How much debt relief can I expect from a consumer proposal?

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Thinking about a consumer proposal? It’s a savvy way to cut down on unsecured debt like credit cards and loans. Typically, you might clear 40% to 70% of your debt, setting you up with a manageable payback plan over five years. Remember, it all depends on your income, assets, and total debt.

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Question

How much debt is forgiven in a consumer proposal? I’m curious to know how much of my debt might actually be written off if I go through with a consumer proposal. I’m hoping for significant relief, so some clarity on this would be appreciated.

From: Anonymous Question, Saskatchewan (SK)

Debt Insiders Answer

When you’re thinking about a consumer proposal, the amount of debt you’ll see disappear can really vary. It all hinges on what you can hash out with your creditors and your particular financial circumstances. Generally, folks find that a big chunk of unsecured debt—stuff like credit cards, personal loans, and medical bills—gets slashed down. Usually, you might wave goodbye to somewhere around 30% to 70% of what you owe. This sets the stage for a smarter, more manageable payback plan that stretches up to five years. Just remember, the exact amount depends on things like your income, what you own, and how much you owe in total.

From: Anonymous Question

Office of the Superintendent of Bankrupty (OSB) Answer

In a consumer proposal in Canada, the amount of debt that is forgiven depends on the proposal terms agreed upon between you and your creditors. Typically, you may propose to pay back a percentage of your total unsecured debt (such as credit cards, loans, and medical bills) over a specified period, often up to five years. The portion of your debt that is not paid according to the terms of the proposal is legally forgiven.

For specifics on how repayment amounts are determined, refer to the Bankruptcy and Insolvency Act (RSC 1985, c 11), particularly sections 50.6 and 66.34, which outline the guidelines for consumer proposals. The outcome is influenced by various factors including your income, assets, and the amount you owe. The creditors must approve the proposal, and they may receive more through a consumer proposal than if you filed for personal bankruptcy.

From: This answer is provided by scanning the OSB Bankruptcy & Insolvency Act and related directives

Related Questions

Here are the top 5 most frequently asked questions related to the concept of debt forgiveness in a consumer proposal, based on common queries and concerns:

1. How much debt can be forgiven in a consumer proposal?

• A consumer proposal can reduce unsecured debts to between 30-80% of their original amount.

2. What types of debts can be included in a consumer proposal?

• Unsecured debts such as credit cards, lines of credit, payday loans, and tax debts can be included, but not secured debts, student loans less than 7 years old, support and alimony obligations, or court fines and penalties.

3. How long does a consumer proposal last?

• Payments in a consumer proposal can be spread over a maximum of five years, but can also be paid off early with a lump sum.

4. Do I have to pay interest on the debts in a consumer proposal?

• No, the payments you make on a consumer proposal are completely interest-free.

5. What happens if my creditors do not accept the consumer proposal?

• If creditors do not accept the proposal, you can change the terms and resubmit, consider other debt alternatives, or file for bankruptcy.

References

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