Understanding Debts: What Isn’t Covered by a Consumer Proposal?
Financial insolvency can be a daunting situation to face. When debts become unmanageable, many individuals consider filing for a consumer proposal. But what debts are not released by a consumer proposal? In this comprehensive guide, we delve into the specifics of consumer proposals, shedding light on the types of debts that remain even after filing for one.
What is a Consumer Proposal?
A consumer proposal is a legally binding procedure administered by a Licensed Insolvency Trustee (LIT). It involves negotiating with your creditors to pay back a portion of your debts over a specified period, relieving you from the full burden of your financial obligations.
However, it’s crucial to remember that not all debts can be included in a consumer proposal. Certain liabilities remain despite filing for one.
Debts Unaffected by a Consumer Proposal
Here are the seven primary types of debts that are not discharged by a consumer proposal:
1. Alimony and Child Support Arrears
Obligations set by alimony or child support agreements are not discharged by a consumer proposal. These debts need to be honored before, during, and after the proposal period. If you’re facing challenges in this area, it’s advisable to consult with a legal professional or your LIT for guidance.
2. Debts from Fraudulent Activities
Debts arising from fraudulent activities remain unaffected by a consumer proposal. These might include embezzlement of funds, misrepresentation, or breach of trust.
3. Fines, Penalties, and Offense Charges
If you’ve been fined or penalized due to a breach of law, those debts will persist even after filing a consumer proposal. This includes violations of traffic regulations, including unpaid parking tickets.
4. Compensation for Bodily Harm or Sexual Assault
If you’ve been ordered by a court to provide compensation due to intentional bodily harm or sexual assault, these debts will not be discharged by a consumer proposal.
5. Undisclosed Debts
During your meetings with an LIT, it’s crucial to disclose all your creditors. If you fail to declare a debt, that particular creditor could still demand repayment after your consumer proposal is approved.
6. Student Loans
Student loans have specific criteria to be discharged in a consumer proposal. Generally, the loan can only be included if seven or more years have passed since the end of your studies. It’s essential to seek advice from your LIT regarding student loans, as different rules may apply.
7. Debts from Deceptive Statements
If you’ve acquired a debt by providing misleading information, that debt will not be included in your consumer proposal. This could include instances where you’ve lied about your income to secure a personal loan.
8. Other Debts
Certain other debts, like overpayments from welfare or employment insurance resulting from deceptive statements, are also excluded from a consumer proposal. Additionally, any debts guaranteed by a cosigner will not be relieved even if you file a consumer proposal.
Debts Included in a Consumer Proposal
After being discharged from a consumer proposal, most of your debts will be released, except for the ones mentioned above. This includes accumulated bills for services like phone, television, and utilities, as well as tax debt, credit card debt, and personal loan debt.
What to Keep in Mind
When dealing with a consumer proposal, it’s of utmost importance to be transparent with your LIT. Hidden debts can result in serious consequences, including a court refusal to release you from bankruptcy due to bad faith. Your LIT is your ally in this process and can provide the best guidance to help you navigate your debts.
Remember, a consumer proposal can be a powerful tool to manage your financial obligations. However, it doesn’t cover all debts, and understanding what debts are not released by a consumer proposal is a critical part of making informed decisions about your financial future.
Conclusion
Filing a consumer proposal can be a lifeline when you’re dealing with overwhelming debts. However, it’s crucial to remember that it doesn’t provide a clean slate for all types of debts. Always seek professional advice before proceeding with a consumer proposal to ensure you fully understand what’s at stake.
Remember, financial stability isn’t an unreachable goal. With the right guidance and a clear understanding of your obligations, you can navigate through this challenging period and secure a financially stable future.
