Consumer Proposals in Ontario: 5 Myths Debunked

Let’s clear up five of the most common myths to help you see how a consumer proposal can be a practical, flexible, and realistic option for resolving debt. Misconceptions about consumer proposals can prevent people from exploring what is often a very effective and manageable debt solution. These misunderstandings create unnecessary fear and hesitation. By understanding how it works, you’ll see how this process can help you regain financial stability without losing control of your assets or future.

Consumer Proposal Myths: One of the biggest misunderstandings is that a consumer proposal is just like declaring bankruptcy. While both are legal solutions for dealing with debt, they differ in significant ways.

Bankruptcy:
When you file for bankruptcy, you may be required to surrender some of your assets.

This could include your home, car, or other valuables, depending on your situation. Bankruptcy can also have a longer-lasting impact on your credit score, making it harder to rebuild your financial future quickly.

Consumer Proposal:
In contrast, a consumer proposal allows you to keep your assets, like your home and car, while offering a structured plan to pay off a portion of your debt.

You agree to make manageable monthly payments, usually over a period of five years, based on what you can afford. This option offers more control and protection compared to bankruptcy.

This key difference gives individuals a less damaging way to resolve their debt while maintaining control over their most important possessions. It’s a powerful alternative for those who want to avoid the harsher consequences of bankruptcy, all while finding a path to financial recovery.

If you’re unsure which option is right for you, our team can guide you through the process and help you make the best choice for your situation.

The hardest part for me was realizing that I needed help and making that first call.  Yanchdey walked me through everything and I saved thousands.  I pay 225/month and will be debt free in 4 years.  Thanks Again R.M. Whitby

A common fear surrounding consumer proposals is the belief that you will lose your home, car, or other valuable possessions. Many people think that debt relief comes at the cost of giving up everything they’ve worked hard for. Fortunately, this isn’t true.

Fact:
With a consumer proposal, you can protect your assets while still finding relief from overwhelming debt. Unlike bankruptcy, where you may be required to surrender certain belongings, a consumer proposal is designed to allow you to keep your important assets. This includes your home, car, and other personal items.

When you choose a consumer proposal, our insolvency trustees will work with you to create a manageable repayment plan. This plan allows you to pay back a portion of your debt over time, without the fear of losing everything. The goal is to help you regain control of your finances without sacrificing your most important possessions.

So, if you’re concerned about losing your assets, rest assured that this debt solution is designed to safeguard what matters most. You don’t have to risk your home or car to get the fresh financial start you deserve.

There’s a common assumption that only individuals with massive debt can qualify for a consumer proposal. This simply isn’t the case. Many people mistakenly believe that if their debt isn’t enormous, they won’t be eligible for this option.

Fact:
In Ontario, you can file a consumer proposal if your unsecured debts range from $5,000 to $250,000. This means that whether you’re dealing with smaller amounts of debt or facing larger financial burdens, a consumer proposal can still be a viable option for relief.

Flexibility:
A proposal covers various types of unsecured debt, including credit card debt, payday loans, and personal loans. This flexibility makes it accessible to many people who are struggling with different financial challenges. Whether your debt is on the lower end or closer to the higher limit, the consumer proposal provides a structured way to manage what you owe without needing to meet extreme thresholds.

This option is designed to help a wide range of people, not just those with overwhelming debt. If you’re unsure whether you qualify, it’s worth exploring the option. Give us a call today!

A common worry about filing a consumer proposal is the fear that it will permanently ruin your credit.

While your credit score will be affected, this doesn’t mean it can’t recover. In fact, many people already have poor credit when they start the process, and taking positive steps through a consumer proposal can actually help improve their credit rating over time.

Rebuilding Credit:
Once you enter into a consumer proposal, there are clear steps you can take to begin repairing your credit:

• Make timely payments: During the consumer proposal agreement, staying consistent with your payments is crucial. This demonstrates financial responsibility and can help in restoring your credit over time.
• Manage your finances wisely: Taking responsible steps—such as creating a budget, avoiding new debt, and focusing on saving—will improve your financial health and set the stage for rebuilding your credit.
• Receive a certificate of full performance: Once you successfully complete your consumer proposal, you’ll be issued a certificate of full performance. This document is an important milestone, allowing you to begin the process of restoring your credit.

With careful planning and responsible financial management, it’s possible to rebuild your credit and regain financial stability. In many cases, individuals are able to rebuild their credit within a few years and take steps toward achieving their financial goals.

If you’re worried about your credit recovery, our team can provide guidance on how to approach the process. We’re here to help you every step of the way.

Some people mistakenly believe that a consumer proposal is the final step before declaring bankruptcy.

However, this couldn’t be further from the truth. In many cases, a consumer proposal is actually a better option for avoiding the severe consequences that come with bankruptcy.

An Alternative to Bankruptcy:
A consumer proposal an alternative to bankruptcy offering a way to manage your debt while still protecting your assets.

Unlike bankruptcy, where you might be required to forfeit possessions like your home or car, a consumer proposal allows you to keep them. You agree to pay off a portion of your debt in manageable instalments, often reducing the total amount owed.

For many individuals, a consumer proposal is a proactive, smart choice to avoid the more drastic measures of bankruptcy. It provides a clear path to financial recovery without the long-term impacts and asset loss associated with bankruptcy.

If you’re unsure whether a consumer proposal or bankruptcy is right for you, our team can help guide you to the best solution for your situation.