Often, our clients consider a consumer proposal to manage their debt because they are interest-free and on average, recipients end up paying back much less than they owe. If you aren’t familiar with consumer proposals, watch this short video or read more here.
If you are familiar, you may have some additional questions about how we can help reduce your debt. We’ve outlined some of the most common concerns and queries below to help you get started.
- What is the difference between secured and unsecured debt?
Unsecured debt is not secured by an asset or collateral; for example, an unsecured credit card, personal loans, line of credit, income tax debts, medical bills, retail installments, certain student loans, and payday loans.
A secured debt simply means that the creditor has the legal right to take possession of the agreed asset, which can be later resold to recover their loan. The most common types of secured debt are mortgages and auto loans, in which the item being financed becomes the collateral for the financing. The other secured loan that catches people off guard, is a secured line of credit that is often secured by your home like a mortgage. We always caution against risking your family’s home for unsecured debt. There are better ways to deal with that.
- Can I include my car payment and mortgage in my consumer proposal?
Short Answer – Unfortunately, no.
Long Answer – if you file for a consumer proposal, you will need to continue to make payments on your mortgage and/or car loan, or else you would run the risk of having your car and/or home repossessed. You cannot use a consumer proposal to reduce your mortgage or auto-loan debt obligations.
However, most clients tell us that they find it easier to contribute towards their mortgage or car payments by taking the consumer proposal route. Filing a consumer proposal helps you restructure your finances enough to catch up on any mortgage arrears. If you are “underwater” on your car loan, if you owe a lot more than it is worth, a proposal is a good way to get out from underneath. There are ways to include this and get into a vehicle that is more in line with your budget. Talk to us about this.
- How long does a consumer proposal last on my credit report?
Short Answer – Three to five years.
Long Answer – Our clients agree to a consumer proposal with a fixed monthly payment typically over five years. When you file a consumer proposal, you receive an R7 rating, and it stays on your credit report for three years after your proposal is paid off. If you can pay off your proposal early, your credit rating improves sooner.
- Would I be eligible to apply for a credit card during a consumer proposal?
The short answer is – No.
Long Answer – You won’t be eligible to apply for a new credit card while you’re making payments on your proposal. If you want a credit card, your only two options are a prepaid credit card and/or a secured credit card. However, many debit cards allow you similar functions as a credit card, so if you are worried about not being able to purchase things online or rent a car, there are options.
- How do I know if I qualify for a consumer proposal?
Short answer – legally you must owe at least $1,000.00 to meet the qualification for a consumer proposal but practically, we would never let anyone file a process under the legislation for $1,000.00 and take the hit on their credit rating.
Long answer – a minimum of $10,000 is much more likely. You must also have the ability to pay something every month towards your proposal. If you don’t, but need protection from your creditors we have the option of filing bankruptcy and converting it to a Consumer Proposal once you have the ability to pay. Any individual who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the individual’s principal residence, are not more than $250,000 meets the qualification for a consumer proposal. If you owe more than that, we have other processes to help you.
Help Us to Help You
At BNA Debt Solutions, we are one of Alberta’s top experts on consumer proposals and personal bankruptcy. Our goal is to help Albertans eliminate debt, end creditor calls, and provide sound education to those seeking financial freedom.
Do you have any other questions about consumer proposals that we didn’t answer today? Ask away! You can message us any time and we’ll give you our best answer. Better yet, book a consultation with a Licensed Insolvency Trustee, and get our team working for you, today.