Why file a consumer proposal in Alberta?

Do you live in Alberta? Are you are struggling to make ends meet and behind on your debt repayments? A consumer proposal can help.

A consumer proposal is a legal debt settlement agreement with your creditors that lets you restructure your unsecured debt into a single monthly payment with no interest.

A consumer proposal combines all your bills into one monthly payment.

You pay back a portion of your debt, with the rest forgiven once you complete the payments.

Reduce your debt by up to 80% with consumer proposal.

As part of this agreement, you can freeze interest, stop collection calls, and reverse wage garnishment.

Collection calls, wage garnishments and legal action stop.

You have the option of making payments for up to five years, but you complete your proposal as early as you want.

A consumer proposal can be spread over five years.

It is a debt solution that helped 1,093 Albertans in May 2022 start their journey towards a debt free future.

To learn more about a consumer proposal, request a free consultation from a local Licensed Insolvency Trustee.

Alberta consumer proposal advantages and disadvantages

Here are some advantages and disadvantages of a consumer proposal.

Advantages of a consumer proposal

  • You can significantly reduce your total debt.
  • Combine your debts into one monthly payment.
  • Interest rates are frozen.
  • Collection calls stop.
  • Wage garnishments end.
  • Keep your assets, like your house and car.
  • Government-approved debt program.
  • Financial counselling sessions.
  • Avoid personal bankruptcy

Disadvantages of a consumer proposal

  • You must have enough money to make monthly payments.
  • There is a negative impact on your credit score.
  • Not all student loans can be included, but you can pause payments during this time.

There are only two formal debt forgiveness solutions in Canada: bankruptcy and a consumer proposal.

Two formal debt forgiveness programs in Canada: bankruptcy and a consumer proposal.

How much does a consumer proposal cost in Alberta?

Consumer proposals can often be cheaper than other debt relief options.

The cost depends on how much you owe, your creditors, your income, and if you have any assets. Our Alberta consumer proposal calculator can estimate your monthly payments.

Consumer proposal cost

Your Licensed Insolvency Trustee (sometimes called a Licensed Bankruptcy Trustee) will make a fair offer to your creditors, and you will only pay what you can afford. This payment never changes, and you will know the exact cost before you proceed.

It’s important to note that consumer proposal fees are paid from your proposal at no additional cost to you.

What debts can I include in a proposal?

You can include most unsecured debts, such as credit cards, loans, overdrafts, income taxes, payday loans and utility bills. Your Licensed Insolvency Trustee can advise further.

Can I include secured debts?

You cannot include secured debt in consumer proposals because they are tied to an asset, such as a mortgage loan.

If you have secured debts, like a mortgage or car loan, you can either keep paying or stop paying and give up the asset to the lender before filing, with the resulting shortfall added to your proposal as an unsecured debt.

It is essential to have a plan for repaying secured debts before filing, as creditors can continue to take legal action against you during this process.

The upside is that a consumer proposal can help you resolve your unsecured debts, freeing up money to make it make payments to your secured creditors.

How do I include my student loan debt in an Alberta consumer proposal?

You can include student loans in a consumer proposal if you’ve been out of school for seven years or more. If it has been less than seven years, a proposal won’t help you resolve your student loan debt.

Can I keep my house if I file a consumer proposal?

You can keep your house if you keep up with your mortgage payments and property taxes.

Will a consumer proposal affect my mortgage?

A proposal has no bearing on your mortgage, and your lender cannot use it as a justification to alter the terms of your loan.

Can I keep my car in a consumer proposal?

You can keep all your vehicles, regardless of their value, as long as you make payments on time. You can also cancel your car loan or lease agreement before you file.

Consumer proposal qualifying criteria

You may qualify for a consumer proposal in Alberta if you meet the following criteria:

  • You owe less than £250,000 (excluding your mortgage).
  • You live in Canada (a permanent resident or under a work permit or another status) or own property in Canada.
  • You are insolvent; you can’t pay your bills as they are due and owe more than your assets are worth.
  • After bills, you can afford to make a monthly payment towards your debt.

You need to offer your creditors more money than they would receive if you filed for bankruptcy. You must include all of your unsecured creditors.

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How does a consumer proposal impact your credit?

A consumer proposal will hurt your credit rating, but you can take steps to rebuild your credit score immediately.

Credit reporting agencies will record it on your credit report, appearing there for three years after completion or six years from the date you filed, whichever is sooner.

The priority is to get out of debt. A good credit score is worthless if you have unmanageable debt because lenders want to see a good debt-to-income ratio.

Fortunately, a proposal can help you get out of debt and repair your credit faster than you could on your own.

Where does a consumer proposal appear on a credit report?

A consumer proposal is noted in your credit report’s public records section.

The Office of the Superintendent of Bankruptcy sends information about your proposal to Canada’s two main credit bureaus, Equifax and TransUnion.

Upon completion, you will receive a Certificate of Full Performance, releasing you from the debts outlined in your proposal.

How to file an Alberta consumer proposal

If you are considering filing a consumer proposal in Alberta, you must understand how the process works.

The first step is to meet with a Licensed Insolvency Trustee. The trustee will review your financial situation and determine if a consumer proposal suits you.

If you proceed, you work with your trustee to craft a payment plan acceptable to your creditors. Once your creditors accept, it becomes legally binding.

The consumer proposal process.

The role of a Licensed Insolvency Trustee (LIT) is to administer your proposal and guide you through the consumer proposal process.

A consumer proposal is not suitable for everyone. Your trustee will explore your options and find the best debt relief option for your unique financial situation.

Other viable options include credit counselling, debt management plans and debt consolidation loans.

Wrapping up

Now that you understand how a consumer proposal works in Alberta, the next step is to contact a Licensed Insolvency Trustee for a confidential consultation on resolving your financial difficulties.

There are various debt relief options available, but Licensed Insolvency Trustees can provide unbiased advice and assist you in reducing your debts.

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