DEBT RELIEF OPTIONS IN DON MILLS, ONTARIO
What is a Consumer Proposal?
A Consumer Proposal is a federally regulated, legally binding process overseen by the Office of the Superintendent of Bankruptcy. This option is an attractive alternative to declaring personal bankruptcy and is exclusively administered by a Licensed Insolvency Trustee (LIT). One of the biggest advantages of a consumer proposal is the potential to reduce the unsecured debt you must repay by up to 80%.
The process starts with a Licensed Insolvency Trustee evaluating your financial situation by reviewing your debts, income, and assets. If a consumer proposal is determined to be the best solution, the trustee will calculate a monthly payment that you can afford. The proposal is then submitted to your unsecured creditors for approval, and once accepted, it becomes legally binding. From the moment the proposal is submitted, all legal actions against you, such as wage garnishments and collection calls, will cease. While the maximum repayment period for a consumer proposal is five years, you have the flexibility to pay it off sooner if possible.
In addition to the substantial debt reduction, a consumer proposal can lead to lower monthly payments, the cessation of interest charges, and the consolidation of unsecured debts into a single monthly payment.
What Debts are Included in a Consumer Proposal?
A consumer proposal includes most unsecured debts, meaning that any debt secured by an asset, such as a mortgage or car loan, cannot be included. Typically, the following can be included in a consumer proposal:
- Credit card debt
- Personal loans, including lines of credit, consolidation, or renovation loans, provided no assets secure the debt.
- Payday loans
- Student loans, if you stopped to be a student at least seven years ago
- Income tax debt, encompassing amounts owed for personal income tax (including penalties and interest), GST debts, Canada Child Benefits overpayments, CPP, and OAS overpayments.
Is a Consumer Proposal the Right Option for Me?
A consumer proposal might be a suitable option if:
- Your debt is less than $250,000, excluding your principal residence’s mortgage.
- You are insolvent, meaning you cannot meet your monthly obligations.
- You seek relief from wage garnishments, collection calls, and accruing interest.
- You aim to retain assets that may not be safeguarded in bankruptcy.
Alternatives to Consumer Proposal
When considering debt relief options, it is important to evaluate all possible solutions thoroughly. A Licensed Insolvency Trustee (LIT) can assist you in determining the best course of action for your situation.
Bankruptcy
Bankruptcy is also managed by a Licensed Insolvency Trustee, who will oversee your case. This trustee takes control of your assets (with certain exceptions), manages your financial affairs, and supervises your bankruptcy obligations, including mandatory credit counselling sessions and monthly income and expense reporting. Upon fulfilling these duties, you can achieve a debt discharge after either 9 or 21 months.
Debt Management Plan (DMP)
In a Debt Management Plan, a credit counselor assesses your debts craft a multi-year repayment plan spanning three to five years. This plan is presented to your creditors for approval. If accepted, you make a single monthly payment to the credit counselling agency. The credit counsellor may be able to negotiate reduced interest rates on your debt, redirecting the savings toward debt repayment. Participation in a DMP is voluntary for your creditors, so it is possible that not all creditors will agree to the plan. They can also withdraw from the agreement at any time.
It is important to note that a DMP does not involve debt reduction or cancellation; you must still repay the entire debt amount. This fundamental distinction is a significant difference from a consumer proposal.
Consolidation Loan
A debt consolidation loan allows you to combine multiple smaller loans or debts into a new single loan. This approach aims to pay off smaller debts or consolidate higher-interest debts into one payment with a lower interest rate over an extended period.
However, it is essential to understand that this approach does not eliminate your debt but makes it more manageable. Additionally, eligibility for a consolidation loan requires an application and qualification process.
