Handling your Financial Future
When it comes to dealing with large amounts of debt, there are different options available. Which of these options are available to you and which option makes the most sense for will depend on your particular financial situation. There is no “one size fits all” solution. One option that many consider is a consumer proposal.
What is a consumer proposal? Should you choose a proposal over a bankruptcy?
As mentioned, each financial situation is different. Whether you should choose a consumer proposal or a bankruptcy or another type of debt management or financial solution will depend on your circumstances. In order to figure out which financial option is right for you, it’s a good idea to consider the available options and fully understand what these options mean and what each one entails.
In order to find out more information on the possible solutions, you may wish to speak with a licensed insolvency trustee. You may think that a trustee in bankruptcy can only help with personal bankruptcy, but this isn’t true. A trustee is trained to review financial situations and is required to inform you of all of the available options. This will allow you to make an informed decision for your financial future.
What is a Consumer Proposal?
A consumer proposal is a legal process where you make an offer to your unsecured creditors to repay them on terms you can afford. In the majority of consumer proposals, a person offers to repay a portion of his or her debt in monthly payments over a set period of time. A consumer proposal can take between one and five years. Once the proposal is complete, the remaining outstanding debt is eliminated. In effect, you reduce the amount of your debt to the amount of your offer if your proposal is accepted.
Filing a Consumer Proposal
When you decide to file a consumer proposal, your trustee reviews your financial information and determines what a fair offer to your unsecured creditors will be. Unsecured debts include debts such as credit card debt, unsecured lines of credit, personal loans and other such debt. It does not include debt such as mortgages or automobile loans. These cannot be included in a consumer proposal. In addition, a consumer proposal cannot include alimony, child support or any court ordered debts.
Your proposal must be submitted to all of your unsecured creditors. You cannot exclude any. Once your proposal has been submitted, your creditors have 45 days to decide if they wish to accept it. If the majority of your creditors vote to accept your proposal, then all are bound by its terms.
If they do not vote to accept, you can resubmit your proposal. Otherwise, you may have no other choice but to file for bankruptcy.
Creditors understand this. They know that, if the proposal is not accepted, you may end up bankrupt. In most bankruptcies, creditors do not get very much, if anything at all. For this reason, many creditors choose to accept a consumer proposal as long as the offer is fair. They would rather get something instead of nothing.
Once your proposal is accepted, your main duty is to make the payments as outlined in the proposal.
In addition, you will be required to attend two financial counselling sessions. The goal of these sessions is to teach you budgeting and money management techniques so that you will not end up in financial trouble again in the future.
You are also responsible for keeping your contact information current and informing your trustee if there are any changes to your phone number, address or employment information.
Paying a Proposal
In general, you will make payments monthly. However, the terms of your proposal will dictate how often you are to make payments and the amount of these payments. It is important that you make your payments as agreed upon. If you miss three payments, your proposal will be annulled and you will again owe creditors the full amount of debt.
You are able to repay your proposal more quickly, if that is possible for you. There is no punishment or penalty for paying larger payments or and it is even possible to repay your consumer proposal in one lump sum. Paying your proposal more quickly allows you to receive your Certificate of Full Performance more quickly.