How Does a Consumer Proposal Works?
Knowing that a consumer proposal can effectively free you from debt without losing your assets, surely you’d be more eager to know how it works. This guide will widen your knowledge of the process that you need to take when applying for a consumer proposal. Through this useful guide, you can get the basic information on what will transpire during your application.
How to Qualify for a Consumer Proposal?
You should be aware that not just anyone can qualify for a consumer proposal. Regardless if you have a huge amount of debts, it does not automatically make you qualify to file for a consumer proposal in Canada. To qualify, your unsecured debts must total not lesser than $1,000 and should not go beyond $250,000 if your filing as a single individual, or $500,000 if your filing for a joint consumer proposal.
If your debts are beyond the maximum limit, bankruptcy will suit you instead. Besides, though you won’t pay your entire debt, you’ll still be asked to put some payments on your debt each month in a consumer proposal. So, if your income isn’t enough to cover any payments of your debts each month, then bankruptcy is what’s left for you.
What are the Process of a Consumer Proposal?
To effectively layout a proposal that your creditors will likely favor, you may need to consider the below pointers:
- Reach out to a licensed bankruptcy trustee and set up a meeting for the assessment.
- Give all the information that your trustee requires and make sure that you provide honest and accurate answers.
- If the licensed trustee concludes that you are fitted to file for a consumer proposal, make sure you carefully analyze both positive and negative aspects. This is to ensure the possibility of considering credit counseling, debt settlement, or debt consolidation.
- Your trustee will assist you to come up with a sound decision and will then recommend if it’s the right choice.
What Your Trustee Will Want to Know?
To decide if a consumer proposal suits your financial status over bankruptcy; your trustee will have to collect some of the information that includes as follows:
- average expenses and income of your household
your entire liabilities
- your conjugal standing or marriage status
- everything that you own or all of your assets
Either of these circumstances will contribute to the evaluation or assessment. Also, if the value of your assets is higher than your debt, your trustee will unlikely to offer for a consumer proposal.
How to Prepare the Proposal?
After the assessment or evaluation, if your trustee concluded that a consumer proposal suits you than bankruptcy or the rest of the debt relief programs, a settlement offer will be crafted by you and your trustee. You and the trustee will identify the due amount to offer to your creditors according to your income and expenses.
When you and your trustee determines the reasonable figure to offer, a proposal will be drawn stipulating the sum that you can compensate every month with a proposition for reducing the principal of the amount you owe. This document is legally essential. It also specifies that the information gathered are accurate and true. Thus, it means that you understood and accepted the terms and conditions listed under the proposal.
What Happens After Preparing?
As soon as your proposal is ready, it will be presented to your creditors. When your creditor agrees to the proposal, it will be effective on the date stated in the document. Keep in mind that you must pay the required amount on the specified date to avoid annulment. Your financial status can be affected during a consumer proposal annulment, the reason why you need to avoid it.
Once everything is set in place, you just need to make sure of paying the required amount; being more responsible in paying can ensure you’re way out of indebtedness. So, if you want to get started with a consumer proposal, start here and see if you qualify.
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.