In Alberta, a consumer proposal is a legally binding agreement that is negotiated between a Licensed Insolvency Trustee and your creditors (the institutions you owe money to). It’s an alternative to bankruptcy that allows you to maintain control of your assets such as your home and car. During a bankruptcy, it is possible to lose assets in certain situations.
Once you file for a consumer proposal, creditors and debt collectors cannot, under the law, proceed with their collections tactics. Also, during the negotiations, they will likely agree to accept less than what you owe to consider their claim against you satisfied.
The Licensed Insolvency Trustee works as a mediator to ensure that both parties, you and your creditors, get a fair deal.
During your consumer proposal, you will pay your debts on a fixed schedule and the payments will not increase in most cases.
While bankruptcy is the right choice for some people, here are some reasons why many individuals choose debt consolidation:
- It simplifies your finances so you only have to keep track of one payment per month.
- You can extend the payment period to lower your monthly payments.
- It’s possible to reduce your interest rate on what you owe and save money.
- You can repay your debts faster.
Who Can Apply for a Consumer Proposal in Alberta?
In order to apply for a consumer proposal in Alberta, you must be insolvent. This means you must be in a state of being unable to pay your debts.
However, there are other qualifications you must satisfy in order to apply for a consumer proposal:
- You must be at least 18 years of age.
- You cannot owe more than $250,000 (but this does not include the mortgage on your main residence).
- You need to demonstrate that you cannot reasonably repay your debts in a reasonable length of time.
- You also need to demonstrate that you have a stable income source in order to complete the terms of the proposal (make your payments on time).
- You have to use the services of a Licensed Insolvency Trustee in order to determine your eligibility as well as file the consumer proposal.
In order to qualify for a consumer proposal, you must also have no prior proposal proceedings currently open. You can only apply again once your prior proposal is discharged (i.e. the matter has been closed). You can’t have two filings open at the same time.
What if I’m Filing a Joint Consumer Proposal With My Partner?
If you share debts with your significant other, it is possible to file a joint proposal with your partner. In order to meet the requirements, you both have to have approximately the same debts to pay off and the total debts must be under $500,000 (again, excluding the mortgage on your principal residence)
Can I File for a Consumer Proposal If I’m Already in Bankruptcy?
Yes, you can still file for a consumer proposal even if you have already declared bankruptcy. However, you will still have to prove you have a stable income in order to make the payments agreed upon in the proposal.
If I’m Approved for a Consumer Proposal, Do All My Creditors Have to Accept It?
Not necessarily. However, as long as 50.1% of your debt is accepted by your creditors, the proposal will be accepted.
For example, say you owe $2,000 to Creditor A, $3,000 to Creditor B, and $4,000 to Creditor C. That’s $9,000 in debt and you must have $4,509 accepted. So if Creditors A and B accept the proposal, the entire application is accepted and will include the debt owed to Creditor C as well.
Consumer Proposals: The Process
The first step in filing a consumer proposal is to speak with a Licensed Insolvency Trustee.
Our team at Frederick & Company understands the stress and worry that comes with financial struggles. When you meet with us to file a consumer proposal, we will work closely with you during an assessment to help you understand your debt relief options – not just consumer proposals.
If you decide that a consumer proposal is best for your unique situation, we will gather the necessary information from you to put together an accurate and fair proposal. From there, we handle the filing and negotiating. Once your proposal is accepted, we will go over your payment plan as well as facilitate two required counselling sessions.
During these sessions, we will give you the tools and confidence you need to build healthy financial habits.
Are You Ready to Get Started?
If you’re drowning in debt, there’s no time to wait! Contact us today so we can get you started on the road to financial freedom.