Understanding Consumer Proposals and Asset Management
When you’re facing a mountain of debt, the process of navigating your way to financial freedom can be a daunting one. Many Canadians turn to a consumer proposal, a legal agreement set up by a Licensed Insolvency Trustee, to deal with their unsecured debts. But, one question that bothers many is: What happens to assets in a consumer proposal?
This article sheds light on this critical topic and provides a comprehensive guide to understanding how a consumer proposal affects your assets.
What is a Consumer Proposal?
Before we dive into details, let’s understand what a consumer proposal is. A consumer proposal is a legally binding process governed by the Bankruptcy and Insolvency Act, allowing insolvent individuals to make an agreement with their creditors to pay back a percentage of their debts over a period of up to five years.
Implication of a Consumer Proposal on Assets
Contrary to popular belief, filing a consumer proposal does not mean you will lose your assets. In fact, one of the significant advantages of a consumer proposal over bankruptcy is the ability to retain your assets while working towards debt relief.
Keeping Your House
Many individuals worry about losing their homes when filing a consumer proposal. The good news is, you can keep your house as long as you can continue making your monthly mortgage payments. Mortgage lenders do not have the right to change your mortgage terms or act against you because of a consumer proposal. However, if you fall behind on your agreed monthly mortgage payments, a lender might change the terms of your mortgage or even foreclose.
Maintaining Your Vehicle
When it comes to vehicles, the rules are even more relaxed. Unlike bankruptcy, where you can only retain one vehicle up to a certain value, a consumer proposal allows you to keep all your vehicles, regardless of their value. This includes car loans or financed vehicles. As long as you can keep up with the agreed monthly payments, filing a consumer proposal should have no impact on your vehicle ownership.
Protecting Your Investments
In Canada, filing a consumer proposal allows you to retain contributions made towards an RRSP. It’s only when you file for bankruptcy that contributions made in the past twelve months might need to be surrendered. A consumer proposal also allows you to maintain your Registered Education Savings Plans (RESPs) and other investments.
Post Consumer Proposal: Buying a House and Rebuilding Your Credit
It’s a common concern that filing a consumer proposal will negatively impact the ability to buy a house or secure a mortgage in the future. While it’s true that a consumer proposal will appear on your credit report temporarily, there are actions you can take to improve your chances of mortgage approval.
Rebuilding your credit becomes much easier once your fixed, affordable monthly consumer proposal payment is in place and you can start to save money. Having a substantial downpayment and a steady income will also significantly improve your chances of securing a mortgage once you have completed your consumer proposal.
Choosing the Right Path for Debt Relief
Understanding the implications of a consumer proposal on your assets, including your house, car, and investments, can be a complex process. It’s essential to seek advice from experienced Licensed Insolvency Trustees to find the best way to achieve debt relief while keeping your assets.
Remember, every individual’s financial situation is unique, and the impact of a consumer proposal can vary. Get the right advice, understand your options, and make an informed decision to get back on the path to financial stability.
Conclusion
To sum it up, a consumer proposal can be a powerful tool for managing unsecured debts without losing your assets. It allows you to negotiate a manageable payment plan with your creditors while keeping your house, car, and investments intact. However, it’s of utmost importance to understand all the implications and consult with a Licensed Insolvency Trustee before making any decisions.
In the end, knowing what happens to assets in a consumer proposal is the first step towards understanding your debt relief options and working towards a brighter financial future.
