Is a Consumer Proposal the Right Choice for You?
If you are having financial difficulties and are unable to pay your debts as they become due, speaking with a licensed trustee in bankruptcy can be a good idea for you. When you meet with a trustee, he or she will provide you with details on all of the options that are available that could help you reduce or eliminate your debt. One of these options may be a consumer proposal.
A consumer proposal is a legal process that can only be administered by a trustee, who is called a “proposal administrator” during this process. Through a consumer proposal, you make an offer to your creditors where you propose to repay them on terms that you can afford. The majority of consumer proposals involve paying a portion of the debt owing in monthly payments over a specific period of time. A proposal can be repaid in anywhere from a lump sum upfront to up to five years.
Should you File a Consumer Proposal?
Every financial situation is different. This means that the solution to each person’s financial difficulties will be different as well. There is no one solution that is the absolute right one in 100% of situations. In order to determine if a consumer proposal is right for you, you will need to consider your specific circumstances and then decide based on those facts.
A trustee in bankruptcy can help you find out the information that you need to make an informed decision. Trustees receive years of training. They are licensed by and registered with the federal government. They are also bound by a strict code of ethics. This means that they are required to provide you with details on all possible options, not just those that they can assist you with. This means that you will receive all of the information you need to make a choice.
If a consumer proposal is an option for you, the final choice as to how to proceed is entirely up to you. You should never feel pressured to choose one option over another. Trustees do not make this decision for you and it is always your choice.
Possible Reasons for Considering a Consumer Proposal
As mentioned, each individual will have different options from the debt relief process which is dependent on their specific circumstances.
However, here are a few reasons why many people consider consumer proposals when they cannot afford to repay their debts in full.
- They reduce the overall amount owing. Some other debt relief options reduce the interest that you are expected to pay or extend the time period that you have to pay back your debt. A consumer proposal effectively reduces the amount that you are expected to repay. When you submit a proposal, you typically offer to repay a portion of what is owed. At the completion of the proposal, your remaining outstanding debt is forgiven.
- It provides legal protection. A consumer proposal is a legal process. This means that it is regulated by government law. It also means that you receive legal protection once your proposal is accepted. Once your proposal is accepted, your unsecured creditors are not able to contact you directly. All communication with your unsecured creditors will happen through your trustee. These creditors are also not able to send collection agencies after you. In addition, all civil legal action against you to collect debts must stop.
- It includes all unsecured creditors. When you submit a consumer proposal, it must be submitted to all unsecured creditors. They then vote as to whether or not they will accept the proposal. If the majority choose to accept it, then all of your unsecured creditors are bound by its terms. You will then make your proposal payments to your trustee who will distribute them to your creditors. This is different from several other debt relief options that require you to negotiate with each creditor individually. In these situations, those who do not accept your negotiations can still take legal action against you to collect their debts. This is not possible with a consumer proposal.
As you can see, there are a number of reasons why a person may choose to file a consumer proposal. By reviewing these facts and comparing them to your specific financial situation, you can determine if this debt relief process is the right one for you.