Could be your best option
One way to restructure your debt is by filing a Consumer Proposal. More than 45,000 Canadians a year find this to be a more viable option than filing for bankruptcy. A Consumer Proposal is a cents-on-the-dollar offer to your creditors collectively, filed under the Bankruptcy and Insolvency Act.
If structured correctly a Consumer Proposal is a good option to consolidate your debts and lower your payments. In order for your proposal to be accepted, your unsecured creditors who hold the majority of the debt must agree to the proposal. Once your proposal has been accepted and your creditors are on board, you will have up to 5 years to repay the agreed upon payments.
It is a legal agreement and the repayment is largely based on your income, your assets and the amount you owe. Your creditors will receive more money than if you went bankrupt and you aren’t required to pay out a lump sum like in an Informal Proposal. Even if you earn extra money during the proposal, your creditors are not entitled to it. You can however pay extra if you wish without any penalty.
My debt counselling services will help you determine if this is for you.
Benefits of Filing a Consumer Proposal
- You only pay back a percentage of what you owe based on your income and ability, without interest or penalty
- You can take up to 5 years to pay off your proposal
- Any garnishing of your wages will be stopped
- As soon as the proposal is filed interest will no longer be accumulating
- Collection agencies and creditors are not permitted to contact you
- Less damage is done to your credit by filing a Consumer Proposal than filing for Bankruptcy.
- An R7 is reported instead of an R9, making it easier to begin rebuilding your credit
Other Things to Consider
- Your debts must be more than your assets
- Your creditors must vote on the proposal and determine if they agree to the terms
- All debts are included in the proposal, you cannot pick and choose
- Child support or alimony must still be paid
- Secured debt like a car loan or a mortgage are not included in your claim
- If your have student loans are within the last 7 years from the end of study they will survive the process
Through this process, you must give “Full Disclosure” of your income and expenses, assets, liabilities, and any business holdings as part of the proposal process and a consumer proposal is filed through a Licensed Insolvency Trustee (LIT).