Consumer Proposal

A consumer proposal, as defined by the Insolvency Act in Ontario, is a formal debt settlement arrangement that allows individuals to make a proposal to their creditors to repay a portion of their debts over a specified period. The Insolvency Act in Ontario is governed by the Bankruptcy and Insolvency Act (BIA), which sets out the rules and procedures for consumer proposals in Canada. Here is an overview of consumer proposals under the Insolvency Act in Ontario:

Pros

Debt Reduction: A consumer proposal allows you to negotiate with your creditors to reduce the amount of your debt. You can propose a repayment plan that is affordable for you, usually over a period of five years or less.

Debt Consolidation: With a consumer proposal, you can combine multiple debts into a single monthly payment, making it more manageable and easier to budget.

Creditors' Agreement: If your creditors accept the proposal, they are legally bound by its terms, providing you with protection from further collection actions and interest accrual.

Less Severe Credit Impact: Although a consumer proposal affects your credit score, its impact is generally less severe and shorter-lived compared to bankruptcy.

Cons

Credit Consequences: A consumer proposal will negatively impact your credit score, and it will remain on your credit report for several years, making it harder to obtain credit during that time.

Debt Repayment Obligations: If you file a consumer proposal, you are committing to make regular payments over an extended period. Failure to fulfill these obligations may result in the proposal being annulled.

Limited Debt Eligibility: Not all debts can be included in a consumer proposal. Secured debts like mortgages and car loans are not eligible, and you'll need to continue making payments on them separately.

Creditors' Acceptance: Your proposal requires majority creditor acceptance to be approved. If the majority rejects the proposal, you may need to explore other debt relief options.