Managing finances and especially debt can throw one into a state of confusion when it gets overwhelming. Most people have gone through this phase at one point or the other in their lives. When you realise you have made a financial mistake or are going through a financial hard time, it’s not the time to throw in the towel. There’s hope and you can always get back on track. Let’s talk about Consumer Proposal and who should file for it. This debt solution method has helped lots of people manage their finances and start the journey towards debt freedom.

Understanding a Consumer Proposal

A consumer proposal is a formal process designed to help people who are unable to pay their debt in full. It is an agreement between you and your creditors to pay less than what you owe. Basically, it gives you an opportunity to get a reduced repayment plan with your creditors.

A consumer proposal is different from filing for bankruptcy. A consumer proposal allows you to retain your assets which you could otherwise lose in the process of filing for bankruptcy. 

Who Can File for a Consumer Proposal?

If you’re thinking about filing a consumer proposal. It’s good to be sure the debt solution method goes with your financial situation and is the best way to go. Generally, those who can file for a consumer proposal will fall into the categories described below:

1. You have a steady income

If you have a consistent source of income but are unable to pay your bills and debt, you can consider a consumer proposal. A consumer proposal allows you to restructure your debt into something more manageable, and divided into monthly payments (up to 5 years).

2. High debt 

If your total unsecured debt is less than $250,000, you qualify for a consumer proposal. The debt threshold is quite good and can help the majority of people whose debt caps at $250,000 or it’s less than that. The good thing with this is, you can reduce your debt by up to 80%. This means if your total debt is $200,000, you will pay less than that. This makes consumer proposal a viable option.

3. Avoiding Bankruptcy

If you want to avoid the severe consequences of filing bankruptcy, a consumer proposal is a better alternative.

4.  A Fresh Start

If you need a clean slate or a fresh start without having to keep accumulating interest as each day passes, a consumer proposal is your go-to. It provides an organised route to regain financial stability and you can take charge of your future.

Benefits of Filing a Consumer Proposal

Consumer proposal offers lots of benefits to individuals who are struggling with overwhelming debt. Let’s take a look at some of these benefits:

1. You can keep assets 

In bankruptcy, you can lose your assets in exchange for clearing off your debt. However, in a consumer proposal, you get to retain the possession of your assets, so you don’t lose all you have worked so hard for in the past.

2. Interest will stop immediately 

One of the good things about choosing to file a consumer proposal is you stop accruing interest. When you stop paying interest, it makes your burden lighter. This will then make the process easier and refreshing.

3. Reduced monthly payment

A consumer proposal gives you a reduced monthly payment plan. This restructuring can grant you some breathing space, allowing for a more manageable financial situation.

Possible Challenges

A consumer proposal is good indeed, but you also need to be aware of some drawbacks attached to it. It doesn’t mean it’s not a great option, but you still need to know all there is to it. Let’s take a look at some of the possible drawbacks of a consumer proposal.

1. Impact on Credit Score

Although a consumer proposal is better than filing bankruptcy, it will still have an impact on your credit score. The implication of this is, it can affect your ability to secure loans in the future. If you secure loans with a consumer proposal, it’s probably going to be with unfavorable terms and high interest.

2. Covers Unsecured Debts

You need to also know that a consumer proposal only covers unsecured debts. Secured debts, like mortgages or car loans, are not included in the proposal, and you must continue to make payments on these separately.

Speak With Us at EmpireOne Credit

As you consider filing for a consumer proposal, you need a team that will help you understand your options. It has to be established if a consumer proposal is the best option for you. Our debt experts are ready to assist you and give you the support you need to navigate this time. Your debt can be reduced by up to 80%, and interest will stop immediately. Don’t go through this process all alone; let EmpireOne Credit be your trusted guide. Call us at (416) 900-2324 to schedule a free consultation. Being debt-free feels good!