Debts Erased in a Consumer Proposal
What Debts Can I Include in My Consumer Proposal?
When you make a consumer proposal you can include most of your debts.
Debts erased in a consumer proposal will depend on certain factors:
Unsecured Creditors in a Consumer Proposal
By making a proposal with your creditors you generally are making a proposal to unsecured creditors.
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Unsecured debts are your debts that are not protected by a security (such as your home or car) to the creditor.
When you make your proposal plan, which your Trustee (known as a consumer proposal administrator) will help you put together so it is the most attractive to your creditors, and therefore will be more likely to be accepted, you must include all of your unsecured debts – you cannot “pick and choose” which debts to include in your proposal.
Examples of unsecured debts include credit card debt, lines of credit, personal and payday loans and income taxes owed.
What About Secured Debts in a Consumer Proposal?
You cannot include secured debts in a proposal, which means that you cannot modify your payment agreements on a secured debt with a consumer proposal.
Secured debts are debts that are backed, or protected, by an asset that the creditor can seize if you stop making the payments on the debt.
When you stop making the required payments on a secured debt your lender can legally seize the asset and resell it (such as your home or car) to recover its loan money lent out.
If there is a shortfall in what you owe from what is recovered when a secured asset is sold then you can include this debt in a consumer proposal as it would be an “unsecured debt.”
Fortunately, if your payments are up to date on your secured debts (such as your mortgage loan or car loan) you can keep the asset if you can afford to make the payments when you enter into a proposal with your creditors.
It is important that you are sure you can maintain the payments because if you miss three consecutive proposal payments your consumer proposal will be cancelled, your payments will be lost, and your debts will be reinstated in full.
If you would like to stop making payments on your secured debts it is possible to surrender the asset when you make a proposal.
To learn more about filing a consumer proposal to get out of debt, please contact us today to schedule a free consultation meeting.