If you think a CONSUMER PROPOSAL will hammer your Credit Score, a JUDGMENT will devastate it. As Joe pointed out, you are a "sitting duck" once the creditors find out that you own a home. I don't know the value of your home, but with a mortgage of $250,000, it's got to be worth well over $300,000. A law clerk can do a title search at the local Registry Office to determine what encumbrances are registered against your property and a phone call to a Real Estate Appraiser will yield a Fair Market Value of your property within 24 hours.

A Consumer Proposal is a method whereby a debtor will attempt to pay all of his debts either in part or in full over a period of time, not to exceed 5 years. The interest on these debts is FROZEN and may even be reduced or eliminated. During the period that the Consumer Proposal is in effect, no creditor can contact you, sue you, garnishee your wages or seize your assets. The Consumer Proposal is administered by a Trustee in Bankruptcy and supervised by a judge of the Bankruptcy Court. More people are now turning to a Consumer Proposal who previously would have considered Bankruptcy as the only solution to their financial problems. Many people can repay their debts, but the interest is "killing them" or they require a longer period of time to repay their debts. A Consumer Proposal provides this relief.

Any debt included in a Consumer Proposal is rated as R7. This tells the reader of your Credit Report that your creditors have approved a Consumer Proposal and you are making an attempt to repay these debts either in part or in total over a period of time not exceeding 5 years, although it can be shorter, under the guidance of a Trustee in Bankruptcy.

Compare this scenario to one, where you cannot meet your financial commitments on a monthly basis, fall behind and eventually into default whereby a creditor initiates legal action (sues you ) and obtains a judgment. This debt is now rated R9 which is the worst rating that you can have. This tells a reader of your Credit Report that you are in financial difficulty and have chosen to ignore your financial obligations. A judgment listed on your TransUnion Credit Report will purge 7 years from the date of the judgment. A judgment on your Equifax Credit report will purge 6 years from the date of the judgment.

Fair Isaac Corporation, creators of the FICO score have gone on record as saying that a judgment shown on a Credit Report will drop your Credit Score 80 to 130 points whereas a Consumer Proposal will drop your Credit Score 50 to 80 points.

If you are experiencing financial hardship, and you have sufficient income to make a Consumer Proposal to your creditors, I strongly urge you to contact a Trustee in Bankruptcy for a FREE consultation. The price is right and all it requires initially is a little bit of your time. You can locate a Trustee in Bankruptcy by Googling Bankruptcy Canada or Bankruptcy Ontario or by looking in the Yellow Pages under "Bankruptcy"

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Educating one Consumer at a time

I guess reality kicked in now lol.If all your creditors know you have a home they will sue you and apply the judgments with at least 5% interest towards your home. If this happens you might have a hard time re-mortgaging unless you include all the debts.

OK, this explains the disadvantage... it hammers your credit rating for 3 + (years to repay).

So that can be quite nasty and you have to assess if avoiding paying the full amount is worth trashing your credit rating.

RETENTION PERIOD OF DATA: EQUIFAX CANADA

REGISTERED CONSUMER PROPOSAL: When a registered consumer proposal is paid, it will automatically purge three years from the date paid.

I believe a consumer proposal does show up in your credit file with a certain R rating or it goes in the public section of your report. Give it a day or two and someone on here will be able to give you the correct information.

I am employed. I make 65K each year.

But...

I have

250K mortgage
13K student loan
15K personal loan
12K credit cards

It`s impossible to manage this.

A consumer proposal does not show up on your credit rating at all?

This does not at all affect your credit rating?

Why isn`t everyone doing this? lol

If I can remove some of this debt (I assume the mortgage wont be included) with no adverse affects on my credit rating I will do it.

I have only called one consultant so far they said $27,000 in debt can be negotiated and bought out and my final debt about would be around $9700. Roughly $200 a month would be my payment. I still have to go over the details with them but that's what they have told me so far.

@jen1976

When you file a CONSUMER PROPOSAL, you do not go to court. You first must meet with a Trustee in Bankruptcy in his/her office to discuss your debts and how you plan to make payments. Obviously, you must have a source of income, but not necessarily a salary or wage. The Trustee in Bankruptcy will discuss various options with you. Based upon how much you can afford to pay each month, the Trustee will contact each creditor with a Proposal. If this Proposal is accepted by a simple majority of the creditors ( i.e. 50% + 1 ) debts owing, then all creditors are bound by this Proposal. If a creditor does not respond to the Trustee's Proposal, the creditor is DEEMED to have accepted the Proposal. Once the Proposal is accepted, it must be presented before a Bankruptcy judge in order to certify the Proposal. The reason for this procedure is that a Bankruptcy judge must be satisfied that the creditors are better off under a Consumer Proposal than a Bankruptcy. A Consumer Proposal can last no longer than 5 years but may be shorter. Once a Consumer Proposal has been approved by a Bankruptcy judge, no creditor can contact you, sue you, garnishee your salary or wages or seize your assets. If you fail to honour your Consumer Proposal, a Bankruptcy judge will annul ( cancel ) your Consumer Proposal and you will be right back where you started from before the Consumer Proposal. A Trustee is paid by taking a percentage of each monthly payment you make and that is factored into the Consumer Proposal. .

@willygf

There are absolutely no disadvantages of filing a Consumer Proposal unless you consider trying to pay down your debts a "disadvantage". In fact, more people who are in serious financial trouble are choosing a Consumer Proposal than a Bankruptcy. A Bankruptcy can last from 9 months to 21 months to 36 months and then you have to wait 7 years before you are discharged. In addition, after a Bankruptcy, it becomes very difficult to obtain credit again and if you do obtain credit, it comes at a hefty price in the form of sky-high interest rates. Bankruptcy should ONLY be contemplated when your back is to the wall, your debts are crushing you and you see no way to continue with your daily activities. This is the "final straw".

You mentioned in your blog that you are currently employed. But by the tone of your blog, it appears that you meant to say that you are unemployed. If that is the case, then a Consumer Proposal is not for you because you MUST have a source of income to make a Proposal to your creditors.

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Educating one Consumer at a time

What is the disadvantage of pursuing a CONSUMER PROPOSAL

I have never heard of them before.

I have quite a bit of debt myself and would like to eliminate it quickly... Not sure if there are any routes to do that since I am currently employed.. :P

I will see who is in my area, I still have to call the law firm today or by the 1st, with a consumer proposal would I still have to go to court?