by admin | Consumer Proposal, Uncategorized
Understanding consumer proposals
A consumer proposal is a formal, legally binding document. When filing for a consumer proposal, you will need the assistance of a Credit Counsellor or trustee who will help you develop a proposal that offers all your creditors a percentage of what you owe them in a set amount of time, usually a five year period in which you have to repay.
When is a consumer proposal appropriate?
In order to ensure that filing for a consumer proposal is really the best option in your situation, set up a meeting with a certified and registered credit counselor.
1. What a consulting firm would do for you is help you evaluate your financial circumstances and explain in detail all the pros and cons of each options so that you can solve your financial problem more efficiently.
2. Not only that, the consultancy firm or trustee will allow follow through with you all the processes involved in filing a consumer proposal, its requirements, submissions and then later develop a proposal plan that works best for you and your creditors.
Consumer Proposal Default
There may come a point where you may feel you will not able to continue your monthly payments to your creditors as promised in the proposal you chose, so will your consumer proposal default? And how will you know if it has defaulted? Your consumer proposal will be in default if:
You miss a total sum of three monthly payments that you required to make as per your consume proposal terms and conditions, or
Your required payments are overdue or in arrears for a period of more than three months, your consumer proposal will go in default.
If you fell victim to any of the two conditions, your consumer proposal will be deemed or annulled and your creditors will once again be able to implement collection to recover their debts and with interests from the date when you filed the proposal and not from the annulment date. Also if you went bankrupt at the time of filing a consumer proposal, you will automatically become a bankruptcy again if your consumer proposal defaults.
Consumer Proposal Revival
In cases when your consumer proposal is deemed or annulled but you weren’t bankrupt, it may be a possibility to revive your consumer proposal and make up all your missed payments. In order to do so:
1. Contact your credit counselor or trustee to notify all your creditors within a period of 30 days of annulment that the consumer proposal will be revived automatically after 60 days from the date of annulment unless any of them objects to it.
2. In case the creditors don’t file an objection or notice, the consumer proposal is automatically revived, but is there are any objections; there will be no automatic revival.
3. But you still want to revive your consumer proposal after objections have been made by your creditors, as a final resort; Talk to your credit counselor, who will help you to make an application to the court.
by admin | Consumer Proposal, Uncategorized
Consumer proposal and its impact on credit rating
Overwhelmed with debt and looking for relief? Wondering if bankruptcy is your only option? Well the good news is that it’s not. Individuals struggling with debt issues are often looking at consumer proposals as a solution with benefits like a reduced impact ton their credit rating as compared to when filing for bankruptcy.
Understanding possible Credit ratings
In order to understand credit rating in Canada, there is a sequence of numbers raging form 1 to 9 represented by the alphabet R. Each creditor you owe money to assigns you a specific score on your credit report. Here is what each of these ratings mean:
1. R1 means you pay loan on time.
2. R2 means your payments are 30 days late.
3. R3 means your payments are 60 days late.
4. R4 means your payments are 90 days late.
5. R5 means your payments are 120 days late.
6. R6 means typically not used.
7. R7 means you are in a consumer proposal, debt management plan or a consolidation order.
8. R8 means that a secured creditor has taken steps to realize on their security (e.g. repossessed your car).
9. R9 means bad debt placed for collection or considered un-collectible, or you are bankrupt.
This means the credit ratings you want on your credit report is R1 and pray that matters don’t go to R9.
One of the most common questions that comes up during initial consultations is how will my consumer proposal impact my credit rating. This apprehension in people generally is due to the misconception that once you file a consumer proposal you might not be able to attain loans.
Well, this is not the case.
Imagine you get into a minor car accident. In financial terms, it means you will not be able to pay your creditors in the promised time. Now imagine the same person gets into a second accident (or files a consumer proposal) few months after the first accident. Will he be able to get a loan or car insurance, maybe yes; but with higher insurance interest rates.
