DEBT RELIEF OPTIONS IN TORONTO, ONTARIO
What is a Consumer Proposal?
A consumer proposal is one of the most efficient debt solutions in Toronto, bringing immediate financial relief and getting you on the path to a more stable financial future.
If you are struggling with credit card debt, personal loans or tax debt, a consumer proposal might be the right solution if you don’t qualify for a debt consolidation loan, can’t repay all of your original debt, or your debt outvalues your assets.
A consumer proposal is a legally binding contract between you and your creditors that consolidates your debt and settles it for less than you owe. Our Licensed Insolvency Trustees (LIT) will review your financial situation to determine if a consumer proposal is the right solution. If so, we will assess a realistic monthly repayment amount you can afford and submit the proposal to your creditors for approval. Once they accept, the proposal becomes legally binding and you will begin to make your monthly payments. When all conditions of the consumer proposal are fulfilled, the remaining debt is discharged. While the maximum repayment period is five years, you have the option to settle the proposal at any earlier time if your financial situation improves.
The most significant benefits of a consumer proposal are:
Discharge up to 75% of your debt
Stop all legal action, such as wage garnishments or frozen bank accounts
Stop all collection calls
Keep all assets, including tax refunds
No additional interest on any debt included in the proposal
Please note that only LIT like Chande Debt Solutions are allowed to file consumer proposals.
What Debts are Included in a Consumer Proposal?
A consumer proposal in Toronto includes most unsecured debts, meaning that any debt secured by an asset, such as a mortgage or car loan, cannot be included. Typically, the following can be included in a consumer proposal:
- Credit card debt
- Personal loans, including lines of credit, consolidation, or renovation loans, provided no assets secure the debt.
- Payday loans
- Student loans, if you stopped to be a student at least seven years ago
- Income tax debt, encompassing amounts owed for personal income tax (including penalties and interest), GST debts, Canada Child Benefits overpayments, CPP, and OAS overpayments.
Alternatives to Consumer Proposal
When considering debt relief options, it is important to evaluate all possible solutions thoroughly. Your Licensed Insolvency Trustee (LIT) can assist you in determining the best course of action for your situation.
Bankruptcy
Bankruptcy is also managed by a Licensed Insolvency Trustee, who will oversee your case. This Toronto bankruptcy trustee takes control of your assets (with certain exceptions), manages your financial affairs, and supervises your bankruptcy obligations, including mandatory credit counselling sessions and monthly income and expense reporting. Upon fulfilling these duties, you can achieve a debt discharge after either 9 or 21 months.
Debt Management Plan (DMP)
In a Debt Management Plan, a credit counselor assesses your debts craft a multi-year repayment plan spanning three to five years. This plan is presented to your creditors for approval. If accepted, you make a single monthly payment to the credit counselling agency. The credit counsellor may be able to negotiate reduced interest rates on your debt, redirecting the savings toward debt repayment. Participation in a DMP is voluntary for your creditors, so it is possible that not all creditors will agree to the plan. They can also withdraw from the agreement at any time.
It is important to note that a DMP does not involve debt reduction or cancellation; you must still repay the entire debt amount. This fundamental distinction is a significant difference from a consumer proposal.
Consolidation Loan
A debt consolidation loan allows you to combine multiple smaller loans or debts into a new single loan. This approach aims to pay off smaller debts or consolidate higher-interest debts into one payment with a lower interest rate over an extended period.
However, it is essential to understand that this approach does not eliminate your debt but makes it more manageable. Additionally, eligibility for a consolidation loan requires an application and qualification process.