Filing a consumer proposal poses several questions, one of the most common being, “Will I lose my house if I file a consumer proposal?” This is a complex issue with numerous factors at play, including the laws of your region, the amount of equity in your home, and the specific terms of your consumer proposal.
Understanding Consumer Proposals
A consumer proposal is a legally binding agreement between you and your creditors, facilitated by a Licensed Insolvency Trustee (LIT). This debt relief solution allows you to consolidate your debts or settle them for less than the full amount owed, without accruing further interest charges.
Advantages of a Consumer Proposal
A consumer proposal comes with several benefits:
- Reduces your debts;
- Halts collection calls;
- Stops wage garnishments;
- Unfreezes your bank account;
- Is legally binding on all unsecured creditors;
- Handles debts with CRA and payday loan companies;
- Allows you to keep your assets including your tax refund;
- Lowers your monthly payment to an affordable amount;
- No interest on monthly payments;
- Helps you avoid bankruptcy.
Will I Lose My House?
In general, filing a consumer proposal does not automatically mean you will lose your house. Secured creditors, such as your mortgage lender, are not allowed to seize assets solely based on the filing of a consumer proposal.
Equity and Consumer Proposals
However, the equity in your home can impact your consumer proposal. Equity refers to the difference between the market value of your house and the remaining balance on your mortgage. If your home’s value exceeds your mortgage debt, that surplus must be addressed in your consumer proposal.
Role of Provinces
The role of equity also depends on provincial laws. Some provinces have laws that protect a portion of your home’s equity from unsecured creditors. For instance, in Alberta, the first $40,000 of equity in your home is protected. However, in provinces like New Brunswick, Nova Scotia, and Prince Edward Island, there is no such protection.
Dealing with Judgments
If there are judgments secured against your house, most can be discharged or removed through a consumer proposal. This not only saves your house but can also improve your overall financial situation.
Debt Consolidation and Consumer Proposals
If you have significant credit card debt, tax debts, or other unsecured debts, you might consider debt consolidation loans or a second mortgage. However, these options can be challenging to secure if your credit score reflects poor or excessive credit. A consumer proposal can be a more practical and economical alternative, especially if you’re struggling with debt repayment.
Filing Personal Bankruptcy
While personal bankruptcy should be considered a last resort, sometimes it is the right solution for debt elimination. A Licensed Insolvency Trustee can guide you in making this difficult decision.
Breaking Free from Credit Card Debt
If you’re making minimum payments on your credit cards, it could take years to pay off your balances. A consumer proposal can help consolidate your payments or make a settlement offer that can lower your credit card balances.
The Payday Loan Cycle
Payday loans can cause financial stress due to accumulating interest. A consumer proposal can help you break the payday loan cycle.
Tax Debt Relief
Only a Licensed Insolvency Trustee can help you reduce your tax debt liability. A consumer proposal includes tax debts in your debt settlement program.
Student Loan Debt Forgiveness
If you’ve been out of school for 7 years or more, your government student loan debt can be discharged through a bankruptcy or consumer proposal.
High-Interest Installment Loans
High-cost financing loans may seem like a quick solution for debt consolidation or bill payment, but they come with exorbitant interest rates. A consumer proposal can eliminate these loans with payments based on what you can afford.
Why Talk with a Licensed Insolvency Trustee?
A Licensed Insolvency Trustee, licensed by the Government of Canada, can help you navigate your debts and break free from your financial burdens. They provide expert advice and guide you through your debt relief options.
In conclusion, while the thought of losing your home can be frightening, filing a consumer proposal does not necessarily mean you will lose it. If you’re facing financial difficulties, consult with a Licensed Insolvency Trustee to explore your options and find the best solution for your specific circumstances.
