Disadvantages Of Consumer Proposal | Consumer Proposal Advantages (2024)

FAQs

Disadvantages Of Consumer Proposal | Consumer Proposal Advantages? ›

Disadvantages of a Consumer Proposal:

These disadvantages include: Secured debt isn't included: Secured loans won't be reduced or included in your payment plan, which may make a consumer proposal impractical. Affects your credit rating: Your credit rating will suffer as a result of entering a consumer proposal because of the debt write-offs.

With a 99% acceptance rate on any consumer proposals we file, we see many Canadians reducing their debt by up to 80% with a consumer proposal. This means that when you file with Spergel, you have a 99% chance of reducing your debt by 80%.

Consumer proposals can provide significant benefits in managing overwhelming debt, making them worth considering. Here are key reasons to explore a consumer proposal: Debt Relief: Consumer proposals offer a structured way to regain control of your finances, preventing debt from snowballing with fees and penalties.

Since they'll probably receive more of what they're owed, most creditors would rather approve your consumer proposal than wait for you to declare bankruptcy. That said, a consumer proposal may not offer them as much money back as other debt solutions like debt consolidation and credit counselling would.

Debts that cannot be included in a consumer proposal

Secured debts like your mortgage or car loan. Support payments or alimony obligations. Court fines and penalties including parking tickets. Debts due to fraud.

With a consumer proposal, all your assets are protected. When you claim bankruptcy, you might have to give up some of your property. With a consumer proposal, you will be able to keep your tax refunds for the calendar year during which you file your proposal. But if you file for bankruptcy, you will lose these refunds.

Filing a consumer proposal may hurt your credit scores, but the damage likely isn't permanent. It's possible to recover your score by practicing good financial habits, including paying bills on time and sticking to a budget.

Credit Cards & Consumer Proposals

The only catch is that the card must have no balance at the time of filing. Since consumer proposals are different from bankruptcy, you can still opt to keep the card to give yourself the option of using it in the future.

Consumer proposals are for insolvent people who cannot meet the payments on their debt. You must have at least $1,000 worth of debt to qualify. Consumer proposals have a debt limit of $250,000, excluding your mortgage. If your debts exceed this amount, you can file a Division I proposal.

Can I keep my savings on a consumer proposal? ›

Only when you file bankruptcy would any contributions made in the past twelve months need to be surrendered to a Licensed Insolvency Trustee. A consumer proposal also allows you to keep any savings, RESPs, and other investments you may have contributed to.

Generally speaking, consumer proposal payments result in settling your debts for roughly 30-40 percent on the dollar. However, the cost of a consumer proposal varies for each person based on a few factors, including income, assets, and debts.

If you pay your proposal off sooner than agreed upon, you will speed up your credit recovery. If you reduce your proposal by a year, the R9 rating disappears a year earlier and the R7 rating takes over for it's three-year run.

With a proposal, banks have voting rights. They can say 'yes' or 'no' to the proposal. If at least half of your creditors vote 'yes,' then the proposal is deemed approved. Banks have 45 days from the date you file the proposal to vote.

Here are the key reasons a consumer proposal might get rejected: You are offering insufficient funds. You are offering an unsuitable repayment schedule for your creditors. You contributed to your financial situation by an unjustifiable extravagance in living expenses or by neglecting business matters.

What Debts are Included in a Consumer Proposal? A consumer proposal includes unsecured debt. Unsecured debt is any type of debt not secured by an asset and generally includes the following: Credit cards – all balances as of the date of filing on your Visa, Mastercard, Amex, etc.

When a proposal passes, it forces all general unsecured creditors(with minor exceptions)to settle their claims against the debtor for the amount offered in the proposal. Consumer proposals get accepted in our office “eventually” at a rate of 95% or better.

A successful, and completed consumer proposal will be removed from your credit report 3 years after you've paid off all the debts according to the proposal, or 6 years from the date it was filed whichever occurs first.

Depending on the credit reporting agency, a consumer proposal can remain on your credit report for either 3 years after you pay off all the debts included in the proposal, or 6 years after you sign the proposal, whichever is sooner.