The new year brings an opportunity to reassess your finances; for many, tackling debt is at the top of the list. If you're struggling with overwhelming debt and are unsure of your options, it's crucial to understand the difference between bankruptcy and other debt-relief solutions. A Consumer Proposal is one solution that can help you regain control of your finances without filing for bankruptcy.

In this blog, we’ll explore why a Consumer Proposal is often a better alternative to bankruptcy, how it works, and how it can set you on the path to financial freedom in 2025.

What is a Consumer Proposal?

A Consumer Proposal (also known as a Proposal to Creditors) is a formal, legally binding agreement between a debtor and their creditors to settle debts for less than the amount owed. It is an alternative to bankruptcy that allows individuals to make affordable payments towards their debt over a fixed period, typically five years or less.

Unlike bankruptcy, a Consumer Proposal enables you to keep all of your assets, such as your home or car, while still resolving your debt. It halts creditor collection efforts, including phone calls and legal action, giving you the peace of mind to focus on your financial recovery.

Why Choose a Consumer Proposal Over Bankruptcy?

Keep Your Assets

One of the primary reasons people opt for a Consumer Proposal over bankruptcy is the ability to retain personal assets. While bankruptcy requires you to surrender certain assets to the Licensed Insolvency Trustee to pay creditors, a Consumer Proposal allows you to keep your property, including your home, car, and other essential items. This is a major benefit for anyone who wants to protect their hard-earned possessions during the debt recovery process.

Stop Interest and Collection Calls

When you file a Consumer Proposal, it stops interest from accumulating on your debts. If you are dealing with high-interest credit cards or payday loans, this can significantly reduce the total amount you owe. Additionally, creditors are legally prohibited from contacting you once your proposal is in place, and collection efforts cease immediately. No more harassing phone calls or letters from creditors, just one manageable monthly payment to the Licensed Insolvency Trustee.

Impact on your credit score

Filing for bankruptcy can negatively impact your credit score and remain on your record for up to seven years. A Consumer Proposal, on the other hand, is a less damaging solution. While it still affects your credit, it shows future lenders that you took a responsible step to manage your debt, which can help improve your credit in the long term. Once the proposal is completed, the remaining debt is forgiven, and your credit can begin to recover.

Reduce the Total Debt Owed

A significant advantage of a Consumer Proposal is that it allows you to reduce the total amount of debt you owe. In many cases, creditors will accept a portion of the debt in exchange for a repayment plan. This can result in debt forgiveness, meaning you only pay a fraction of what you originally owed. For individuals overwhelmed by credit card debt, payday loans, or personal loans, a Consumer Proposal can provide much-needed relief.

Structured and Affordable Repayment Plan

One of the most appealing aspects of a Consumer Proposal is the structured repayment plan. The monthly payment you agree to is based on your income, expenses, assets and what you can realistically afford. This ensures the plan is manageable and prevents you from falling into debt. With a Consumer Proposal, you know exactly how much you must pay each month and how long.

Who Is Eligible for a Consumer Proposal?

To qualify for a Consumer Proposal, you must owe less than $250,000 in unsecured debt (not including mortgages on your primary residence). You must also demonstrate that you cannot pay your debts in full but can make reduced payments.

A Licensed Insolvency Trustee (LIT) will work with you to determine your eligibility and help you file the proposal with your creditors. They will also ensure that the repayment plan is reasonable and based on your financial situation.

How to File a Consumer Proposal?

Filing a Consumer Proposal is a simple process, but it requires the help of a Licensed Insolvency Trustee (LIT). Here are the steps involved:

Initial Consultation: Meet with an LIT to discuss your financial situation. They will assess your debt and help you understand your options.

Proposal Drafting: The LIT will work with you to create a proposal that outlines how much you can afford to repay and over what period.

Filing the Proposal: Once you agree on the terms, the LIT will file the proposal with your creditors.

Creditor Vote: Your creditors will review the proposal. If the majority agree, the proposal is accepted, and your repayment plan begins.

Repayment: You will make monthly payments to the LIT, who will distribute the funds to your creditors. Once all payments are made, the remaining debt is forgiven.

Is a Consumer Proposal Right for You?

If you’re struggling with debt but want to avoid filing for bankruptcy, a Consumer Proposal could be the perfect solution. It allows you to take control of your finances, stop interest from accumulating, and keep your assets.

At MORATAYA Corp, we specialize in guiding individuals through the Consumer Proposal process, providing expert advice and support every step of the way. If you’re looking for a fresh start in 2025, we can help you explore your options and find the best debt relief solution for your needs.

Contact Us Today for a Free Consultation

The new year is the perfect time to tackle your debt and start fresh. If you’re overwhelmed by debt and need a structured solution, MORATAYA Corp is here to help. Our Licensed Insolvency Trustees (LITs) will work with you to develop a personalized Consumer Proposal that gives you the best chance for a debt-free future.

Contact us today for a free consultation and take the first step toward a brighter financial future!