Are you drowning with your unsecured debts? If you’re on the verge of filing for bankruptcy, you might want to step back and learn how you can eliminate your debts through a consumer proposal. Through a consumer proposal, you can get assistance to cope up with your debts. Here, you’ll learn what is consumer proposal, how it can impact your credit repute and its process.
Things You Should Know on a Consumer Proposal
What is a Consumer Proposal?
A consumer proposal is a binding debt settlement in a form of legal arrangements. You can file for a consumer proposal through a Licensed Insolvency Trustee. In a consumer proposal, you will still pay for your debts but at a lower amount than you owe. Unlike bankruptcy, a consumer proposal allows you to retain your assets while eliminating your debt. It is the only debt settlement arrangements authorized by the government of Canada.
How Does a Consumer Proposal Work?
In a consumer proposal, your payment terms are based on what arrangement you agree with your creditors. In this instance, your creditors will likely expect the amount that you can afford to pay. Your insolvency trustee will function as a consumer proposal administrator and will set a meeting with you to assess your financial status. This is done to determine the due amount to offer.
Moreover, every proposal differs since it will depend on your income and the amount of debt you owe; simultaneously, every proposal to your creditors also varies. In general, payments under a consumer proposal are dispersed over 5 years as the maximum and free of interest. Thus, allowing you to save approximately 70%-80%. Also, when a consumer proposal is accepted, it will halt your interest and can prohibit debt collectors and the deduction from your wage.
Do I have to pay my Entire Debt?
In a consumer proposal, you don’t need to pay your entire debt. Through the Licensed Insolvency Trustee, a certain proposal will be made for your creditors. This includes an option to offer a percentage or fraction of the amount you owe from creditors. Also, it can include an extension of the period to repay your debts or both options.
Furthermore, you must be aware that a consumer proposal cannot be extended over 5 years. When considering a consumer proposal, a Licensed Insolvency Trustee will administer a suitable arrangement to increase the possibility of having your creditors approve it.
How Does a Consumer Proposal Impact my Credit Rating?
Several debtors consider settling for a consumer proposal as the last means. This is because when you file for a consumer proposal, you can potentially acquire the lowest credit rating, which makes it hard and expensive to get a loan in the future. In general, a consumer proposal is evident in your credit report for 3 years after you completed it. Besides, it will sum up to 8 years in your credit rating, considering the 5 years maximum of a consumer proposal.
Should I File for a Consumer Proposal?
You will get an instant shield from creditors and lenders when you file for a consumer proposal via a Licensed Insolvency Trustee and Consumer Proposal Administrator. You wouldn’t have to worry about your creditors’ harassing calls and deduction on your wages in this case.
So, if you’re interested in filing for a consumer proposal but you’re still in doubt if it’s the most suitable means to free you from indebtedness, simply contact us and see if you qualify to file for a consumer proposal.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.