Financial issues can be incredibly stressful. When you’re struggling with debt, you may feel as though the situation is hopeless. However, that isn’t the case. There are many different options available to those who are struggling with debt. An option that may be available to you is filing a consumer proposal.
What is a Consumer Proposal?
A consumer proposal is a legal process where you make a formal offer to all of your unsecured creditors. This offer will likely see you reduce the overall amount that you pay back, extend the time you have to pay your loan, or both. Once you have made all of the agreed upon payments, the remainder of your outstanding debt is eliminated as a part of the proposal. A consumer proposal often sees a person pay back a portion of what they owe in monthly payments for a set period of time. These monthly payments, based on your income and assets, are structured in a way so that you can fit them into your monthly budget. If you’re looking for details on how to file a consumer proposal, here is some information on the process.
The Consumer Proposal Process
A consumer proposal can only be filed by a licensed trustee in bankruptcy. This is a person who has been trained and is registered with the federal government to handle proposals. When filing a consumer proposal, a trustee in bankruptcy is known as a proposal administrator. If you decide that you would like to proceed with a proposal, your trustee will review your financial situation and determine what a fair offer to your unsecured creditors will be. Trustees take into account how much you owe and determine how much you can afford when creating the offer. In most cases, the offer will be more than what your creditors would receive if you were to file for bankruptcy. Only unsecured debts can be included in a consumer proposal. Unsecured debts include credit cards, personal loans, unsecured lines of credit, department store cards and many other similar debts. You cannot include secured debts such as mortgages or automobile loans in a consumer proposal. Once the offer is prepared and all paperwork is completed and signed, the offer is submitted to your unsecured creditors. Your creditors will then have 45 days to decide whether or not they choose to accept your proposal. If the majority of your creditors vote to accept your proposal, then all creditors are bound by its terms. A consumer proposal is a legal process. This means that, once your proposal is accepted, your creditors are not able to take any legal action against you to collect their debts. They cannot send collection agencies after you, they cannot garnish your wages and they cannot even communicate with you directly. All communication with creditors will be done by your trustee. This can greatly reduce the amount of stress you feel. As part of the consumer proposal process, you will need to complete two financial counselling sessions. The goal of these sessions is to teach you money management and budgeting tactics that will help you avoid financial trouble in the future. These sessions will also provide you with information on how to repair your credit rating and put yourself in a position for a stronger financial future. It is also your responsibility to keep your trustee updated if you move, change jobs or change your phone number. Once you have completed the agreed-upon payments and the other duties expected of you under the terms of the proposal (attending counselling sessions, keeping your contact information current, etc.) your proposal will be complete and your remaining outstanding debt will be erased. Most proposals are paid off in between 1-5 years, but you can pay your proposal off more quickly if you choose. There is no penalty for doing so.
Most bankruptcy trustees offer an initial consultation at no charge. In addition, all administrative costs associated with a trustee are set and regulated by the government. These costs come out of your proposal payments, so you do not have to pay the trustee any additional fees for his or her services.
Speaking with a Trustee
If you are dealing with financial issues, struggling with debt or if you would like more information on how to file a consumer proposal, speaking with a bankruptcy trustee is a good idea. As mentioned, most offer free consultations. A trustee can review your financial situation and provide you with details on the options available to you that can help you eliminate your debt and improve your financial situation.