Understanding the Intricacies of a Consumer Proposal
Dealing with debt can be a daunting endeavor. However, a consumer proposal can be a viable solution to avoid bankruptcy and negotiate a better settlement with creditors. If you’re wondering what information is needed for a Consumer Proposal, this comprehensive guide will provide you with all the necessary insights.
What Exactly is a Consumer Proposal?
Before we delve into the specifics of what information is needed for a Consumer Proposal, it’s crucial to understand what a consumer proposal entails. A consumer proposal is a form of debt relief where you negotiate a payment plan with your creditors. This plan typically involves paying less than the total amount you owe, spread over a period, as long as the majority of your creditors (more than 50%) agree to the terms.
Evaluating Your Financial Situation
In order to assess if a consumer proposal is a viable solution for you, a Licensed Insolvency Trustee (previously known as a Bankruptcy Trustee) will need to evaluate your financial situation. They will need the following details:
List of Debts: This should include both your unsecured and secured debts.
Asset Details: The Trustee will need to understand which of your assets are exempt from seizure in a bankruptcy or consumer proposal. Exempt assets can vary by location.
Household Income Details: This will help the Trustee determine if you have surplus income and what you would be required to pay in bankruptcy as this is factored into a consumer proposal.
Household Size: The number of people in your household, including a spouse and children, if any.
Bankruptcy History: Whether you have ever filed a personal bankruptcy before.
Advantages of a Consumer Proposal
There are several reasons why you might choose to file a consumer proposal versus personal bankruptcy:
- You want to pay your creditors more than they would get in a bankruptcy.
- Your income is high and you could not manage the surplus income payment required in a bankruptcy.
- You have equity in assets that would take too long to pay within a bankruptcy.
- You have been bankrupt previously.
- You want to take advantage of a potentially shorter impact on your credit score.
The Process of a Consumer Proposal
Crafting a consumer proposal allows for creativity in determining the terms of a settlement. As long as it is fair and reasonable and more than 50% of your unsecured creditors (by dollar-value of claims) accept it, it will be binding on all unsecured creditors, regardless of their stance.
Structuring Your Consumer Proposal
Most consumer proposals are structured as monthly payments over time at less than the full amount owed. To entice your creditors to vote in favor of the proposal, it should provide a higher return or recovery than they would obtain in bankruptcy. Once the total amount of the settlement is determined and accepted, you can pay it out early if able, which would hasten the process of rebuilding your credit.
Other Options
To qualify for a consumer proposal, your debts must be less than $250,000, excluding the mortgage on your main residence. If your debts exceed this limit, there is another type of proposal that can be filed. Your individual situation will be reviewed to determine if a consumer proposal (or another form of a proposal) makes sense for you.
The Impact on Your Credit Score
It’s important to note that the fact that you filed a Consumer Proposal will stay on your credit report for three years after you have completed all of the terms of your Proposal or six years from the date of filing, whichever comes first.
How a Licensed Insolvency Trustee Can Help
A Licensed Insolvency Trustee can provide valuable assistance in navigating the process of a consumer proposal. They are experienced in dealing with major financial stress and can provide prompt responses and resolution of issues. They will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
Dealing with Creditors
Once you file a consumer proposal or personal bankruptcy, the Trustee will deal directly with your creditors on your behalf. Your unsecured creditors are required to cease contacting you or continuing legal procedures against you.
Seeking Professional Advice
If you’re uncertain about what information is needed for a Consumer Proposal, it’s advisable to consult with a professional who can provide you with a free consultation to review your financial situation and possible debt resolution options.
Remember that your journey towards financial freedom begins with the right information. Understanding what information is needed for a Consumer Proposal is the first step in this journey.
