A consumer proposal for many people is the best of
all of the bankruptcy alternatives. Here's what you
need to know:
A consumer proposal can only be filed by residents
of Canada. U.S. residents can file a Chapter
13 Wage Earner Plan, which is similar to a consumer
A consumer proposal is a deal you make with your
creditors. It's a "win-win" for everyone.
Your creditors get payments on what they are owed,
and you don't have to worry about your creditors taking
you to court and garnisheeing your wages.
How is a consumer proposal different than credit
A consumer proposal is very similar to credit
counseling. In both cases you have more debts
than you can repay on your own, and you have professional
assistance to work out a plan. You make monthly payments,
and at the end your debts are eliminated.
Both consumer proposals and debt management plans
appear as as R7 on your credit report, and remain
on your credit report for three years after all payments
There are however two significant differences between
credit counseling and consumer proposals.
First, in a credit counselingdebt management planyou will generally be required to repay
your debts in full. In a consumer proposal,
you do not necessarily repay all of your debts in
Second, a consumer proposal offers legal protection;
credit counseling does not. Once a consumer proposal
is accepted by your creditors and approved by the
court, none of your creditors can change their mind,
or demand larger payments. A debt management plan
prepared by a credit counselor is an informal,
non-binding deal with the creditors, so the creditors
could ask for more money at a later date.
To decide whether a consumer proposal or credit counseling
is right for you, determine first if you require court
approved legal protection. If your wages are being
garnisheed, or if you have tax debts, a consumer proposal
may be your best bankruptcy alternative.
On the other hand, if your debts are manageable,
and no-one is threatening legal action, a debt management
plan through a credit counselor may be your best option.