Residents of Canada have access to a little known strategy for dealing with debts: it's called a consumer proposal. (Sorry, if you live in the United States you cannot file a consumer proposal. The closest equivalent is a Chapter 13 Wage Earner Plan, which has many of the same features).

Consumer proposals are very common in large cities such as Toronto, Ontario where incomes are high, but debts also tend to be above average.A consumer proposal is an alternative to bankruptcy, and it has many advantages.

The most important advantage is that as soon as your consumer proposal is filed, your creditors cannot take you to court, sue you, or garnishee your wages. You receive protection from your creditors immediately. The protection automatically lasts for 45 days. After 45 days the protection continues if the creditors accept your proposal.

Second, interest on all your credit cards is frozen on the date you file your consumer proposal; no further interest payments are required. Third, most wage garnishments are immediately stopped. The only exceptions would typically be garnishments for court ordered child and spousal support.

Fourth, a consumer proposal is binding on most government debts, so even if you owe taxes to Revenue Canada they can be dealt with in the proposal.

Finally, a consumer proposal is a legally binding procedure. It is administered by a government licensed trustee, and is supervised by the courts, so once the consumer proposal is accepted, creditors cannot change their minds and demand more money.

Consumer proposals are not for everyone. You need an income to make the payments each month. If you have a low income a personal bankruptcy may be a better option. However, if you have more debts than you can handle, a consumer proposal may be a great option for dealing with your debts.

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