Under a consumer proposal you will receive protection from your creditors as if you were bankrupt but there are many advantages over bankruptcy such as you will be able to keep all of your belongings and property and if you have surplus income it will not increase the cost of your consumer proposal.
A consumer proposal can be a valid bankruptcy alternative to individuals who have total debts that do not exceed $250,000, excluding debts secured by their principal residence.
When you go to see your Licensed Insolvency Trustee (a bankruptcy trustee) you and the trustee will work to put together an offer that the trustee will present to your creditors and give them a chance to vote on whether to accept the consumer proposal or not.
When structuring a proposal agreement your trustee might help you make an offer to pay back your creditors a percentage of the debt you owe, to extend the time to pay the debt, or some combination of both.
A proposal can last for up to 60 months, or you can make an offer of a lump-sum one-time payment.
If your consumer proposal is accepted (almost all proposals are accepted because the main rule of a consumer proposal is that the debtor’s creditors must be better off than if the debtor was to go bankrupt) you will make your agreed upon payments to your LIT who will in turn use that money to pay each of the creditors included in your proposal.
Without declaring bankruptcy you can retain your assets, protect yourself from actions by your unsecured creditors for collection, wage garnishments will stop and you can fix your money problems with a consumer proposal.
For some people debt consolidation may work as an alternative to bankruptcy. When you consolidate your debt you will be consolidating your bills and what you owe into a new loan, or you might consolidate only certain debts into a new loan.
In order to get a debt consolidation loan you must qualify for the new loan from your bank or other lender, which if you are considering bankruptcy, might not be possible if your credit has become too bad. Fortunately, a bankruptcy trustee (Licensed Insolvency Trustee) might be able to help you apply for other types of debt consolidation.
Debt consolidation loans usually have lower interest, and with only one loan payment to make you do not have to worry about missed payments.
If you have high interest unsecured debt, a consolidation loan can help you get your finances on track.
Alternative to Bankruptcy – Debt Settlement
Paying back a portion of what you owe is sometimes a possibility. A Licensed Insolvency Trustee can help you make a debt settlement with your creditors. Under a debt settlement plan you will offer your creditors a lump sum of money.
Bankruptcy Alternative – Consolidation Order (Available in Alberta and Nova Scotia Only)
Residents of Alberta and Nova Scotia are able to seek a legal proceeding known as a consolidation order or orderly payment of debt in which the court will combine your debt into one and will give you the amount that you are required to pay the court and the schedule in which to make these payments.
In turn, the court will make the payments to your creditors. Debtors struggling with debt can voluntarily seek out a consolidation order.
Alternative to Bankruptcy – Voluntary Deposit Service (Quebec only)
Residents of Quebec can seek a voluntary deposit service to have the court distribute money to your creditors that the debtor deposits to the court each month.
The required deposit payment will depend on your income and the number of dependents you have.
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