Filing a Joint Consumer Proposal For Mutual Debt
If you’re struggling to pay your debts, it’s important to know the options that are available to help you get out of it.
In Canada, an individual can file a consumer proposal, which acts as a debt settlement between the debtor and creditor through a Consumer Proposal Administrator.
But not all debts are individual.
If you have joint debts that you cannot afford to pay, then you could file a joint consumer proposal to take action.
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A joint consumer proposal can apply if:
- Both of you are in debt;
- You’re both struggling to repay the debt;
- A consumer proposal is an appropriate solution for you both.
Joint Consumer Proposal: How To Deal With Joint Debt
A joint consumer proposal can be filed by more than one individual if the amounts owed are either substantially or similarly the same.
The difference between substantially and similar is:
Substantial isn’t fully defined by law, although it’s accepted that debts should be around 90% the same.
In the majority of cases, a proposal is filed to deal with a combined or shared debt, so it is expected the individuals involved would be filing for the same amount.
Similar means both parties are responsible for paying the same debt.
This could apply to joint credit card or loan agreements where two people, such as a married couple, make a joint application for credit.
To be able to file a joint consumer agreement, each individual needs to meet the requirements to file an individual consumer proposal, meaning:
- They must owe at least $1,000 individually;
- They are unable to repay these debts;
- Assets that could be sold to clear the debts wouldn’t be enough to repay in full.
Determining whether or not you can qualify for a joint consumer agreement is something you can discuss with a Consumer Proposal Administrator.
Benefits and disadvantages
Both people need to be in agreement to file a debt proposal – one person can’t force another to file.
An individual can choose to file, but their partner must make their own decision as to whether to file or not.
Benefits of filing
There are two key benefits to filing a joint consumer proposal:
- The total debt that can be filed for is increased to $500,000. In comparison, an individual making a consumer proposal could only file for $250,000 total debt, excluding a mortgage on your main residence.
- It helps to save costs, which could lead to a better solution with creditors, helping to reduce repayments to a more affordable amount.
However, there are some disadvantages to filing a joint consumer proposal too:
- A joint consumer proposal will be noted against both applicants’ credit scores. This will make borrowing money more difficult for some time.
- Both parties are responsible for making the repayments, and if one person can’t pay, it falls to the other to cover the repayment or risk having the proposal annulled. This will happen after three missed payments.
Should you file?
Finding a solution to tackle debt is never easy, but it’s important to explore your options and choose the most appropriate solution.
When dealing with joint debt, it has to be the right solution for the two of you.
There are multiple scenarios that are possible in this situation, and while the typical route is to file for a proposal to deal with joint debt, other options include:
- One spouse files a consumer proposal while the other continues as they were;
- One spouse files for a consumer proposal and the other decides to file for bankruptcy;
- Both spouses file an individual consumer proposal.
In these situations, there is no right or wrong answer.
Each person’s circumstances is different and there isn’t a one-size-fits-all way of dealing with it.
You’ll need to consider all of the options that are available to you to make sure that you are both happy with what you decide.
While you might be wondering if a joint consumer proposal is the way forward for you, it’s not the only option available.
You’ll need to consider your family and your future to decide on the best course of action.
If you have questions about a joint consumer proposal and need expert advice, we’re here to help.
Get in touch today for a free consultation where we can review your situation and outline your options to help you take care of your joint debt.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal