If you are struggling to pay your debts as they become due, you may feel as though there are no options out there that can help you. The good news is that this isn’t true. There are a number of to help those who are in debt improve their financial situation. One of these options is a consumer proposal.
What is a Consumer Proposal?
A consumer proposal is a legal process through which you make a formal offer to your creditors to repay them on terms that are possible for you. In most cases, you will propose to repay a portion of your debts in fixed monthly payments for a specific period of time. Once the proposal is complete, the remaining debt is eliminated. A consumer proposal can only be administered by a licensed trustee in bankruptcy.
Possible Consumer Proposal Benefits for You
One major reason why many people consider a consumer proposal is because it effectively reduces the amount that you are expected to repay to your unsecured creditors. In many cases, a consumer proposal offer involves paying as little as 30 percent of the outstanding debt. If you are able to repay some of your debt, but not the full amount, then a proposal could be a good option for you. Another reason why many people consider consumer proposals is because you receive certain legal protection from unsecured creditors once your proposal is accepted. Your creditors are not able to contact you directly once your proposal is agreed upon. All communication between you and your creditors is done through your trustee and unsecured creditors cannot send collection agencies after you to collect their debts.
You are also protected from most civil legal action once your proposal is accepted. This means that your unsecured creditors cannot take legal action against you to collect their debts and most existing legal action that has been started for this purpose must end. Another important aspect to consider is that, once a consumer proposal is accepted by the majority of your creditors, then all of your unsecured creditors are bound by its terms. This means that you do not have to negotiate with each creditor individually and convince each one to cooperate with you.
Why Creditors Accept Consumer Proposals
Many people wonder why any creditor would accept less than is owed to them. However, the truth is that most consumer proposals are accepted as long as they are fair. Why? Creditors know that, if you are in a situation where filling a consumer proposal makes sense for you, you are unable to repay your debts in full. This means that, if your proposal is not accepted, you may have to file for bankruptcy. Creditors typically do not get very much when an individual files for bankruptcy. In many cases, they get nothing at all. Creditors recognize this and accept fair proposals because they would rather get something than nothing.
What is Right for You?
Every financial situation is different. Therefore, there is no solution that works for every person in every case. In order to help you decide if a consumer proposal is the right option for you, it makes sense to speak with a financial professional such as a licensed trustee in bankruptcy. Trustees receive years of training and are licensed by the federal government to administer bankruptcy and consumer proposal processes. They are bound by a strict code of ethics and thus are required by law to explain all possible options to you, not just the ones that they can help you with. Most trustees offer free consultations where they will review your financial situation and provide you with details on the available options. It is then your choice as to how you wish to proceed. A consumer proposal may be the choice that you wish to go ahead with. If it is, your trustee will determine what a fair offer to your creditors will be and submit this offer to all of your unsecured creditors for review. Your creditors will then have 45 days to decide on whether or not they will accept the proposal. If they do, your primary responsibility is to make the agreed-upon payments.