Going Debt Free: Consumer Proposals in 1-2-3
A consumer proposal is a legal avenue for dealing with debt. Over the last few years, this has become a very popular option for Canadians looking to deal with financial challenges. Today, in an effort to help you better understand this option, we get back to the basics with consumer proposals. Read on to learn more.
Firstly, what exactly is a consumer proposal? It starts with a proposal to your creditors based on an amount that you can reasonably pay back. This amount is based on a trustee’s assessment of your financial information.
The majority of your creditors must accept the proposal, and proposals have a very high success rate if structured properly. If accepted, you then begin to make single, monthly payments to a trustee for a term of 4-5 years. As soon as the proposal is filed, any enforcement action against you will be stopped, interest stops and often the proposal will involve you repaying less money to your creditors than the total debt initially owed.
While the term of the proposal may be 4-5 years, the consumer proposal can actually be paid in full at any time. This is a great benefit. Over time, many individuals experience financial positioning changes and once paid in full the consumer proposal will be removed from your credit in 3 years which means that you can rebuild quickly. This is important, as a consumer proposal will negatively impact your credit. However, if you’ve decided that a proposal is the best course of action to deal with your debts, your credit has likely already taken a hit.
Who can administer a consumer proposal? Only a trustee in bankruptcy has the ability to file a consumer proposal. That being said, while it must be administered by a trustee, most people negotiate their consumer proposals through an independent financial consultant. Why? Because in a proposal the trustee represents both you and your creditors – so their role is to get your creditors as much money as possible in the proposal. Seems like a bit of a conflict of interest, no? We agree, especially because the trustee makes a percentage of whatever the settlement is – the more you pay, the more the trustee gets paid. That’s why we suggest seeking out your own independent advice before speaking with a trustee.
At DebtCare, we can offer the advice you need to best protect yourself in a consumer proposal. Have questions or want to find out more about the benefits or get started?
Call us today at 1-888-890-0888.