? A proposal is like a consolidation loan where your payments are made affordable and downgraded into a single monthly payment term. You can make the payments to a trustee who accumulates them and pays the money out to your creditors every six months.

Consumer Proposal Meaning & Consumer Proposal Definition

A proposal is a debt settlement agreement that you can do with a Licensed Insolvency Trustee.

The thing about it is that it does not necessarily involve paying back 100 percent of what is owed to the creditors. Many times the total amount owed can be reduced by 50% or more. It involves making a new deal with creditors so that they get paid to the best of your ability.

The major difference between an informal arrangement with creditors and a proposal is that the latter has the protections that are built into the law. You are protected by the law until it is determined that the creditors will or will not accept your proposal. They still have the option of turning you down but no one can take legal action against you. However, if you are under an informal agreement, the creditor who does not approve with the arrangement can still sue you, garnishee your pay and seize your assets.

What happens in the proposal?

A consumer proposal can be a solution to avoid bankruptcy if you are having difficulties with your debt payments. Your trustee will review your situation with you and help you determine the best payment term for your financial problem. The settlement will depend on your income and personal assets. The term can cover an interest-free payment of up to 5 years which can lead to bigger savings. A consumer credit proposal can work with various unsecured debts such as bank loans, tax debt, and credit card debts as well as student loan debt.

How will you know that you are eligible for a consumer proposal?

First of all, you need to make sure that you can make payments for a portion of your debts. Secondly, your assets must be of lesser value than your debt which shows the reason why you are not able to keep up with the payments. You must also be a resident of Canada to qualify. Take note that a proposal is regulated by the federal government and you must comply with all of the requirements.

What are the benefits of Consumer Proposals?

Aside from being able to avoid bankruptcy, it can help you save money by reducing your debt by a significant amount and by stopping the interest rates. This way, you can keep your properties. You also do not have to make multiple payments—this will combine your debt into a single monthly payment. Besides, your creditors will have to follow your terms and stop wage garnishments. This is instant protection from the creditors and collection agencies who must stop chasing you for payment.

A CP can be the most effective solution for your financial situation. Legal consumer proposal services can only be provided by a Licensed Insolvency Trustee or a licensed consumer proposal administrator. They will help you understand your debt relief options and help you manage your debt problems. You can book a free consultation with a trustee.

Now that we have answered the question “What Is a consumer proposal?”, you now have a much better understanding of the consumer proposal meaning where you pay only a portion of the debt owed with no interest versus a debt consolidation loan where you pay back 100% of the debt owed, plus interest.

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