Filing for a consumer proposal is becoming a popular debt consolidation option for Canadians. In 2016, 62,506 Canadians filed for consumer proposal. More Canadians are opting for consumer proposal than bankruptcy, and the number of people who filed for a proposal is steadily increasing.

If you’re filing for a consumer proposal, you are making an offer to your existing creditors to pay back a portion of your debt. This number is then presented to the creditors, and the majority must accept. Once accepted, the proposal is legally binding.

The downside to a consumer proposal is that your credit will be critically affected for years afterward, making it difficult to secure any types of loans or refinance your mortgage. Plus, a consumer proposal must be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who will take a portion of your consumer proposal as their payment.

One of the questions we’re always asked about filing for a consumer proposal is “Can I keep my house?”

The short answer is likely yes, but it depends.

Secured debts, such as mortgages, aren’t included in consumer proposals. So, when you file for a consumer proposal, it is only paying off your unsecured debts — loans without collateral — such as credit cards, student loans, and payday loans. When you’re in a consumer proposal, so long as you continue to make payments on time to your secured debts, such as your mortgage, your car payments, etc., those assets can’t be taken away.

In many cases, filing for a consumer proposal is actually going to allow you to keep your house. If you’re struggling to keep your head above water because you’re relying on unsecured credit, a consumer proposal is going to ease that suffering. If your income is enough that you can afford to keep paying your mortgage, car payment, cost of living, and consumer proposal payments, then you will be able to keep your house. But you have to be sure to make your payments on time and not miss any.

If, however, after filing for a consumer proposal your income is still not enough to make ends meet, it’s a different situation and it would be a good idea for you to consult a debt counsellor to either make a budget or look at other financial options. If you don’t pay your mortgage, you will lose your house.

DebtCare Canada can help you make a budget for life after a consumer proposal or answer any questions you have about filing for a consumer proposal.

Contact us today for a free consultation by calling 1-888-890-0888.