Consumer Proposals - 3 Common Misconceptions (MNP 3 Minute Debt Break)

2023-07-17  3 minute read

Consumer Proposal


here are a few different ways you can manage your debt in a smart way. One is a frequently misunderstood topic, Consumer Proposals. We’re going to look at three common misconceptions that could be hindering your journey towards financial freedom.

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When faced with mounting debts, making the decision to file a Consumer Proposal can be difficult, even more so when misinformation stands in your way. So let's brighten the path by debunking some of these misconceptions.

The first misconception can revolve around the belief that a Consumer Proposal is financially out of reach due to the perceived cost of engaging a Licensed Insolvency Trustee or LIT. It might feel counterproductive to pay someone to help manage an already overwhelming debt load.

However, it's vital to understand that there's no upfront cost to you when filing a Consumer Proposal in Canada. The fees charged by an LIT are federally regulated and are taken directly from the settlement offered to your creditors. There are no hidden fees or extra charges. It's part of the  government’s design to provide you with a fresh start, without piling on more financial burden.

A second misconception is the fear that an increase in income or sudden financial success would result in higher monthly payments towards your Consumer Proposal. This might be the case in a bankruptcy situation, where your monthly payments can fluctuate with your income. However, in a Consumer Proposal, your monthly payments are fixed and determined at the outset. They remain the same throughout the duration of the proposal. Even if you receive a pay raise, an income tax refund, or an inheritance, your proposal payments won't change. This is one of the significant benefits of a Consumer Proposal, providing you with a clear, predictable plan to manage your debt.

Lastly, we often encounter the misconception around the stigma or shame associated with filing a Consumer Proposal. Understandably, privacy is a concern for many. But every conversation you have with your LIT is kept confidential. Licensed Insolvency Trustees are bound by a stringent professional Code of Ethics to ensure your privacy is upheld. Your situation remains a private matter between you, your trustee, and your creditors. 

Treading the path to financial stability is challenging, and it's natural to feel overwhelmed and concerned. However, it's essential not to let misconceptions stop you from taking steps that could lead to a secure financial future. When properly understood and used, a Consumer Proposal can be an effective tool to achieve debt-free living.


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