How Much Debt will a Consumer Proposal Eliminate?
Consumer Proposals & Eliminated Debts
Being in debt is often distressing.
It’s not that surprising, and none of us really want to be in a position where our debt has gotten out of control.
What can be surprising, however, is what causes that distress.
One of the most wearing aspects of debt can be the constant collection calls and a feeling we’re swimming against a tide of creditors who just won’t let up.
Often, being in debt takes all of our disposable income.
Merely servicing the fees which accumulate can drain our financial resources – no matter how hard we work to try and keep up.
Creditors drain our mental reserves just as much too.
It can feel like a constant battle – and a battle we just can’t win.
What is a Consumer Proposal?
Consumer proposals are all about stemming that constant tide of collection calls from creditors.
They’re a way to reset your financial situation and get some respite from fees and minimum payments.
The purpose of credit is not to punish.
It’s not supposed to be a facility that drains your resources and mental strength – credit is intended to be a way for companies to provide services and goods to people who can’t afford to buy them outright.
Many people wouldn’t be a potential customer without the ability to borrow.
The trouble with debt is that it can get out of hand and overwhelm us easily.
However, you shouldn’t feel like filing a consumer proposal is running away from your responsibilities.
You’re no good to anyone at the end of the day if late-payment fees and creditor calls paralyze you.
It’s a time to stop, consider your circumstances – and press that reset button.
Meeting Your Local Licensed Insolvency Trustee
A licensed insolvency trustee is the only professional who can file for a consumer proposal on your behalf.
Think of them as your advisor during the process.
Firstly, when you talk to a local licensed insolvency trustee, you’ll find out that every consumer proposal is different.
They’re a solution to debt that gets tailored to meet the needs of each individual who signs up.
Some of your debt will get written off, for sure.
However, that’ll be in proportion to where you currently find yourself – with the aim of getting you back on your financial feet and moving forward.
In some cases, 70% of a person’s debt might disappear with a consumer proposal – in other cases, much less.
It all comes down to what you can afford – without the excessive hardship you’re experiencing right now.
The first thing your trustee will do when they look to assess your situation is to work out what you can afford.
They’ll examine your level of debt, your income, and your regular expenses to determine that.
Most situations where a debtor can afford to repay between 20% and 40% of their total debt is considered ideal territory for a consumer proposal.
As soon as you file, interest ceases to accrue on the debts.
That’s the law, and it’s the first step to you getting some relief.
Constant interest charges are often what’s keeping you in debt in the first place – and that stops right now.
Consumer Proposal: What you Can Afford is Your Way Forward
Not surprisingly, your trustee will be looking closely at your day-to-day finances during the assessment.
Your household income versus your household or family expenses plays a massive part in determining how you’ll proceed.
It makes sense if you think about it – because that’s what defines how much you can afford to repay.
One way of thinking about this is that before you filed, what you were repaying every month had zero to do with affordability.
When debts build up over time, that can happen.
This process is all about putting you in a situation where you can get yourself back out of debt – and that has to be affordable, so your disposable income will set the tone for your recovery.
Let’s look at how that works:
Case Study from the BankruptcyCanada Archives
David came to us because he’d reached a point where his debts had overwhelmed him.
He was having trouble sleeping, and fielding calls from creditors all day – every day.
Working was becoming difficult.
He felt stressed out, sick, and couldn’t see an end to things.
We put David in touch with his local licensed insolvency trustee, and they went to work on a solution.
- David was a 36 year old, with three kids.
- He worked in manufacturing and earned 3,600 a month.
- He was being crippled by $60,000 in consumer debts.
David and his licensed insolvency trustee examined all financial aspects of his circumstances and decided to file a consumer proposal.
As soon as it was filed, collection calls stopped, as did accruing interest, and David felt better about things immediately.
He reported being more able to work, less stressed out, and said he felt for the first time in a long while like he could see an end to his problems if he continued to work hard.
- Of his total $60,000 debts, David agreed to repay $27,000.
- He worked out with the licensed insolvency trustee that he could afford to make $750 payments every month for three years and become debt-free.
- Before his proposal, David had been spending half of his monthly income servicing his debts.
Getting back on track is just a phone call away
Step one to recovery is getting in touch.
You too can escape the trap of debt and reach a place where you get to start again.
Call us today on (877) 879-4770 (24/7) for a no-obligation discussion about your situation.
Here at BankruptcyCanada, we work hard to help Canadians just like you every day.