A lot of people ask us is a Consumer Proposal a legitimate debt solution? Well to put minds at rest, here is some information below to clarify;
A Consumer Proposal is a formal alternative, which is used by individuals to avoid bankruptcy.
Overseen by the Office of the Superintendent of Bankruptcy (OSB), the solution is a secure and formal setup used in Canada where a debtor (a partnership or individual) agrees to make a formal, legally binding agreement with his or her creditors to make a reduced payments to repay the debt owed in return for a reduced overall sum.
This could be a route for individuals facing debt problems as it safeguards the debtor from the legal enforcement usually attached to the various other types of debts.
These come along with the agreement, only after having been approved and registered with the OSB. It won’t reverse any initiative or ploy taken before the agreement isin place, like bank arrestment or earning, though the trustee could negotiate any lifting there is to the arrestment.
Several individuals entering the debt solution could keep their properties, but the equity of the house would usually get realized to inflate the property. This is plausible via re-mortgaging or third-party buyouts. However, in certain extreme scenarios, the debtors’ house would have to be sold.
Advantages
Once a Consumer Proposal becomes registered with the OSB it prevent creditors from petitioning for bankruptcy of the debtor. The primary benefit of this is that all correspondence would get forwarded to the trustee – the person responsible for handling all creditor-related communication. The court would not get involved at any point, provided the debtor cooperates with the trustee as expected.
This financial arrangement would likely lessen problems from creditors while the related charges and interest pertaining to unsecured debts (within the agreement) are suspended (not applicable in case the debtor can make interest payment before discharge).
Post 5 years, the debt remainder could be written off (5 years is the minimum now). Typically, creditors get paid with disposable income, but if that doesn’t suffice, other assets could be liquidated to add to the sum. Social security advantages and aspects such as Universal Credit could be looked into to examine your existing financial scenario.
This assessment usually takes place at the time of trust deed application. However, the contribution paid back would not be removed from these funds.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
1 | Personal loan | $8,000 |
2 | Credit card 1 | $6,812 |
3 | Tax Debts | $5,399 |
4 | Overpayments | $5,200 |
5 | Overdraft | $700 |
Total Owed | $30,204 |
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
60%
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.