A Way Out or A Dead End: The Pros and Cons of Consumer Proposal

Managing finances even with a considerably “stable” income you can never really tell. Especially that most people in the population are fixed income earners and the rate of a regular salary does not always or rarely keep up with the continuously increasing cost of living not to mention small businessmen are also a target. Suffice it to say, for most people the regular salary rate only covers one’s daily living expenses. That means a regular employee or small business personnel has only little to no savings for unforeseen expenses and most insurance companies do not usually cover.

You see, it is not usually a case of bad financial management, oftentimes getting buried in a pile of debt is a result of underemployment which is not the creditor’s fault entirely, most people in America juggle three to four jobs in order to make ends meet but still end up with a considerable sum of debt.

In the event of when all options are exhausted but there is still seems to be no escaping your insurmountable debt, you choose the usual last resort; file for bankruptcy.

You may think that doing such would solve your problems but getting rid of your debts is just the tip of the iceberg. You see bankruptcy (1 allows your creditors to hold your unnecessary assets (2) charges attorney’s and court costs and (3) does not completely discharge all your debts to name a few. With all the settlements required you might have a bit of a hard time getting back on your feet.

However, there is a better option than bankruptcy called consumer proposal where you get to settle an agreement with all your creditors through your Licensed Insolvency Trustee (LIT) and get to pay only a portion of your total debt. But again, it is not all it’s cracked up to be., amid the benefits, there might be conditions that would not fit your current circumstance.

So here is where we lay down the major terms, advantages, and disadvantages of filing for a consumer proposal.

But first, we have to understand the role of another party involved in the settlement. Your Licensed Insolvency Trustee (LIT) unlike a typical debt consultant is a federally licensed personnel who intercedes your current financial circumstances to your creditors on your behalf. In addition, your LIT would be the one to formally file your consumer proposal as well as give you formal financial counseling sessions.

Below are the advantages and disadvantages as well as the terms and conditions of filing a consumer proposal.


1.)  As mentioned a consumer proposal only asks you to pay a portion of your total debt.
2.) It has no interests.
3.) Pauses ongoing collections as well as lawsuits filed by your creditors.
4.) If your creditors fail to give a response to your request for a consumer proposal within three months it is automatically accepted.
5.) There will be no holding of assets.


1.) You are given typically only four to five years to pay the agreed amount.
2.) If you miss three payments, you will not be allowed to file another consumer proposal and there is no opportunity to apply for a reconsideration.
3.) All consumer proposals are public records
4.) Your consumer proposal will be reflected on your credit record which then will badly affect your credit score.
5.) According to the Credit Counsel Society one out of five people who apply for a consumer proposal end up filing for another one in the future.
6.) A standard fee of $1000 is usually charged.
7.) The final decision will come from your creditors and not from your LIT. Therefore, it is worth reiterating that not all proposals are accepted

Perhaps the difference of the risks between filing for bankruptcy and consumer proposal may not make that big of a difference. However, the vivid assurance that a consumer proposal can give is that it is federally licensed so clients are guaranteed a formal complaint mechanism plus the direct involvement of the state in the event of any mishap committed by any party involved in the negotiation.

This is not to say that a consumer proposal is more preferable than filing for bankruptcy, our objective is just to lay out all available options but you do have to be aware that all credit aid transactions will greatly affect your credit rating. Nonetheless, this is again just another option, the overall key for this one us to find an excellent Licensed Insolvency Trustee. But overall the best thing to do is find a credit aid most suitable to your current financial circumstances