Consumer Proposal in Alberta: What You Need to Know

A consumer proposal in Alberta is a formal, legal process designed to help individuals manage their debt. It offers a structured way to resolve financial problems by allowing you to pay back a portion of what you owe over a set period of time. If you're struggling with overwhelming debt, a consumer proposal could be a viable option to consider. This article will dive deep into the specifics of how consumer proposals work in Alberta, their benefits, eligibility criteria, and the steps involved in filing one.

Understanding Consumer Proposals
A consumer proposal is an alternative to bankruptcy. It’s a legally binding agreement between you and your creditors, facilitated by a licensed insolvency trustee. The primary goal of a consumer proposal is to reduce the total amount of debt you owe and make it manageable through a structured repayment plan. Here’s what you need to know about how this process works:

1. Eligibility Criteria
   To be eligible for a consumer proposal in Alberta, you must meet the following criteria:

   • Your total debt must be between $1,000 and $250,000 (not including your mortgage).
   • You must be unable to pay your debts as they come due.
   • You must be a resident of Alberta.

2. Filing Process
   The process of filing a consumer proposal involves several steps:

   • Consultation: Meet with a licensed insolvency trustee to discuss your financial situation and explore the suitability of a consumer proposal.
   • Proposal Preparation: The trustee will help you prepare a formal proposal outlining the terms of repayment, which is then submitted to your creditors.
   • Creditors' Meeting: Your creditors will review the proposal and vote on whether to accept or reject it. You must receive approval from the majority of your creditors to proceed.
   • Repayment Plan: If accepted, you'll make regular payments to the trustee, who will distribute the funds to your creditors.

3. Benefits
   Consumer proposals offer several advantages:

   • Reduced Debt: You may only have to repay a portion of your total debt.
   • Legal Protection: Once a proposal is filed, creditors cannot take legal action against you.
   • Avoid Bankruptcy: It provides a way to manage your debts without declaring bankruptcy.
   • Improved Credit: Successfully completing a consumer proposal can help improve your credit score over time.

4. Impact on Credit Rating
   Filing a consumer proposal will affect your credit rating. It will be noted on your credit report and can impact your score. However, it is generally less damaging than bankruptcy and will remain on your credit report for three years after the proposal is completed.

5. Costs
   The cost of filing a consumer proposal includes the fees charged by the insolvency trustee. These fees are usually included in your repayment plan, so you won’t have to pay them upfront.

6. Alternatives
   If a consumer proposal isn’t suitable for you, other options include debt management plans, debt consolidation loans, and bankruptcy. Each option has its own advantages and drawbacks, so it's important to explore all possibilities before making a decision.

Conclusion
A consumer proposal can be an effective solution for managing significant debt in Alberta. It offers a way to resolve financial difficulties without the need for bankruptcy, providing a structured plan for repayment and legal protection from creditors. However, it's essential to fully understand the implications and work with a licensed insolvency trustee to ensure it's the right choice for your financial situation.