How A Consumer Proposal Can Help Manage Rising Debt Levels
There are several possible solutions to help manage rising debt levels – one of which is a Consumer Proposal. If your debts are less than $250,000 (not including your mortgage) and you have a stable source of income, a Consumer Proposal might be the right choice for you.
A Consumer Proposal is a federally legislated debt settlement program between you and your creditors that allows you to pay a percentage of what is owed, extend the time you have to pay off your unsecured debts, or both. Once accepted by your creditors, you will have one payment per month at 0% percent interest.
When a Consumer Proposal is filed, you are protected from your creditors and they must stop collection calls and legal actions. There are a very limited number of legal actions that won’t stop during a Consumer Proposal – actions to collect Child Support and Alimony, for example.
Only a Licensed Insolvency Trustee (LIT) can facilitate this program, so make sure any advisor you may be talking to has the LIT designation. Most LITs offer free consultations - it is not necessary to pay someone to find a LIT to administer your proposal or to explain the process.
If a Consumer Proposal is identified as the best solution for you, the LIT will draft a series of documents that will be presented to your creditors. These documents are carefully reviewed with you, signed when you are comfortable with the terms, and then presented to your creditors for consideration. You stop making payments to unsecured creditors and they then have 45 days to decide whether or not they want to accept your proposal.
Each dollar owed to is one vote – as long as at least 50% of creditors vote in favour of the proposal, it passes and the terms become a binding agreement. If less than 50% vote in favour, the LIT will work with you to amend the proposal and find terms that satisfy your creditors while still fitting into your budget.
There are several advantages to filing a Consumer Proposal:
You avoid Bankruptcy
Collection calls stop
You keep your assets, so long as you make your payments to your secured creditors
Your proposal payment is the same every month
Interest is cut off
There is no penalty for paying ahead or paying off the proposal early
A Consumer Proposal only stays on your credit report for 3 years after you are finished or 6 years from the filing date, whichever is less
A Consumer Proposal is legally binding on all your unsecured creditors
Start your journey to financial freedom. Book your free, no obligation consultation today to connect with one of our experienced BC/Yukon Licensed Insolvency Trustees (LITs).
