5 Reasons To Use A Consumer Proposal To Consolidate Your Debt

5 Reasons To Use A Consumer Proposal To Consolidate Your Debt

Canadians are more in debt than ever, and, with the increasing challenges most households face just covering their mounting expenses, many are finding they can no longer manage their debt effectively without a comprehensive plan.

Individuals seeking a structured and effective approach to manage their debts may be considering debt consolidation. There are several ways to consolidate your debts, but below are five reasons why a Consumer Proposal might be the best way to achieve this.

  1. Negotiated Reduction of Total Debt

A Consumer Proposal allows you to negotiate a reduction of the total debt owed. To qualify for a Consumer Proposal, you must be insolvent (you cannot meet your debt payments as they become due, or you don’t have sufficient assets to cover your debts). In that case, creditors may be willing to accept a portion of the outstanding amount rather than risking a larger loss through bankruptcy.

  1. Assistance from a Licensed Insolvency Trustee

A Licensed Insolvency Trustee (LIT) is legally required to file a Consumer Proposal. This is a great feature, as it means you don’t have to negotiate directly with your creditors. The LIT collects the information and submits the proposal to the creditors, acting as a go-between for any negotiations. They also handle distributions to the creditors, so that all you have to do is make payments directly to the LIT.

  1. Structured Repayment Plan

A Consumer Proposal provides a structured and realistic repayment plan based on your financial capabilities. Unlike managing multiple debts with varying interest rates and payment schedules, the Consumer Proposal consolidates these debts into a single, manageable monthly payment designed based on your unique financial and personal situation.

  1. Legal Protection and Cease of Collection Actions

Upon filing a Consumer Proposal, there is an automatic stay of proceedings, which means that creditors cannot take any collection actions from that day forward. They must instead participate in the proposal process. This can provide significant relief if you’re facing harassment from creditors, are under threat of legal action, or are having your wages garnished. This breathing room allows you to focus on fulfilling the terms of the proposal and getting back on your feet financially.

  1. Increased Likelihood of Creditor Acceptance

Creditors are often more inclined to accept a Consumer Proposal over other debt resolution options because it demonstrates your commitment to repaying the portion of the outstanding amount that you can realistically afford. It also lays bare the reality that if they don’t accept the proposal, you may have no options left but to file a bankruptcy, where they may receive significantly less. Most creditors will see a Consumer Proposal as a win-win scenario, in that it provides both sides a level of certainty about how the debt will get resolved.

Other debt consolidation methods may require you to pay the entire amount owing (usually, with interest), or they may provide only partial relief if some creditors opt not to participate. A Consumer Proposal is often a more appealing choice for those looking for a comprehensive resolution of their debt issues.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the southern Alberta region. We regularly help individuals review their options for dealing with overwhelming debt, including determining whether a Consumer Proposal is their best option. If you'd like to explore your options, please reach out to us.

Disclaimer: This publication provides general information and should be seen as broad guidance only. The information contained herein cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon this information without obtaining specific professional advice relating to your particular circumstances. Charla Smith & Company Ltd. does not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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Frequently Asked Questions

While technically a person is supposed to hand over all of their assets to the Trustee in a bankruptcy, in reality you typically don't lose your home for several reasons that are explained in this post. But if you own your home and you have available equity which you can't afford to pay into the bankruptcy estate, sometimes it is necessary to sell the home. For more information about what could happen to your assets in bankruptcy, contact us for a free consultation.

Check out our blog post that explains about options for settling your debt, or contact us for a free consultation.

The cost of a bankruptcy is determined based on many factors such as your assets, your income, and your family situation. However, you typically pay less in a bankruptcy than you would in a Consumer Proposal, because your creditors don't have as much ability to impact your payments in bankruptcy. For more information about how these options compare, reach out to us for a free consultation.

No, a Licensed Insolvency Trustee is an impartial facilitator who communicates with all parties to make sure the process is transparent, and that everyone is following the required rules so that the process is orderly and predictable.

A Consumer Proposal is a legal process available to insolvent Canadians with no more than $250,000 in debt (not including a mortgage on a principal residence) to negotiate an extension of time and/or a reduction of debt with all your creditors at once.

A Licensed Insolvency Trustee is required to file a Consumer Proposal. We'll work with you to determine whether a proposal is the best option, and to develop a proposal that is both achievable for you and beneficial for your creditors. For more details on the features and benefits of a Consumer Proposal, visit this page or our Consumer Proposal blog or contact us.

Even though the Canada Revenue Agency (CRA) will not negotiate a reduction of the amount owing when talking directly with a tax debtor, they will typically consider a reduction of the amount owing through a Consumer Proposal. This is because they understand that the individual is insolvent and the case has been reviewed by a Licensed Insolvency Trustee who has assessed that the CRA will get less if the person is forced to file a bankruptcy due to an inability to pay.

With a Consumer Proposal, the amount of the debt that you pay is based on what you can afford (based on the level of your income, your assets, and your family situation). This is often less than the amount owed. If your proposal is accepted and you perform your end of the deal, the unpaid portion is forgiven... even in the eyes of the government.

Contact us if you'd like to find out what a Consumer Proposal might look like for you.


With our experience and our caring approach, we will help you find the best option for debt relief based on your unique situation - from advice on talking to your creditors to a consumer proposal or bankruptcy, and everything in between. We are here to lift the burden caused by overwhelming debt. 

Contact us today at 1-403-899-3890‌ for a FREE, no-commitment meeting, and let us guide you to regaining your financial footing.

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