Myth-Busting Consumer Proposals (MNP 3 Minute Debt Break)

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ebt can be a heavy burden, and exploring a consumer proposal can feel daunting. It's natural to seek information online or talk to loved ones during this stressful time. Research is a good first step, but be cautious – online sources can be unreliable, and even well-meaning advice from friends or family might be inaccurate. Many people have misconceptions about consumer proposals before meeting with a Licensed Insolvency Trustee (LIT) for the first time. But you need to know… LITs are there to answer your questions and set the record straight.

Let's tackle three common myths about Consumer Proposals to help you make the right decision.

Myth #1: LIT Fees Are a Barrier

The idea of paying someone to manage your debt might seem counterintuitive. But if concerns about LIT fees are holding you back, it's important to understand the fee structure. There's no upfront cost to file a consumer proposal in Canada. The LIT profession is federally regulated, and their fees are set by law. This means LITs can't set their own prices. While they don't work for free, their fee is deducted directly from the settlement offered to your creditors. This translates to no additional cost for you. Remember, a consumer proposal is designed for financial relief – there are no surprise fees with a Licensed Insolvency Trustee.

Myth #2: Salary Increases Only Benefit Creditors During My Proposal

The rules surrounding "surplus income" can be confusing. Under bankruptcy, your monthly payments fluctuate with your income. If you get a raise, you pay more surplus income to the Trustee. However, consumer proposals offer fixed payments. A raise, tax refund, or any other windfall won't increase your payments. The proposal amount is calculated at the beginning and remains fixed throughout. While you can use extra money to pay it down faster, there's no obligation.

Myth #3: Filing a Proposal is Public Knowledge

All conversations with your trustee, including the initial consultation, are completely confidential. LITs are bound by a Code of Ethics, meaning your information is protected unless you give permission or the law requires disclosure. Only you, your creditors, and your trustee will be aware of the details of your proposal. It will appear on your credit report for 3-6 years after filing. Beyond that, you control who you disclose your situation to, be it family, friends, or coworkers.

In many cases, a consumer proposal is a practical and effective solution to becoming debt-free. If you're considering this option, a local trustee at MNP Debt can answer your questions, address your concerns, and equip you with the best available information to make an informed decision.

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