Consumer Proposal Information
The Bankruptcy Laws in Canada recently changed. For example if you earn income that exceeds $2,000 net per month as an individual or $3,700 net per month as a family of 4 you will be subject to a Surplus Income provision.
What does this mean to you? If you choose bankruptcy as a means to deal with your debt AND you make a decent living, you will be subject to large monthly payments in Bankruptcy and a Bankruptcy that could last 21 months or longer. During the time you are an undischarged bankrupt the Trustee in Bankruptcy will make you report every single dollar you earn. 21 Months is a long time and if you earn more money during this period, you will have to pay even more money to the trustee.
This fact alone has made a Consumer Proposal a much more attractive option than a Bankruptcy.
In a Consumer Proposal an offer to reduce your debts is presented to your creditors. For example, if your total debt is $50,000, the proposal to your creditors may be for $15,000.
The amount of the Consumer Proposal is determined by your income and ability to satisfy its payments.
If your creditors accept your Proposal, you can then proceed to make a single payment over an interest free term of up to 5 years. Unlike a bankruptcy, a Consumer Proposal can be paid in full at any time.
Because your creditors accept the Proposal, other than making your monthly payments each month, you have no other obligation to a Trustee in Bankruptcy.
Benefits of Making a Consumer Proposal
- Stops collection actions by creditors
- As long as the majority of your creditors accept the proposal it is binding on all creditors whether they voted against the proposal or not.
- Allows you to make a settlement with your creditors and keep your home, car and investments.
- Allows for one low interest free monthly payment
- Can be paid in full at any time, at no additional cost.
- Stays on your credit rating for 3 years from the date it is paid in full as opposed to a bankruptcy that will remain on your credit for 6 years from the date that it is discharged
What Do You Need to Qualify?
In order to qualify for a Consumer Proposal you must
- Have debts exceeding $8,000, to a maximum of $250,000;
- Demonstrate the ability to repay a portion of your debt
The Bankruptcy Trustee’s Role in Consumer Proposals
Bankruptcy Trustees are appointed by the Superintendent of Bankruptcy to administer Consumer Proposals and Bankruptcies and represent BOTH you AND your creditors. Trustees in Bankruptcy are paid based on a percentage of the amount of the Consumer Proposal that they negotiate. The larger the settlement = the more money the Trustee in Bankruptcy makes.
At DebtCare Canada we perform an independent review of your financial situation and make practical financial recommendations that will work for you.
If a Consumer Proposal is your best choice, we will work with you and structure the terms of your Consumer Proposal before you meet a Trustee in Bankruptcy. With our assistance we will schedule a meeting with a Trustee and negotiate on your behalf as well as supervise the entire process.