Financial crises can lead to challenging decisions, one of the most common being whether to file for bankruptcy or a consumer proposal. However, a question that often arises during this process is: Do I have to sell my house with a consumer proposal? This article will provide a comprehensive answer to this question and more, shedding light on the intricacies of consumer proposals and their implications on homeownership.
Defining a Consumer Proposal
A consumer proposal is a legally binding arrangement negotiated with your creditors through a Licensed Insolvency Trustee. This arrangement allows you to pay back a portion of your debts over a specified period, which can extend up to five years. However, the question remains, do you have to sell your house with a consumer proposal?
Do I Have to Sell My House with a Consumer Proposal?
The simple answer to this question is no. In most cases, you do not need to sell your house when you file a consumer proposal. This is one of the primary advantages of a consumer proposal over bankruptcy. However, there are certain conditions and exceptions which we’ll discuss in detail in the following sections.
Understanding Home Equity and Consumer Proposal
Home equity refers to the difference between the current market value of your home and the remaining balance on your mortgage. If you have a significant amount of equity built up in your home, it could potentially affect your consumer proposal.
In a consumer proposal, you’re typically required to offer your creditors more than what they would receive if you filed for bankruptcy. If you have significant equity in your home, this could mean that you would need to offer more in your consumer proposal.
The Role of a Licensed Insolvency Trustee
A Licensed Insolvency Trustee plays a crucial role in the consumer proposal process. They negotiate with your creditors on your behalf, aiming to reduce your debt and establish a reasonable repayment plan.
It’s the trustee’s responsibility to evaluate your financial situation, including the equity in your home. They’ll also guide you through the consumer proposal process, answering any questions you might have along the way, including “Do I have to sell my house with a consumer proposal?”
Selling Your Home During a Consumer Proposal
While selling your home during a consumer proposal isn’t usually required, there may be situations where you choose to do so. Selling your home could provide you with the funds needed to pay off your proposal early.
However, it’s important to note that if your consumer proposal includes a clause about selling your house, you may be required to use the proceeds from the sale to pay off your proposal. Always consult with your trustee before making any major financial decisions during a consumer proposal.
Amending a Consumer Proposal
In certain cases, you might have the option to amend your consumer proposal. This could be beneficial if your financial situation changes significantly during the proposal term, such as if you sell your house.
If you choose to sell your home and your consumer proposal includes a clause about this, you may need to amend your proposal. This typically involves negotiating with your creditors to adjust the terms of your proposal.
How a Consumer Proposal Affects Your Credit Rating
A consumer proposal will have an impact on your credit rating. However, the effect is less severe than bankruptcy. A consumer proposal will remain on your credit report for three years after you’ve completed your payments, whereas bankruptcy stays on your report for six to seven years.
Life After a Consumer Proposal
Once you’ve completed your consumer proposal and all your payments have been made, you’ll be issued a Certificate of Full Performance. This certificate signifies the end of your consumer proposal and the start of your journey towards rebuilding your financial health.
You’ll also regain full control over your assets, including your home. You can choose to sell your house at this point without any restrictions or obligations related to your previously completed consumer proposal.
Summing Up: Do I Have to Sell My House with a Consumer Proposal?
The question, “Do I have to sell my house with a consumer proposal?” is a common concern for many individuals considering a consumer proposal. However, the answer is typically no. Your house and other assets usually remain under your control during and after a consumer proposal, except under specific circumstances where a clause might exist in your proposal agreement.
Remember, each situation is unique, and it’s important to consult with a Licensed Insolvency Trustee to understand the best course of action for your specific circumstances. They can provide you with expert advice and guidance, helping you navigate the complex process of a consumer proposal.
