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What Kind of Debts Can You Include in a Consumer Proposal?

When is a consumer proposal the best solution for helping your reduce debt? You may have reached the point where you can’t keep up with all of your bills and/or debt payments. Your debts keep accumulating along with the growing amount of interest you’re paying. You can repay some of your debts and you want to avoid filing for bankruptcy. Recently, an increasing number of people in Saskatchewan have found themselves in this situation. In fact, there were over 47 per cent more consumer proposals filed in 2016 compared to 2015.

What is a consumer proposal?

In short, a consumer proposal is a legal agreement you make with your creditors to resolve your debts. You work with a Licensed Insolvency Trustee (LIT) to decide on a repayment plan that is affordable for you and acceptable to your creditors. Interest charges are frozen, wage garnishments and collection calls cease, and you can keep all of your assets. It’s always important to do your homework before committing to a formal debt relief solution. You can find out more about how a consumer proposal works on this government of Canada website.

What kind of debts can be included?

A consumer proposal can only include your unsecured debts. Unsecured debts are not backed by an asset or collateral. Debts that can be included in your consumer proposal include:

  • Credit cards
  • Medical bills
  • Utility bills
  • Unsecured bank loans or lines of credit
  • Payday loans
  • Income taxes owed

What kind of debts can’t be included in a consumer proposal?

Any secured loan, like a mortgage or vehicle loan, cannot be resolved with a consumer proposal. Other kinds of debt that you will need to continue to make payments on include:

  • Home equity line of credit
  • Recent student loans – you must be out of school for seven years or more to include your student loans in a consumer proposal.
  • Alimony or child support payments

An initial meeting with an LIT will involve reviewing your financial circumstances and exploring all possible debt relief options. In most situations when you decide to file a consumer proposal, you’ll only repay a portion of your debt, by making monthly payments to your LIT over a period of up to five years. The LIT will then distribute these payments to your creditors each month.

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