Alternative to Bankruptcy
There is a stigma around bankruptcy. No one likes talking about it and people, for the most part, want to keep their bankruptcy private. It’s become a dirty word in our society (which it shouldn’t be as it gives unfortunate debtors hope – but that’s another blog post). Therefore, when we offer debtors an alternative to bankruptcy, it’s not surprising that they would rather the alternative. One of the alternatives is a consumer proposal.
What is a Consumer Proposal?
A consumer proposal is legal process provided by the Bankruptcy and Insolvency Act for anyone with over $5,000 but less than $250,000 in unsecured debt. Unsecured debt might include credit cards, lines of credit, loans and unpaid income tax. The consumer proposal is an agreement to repay a portion of the unsecured debts through the services of a Licensed Insolvency Trustee. The proposal terms are normally structured over 5 years with one monthly payment. While the amount of debt being repaid is usually substantially less than the actual amount owed, it is normally more than the creditors would get if the person went into Bankruptcy.
The consumer proposal is voted on by all the creditors involved, if the majority accepts, it is binding for all creditors. Once a proposal is accepted by the creditors, all interest is frozen and all unsecured debt collection efforts, including calls, letters, wage garnishments, and legal actions will stop.
During the process, a person can miss two payments, which would then be added on to the end. If a third payment is missed during this process, the proposal would be annulled and the creditors rights would be revived to purse the person for collections of their account, including the interest since the time the proposal was filed.
The main benefits of filing a consumer proposal are:
- Avoids bankruptcy
- Stops all interest charges
- Consolidates debt payments into one monthly payment
- Compromises the amount you owe
- Makes personal budgeting easier
- Protects assets from creditors
- Does not require you to submit monthly income reports
If you are in debt and need help, contact our office today. We will review all options with you and together decide on what the best option is for you.