In such a scenario,once you fully paid off your consumer proposal, will only impact your credit rating for the next three years, before they consider approving your loans. Financial institutions will scan through your two year repayment history and then make judgment whether you are eligible for a loan or not. Numerous lending institutions (secondary) might lend you money shortly after you filed the consumer proposal. Although, the interest rates may be higher, an individual may be able to rebuild his credit rating over time and as a result get approved for credit borrowing from financial institutions.
Will I have to wait three years to apply for another loan?
The ability to borrow once you are done with your consumer proposal depends on many factors like your current income, amount you are borrowing and the value of assets you will be pledging as security.
It is best that you consult your credit counselor or list of lenders who will be able to lend you money upon your consumer proposal completion. Provided that you have sufficient income and appropriate down payments,with two credit cards with minimum limit $1,500 ; it is possible that you may qualify for new mortgage as soon as two years after completion of you consumer proposal.
by admin | Consumer Proposal, Uncategorized
Filing for bankruptcy may seem like your last resort but it is not always the best option. Consumer proposals conversely seem a more suitable alternative. In order to understand why it is a better alternative, continue reading to find out how consumer proposals apply to your personal status quo.
Paying off your hard earned money
When filing for bankruptcy there are set rules delegated by the Federal government as to whatfixed amount you can earn as income before you have to start paying off creditors with that hard earned money as a penalty.
A consumer proposal on the other hand, has no such legal binding and also comes with ease of small monthly payments over longer periods.
Homeownership
The first question on everyone’s mind is, “if I consider debt relief, will I able to keep my house?” This question can only be answered by your trustee who after thorough analysis decides how much equity you have on your home. The analysis looks at the realistic value of the house, outstanding mortgage and other property tax charges. Then expected selling expenses such as of lawyers, real-estate agents commission is deducted and the final equity on the house is estimated. Although the creditors will not force you to sell your house, they would still demand to be paid. This means you need to come up with money you obviously don’t have to pay off your debts.
In such a case, filing a consumer proposal is ideal since it provide a good solution to pay monthly payments out of your equity to the creditors.
Gambling or Other Addictions
You will not be eligible to an automatic discharge if the debts were the result of addictions such as gambling. This means unlike other bankruptcies this will not end automatically. Not only will you have to present your case before the judge and prove that you have taken remedial steps to overcome this addictions but also some additional penalty will be imposed on you to repay a portion of the debt.
Consumer proposal saves all the hassles of court. A consumer proposal acceptable by your creditors will ensure some certainty of the payments you will have to make monthly.
Prior Bankruptcy
Any previous bankruptcies filed will have different consequences. “If this is your first bankruptcy you are entitled to an automatic discharge after a period of nine months. If this is your second bankruptcy, the period is extended to 24 months (two years) and vice versa.
In case you had already filed for bankruptcy and looking for a debt relief, filing a consumer proposal is your best option. Monthly payments are usually smaller and can last up to 5 years with the option to pay it off faster if you have the right financials.
If you are facing one of the explained situations, your professional adviser or credit counsellor will surely suggest you and advice you to opt for filing a consumer proposal.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
While most consumer proposals are filed individually, it is also a possibility to file for a joint consumer proposal. When two people have nearly substantial debts they are eligible to file a joint consumer proposal, legally referred to as “commonality of debt”. Debts however don’t have to be identical but as a general rule of thumb more than half of your debts must be common.
But whether it is a good idea or not depends on the circumstances at hand. Here’s what you need to know before considering your options.
Advantages of a Joint Proposal
Reduced Total Payments
Joint consumer proposals can be filed even with less offering to the creditors’ altogether. For example if you were to file two separate consumer proposal you may have to give 50 cents per dollar (25 cents on each). In a joint consumer proposal banks may also accept 35 cents per dollar offer, making them less expensive.
Combined Debts
A separate proposal limit is usually up to $250,000 excluding the mortgage, whereas when co-filing a joint consumer proposal the limit exceeds to $500,000.
Easy management
It is obviously easier to manage payment per month than two separate payments. This is less stressful than taking care of individual payments.
Disadvantages of a Joint Proposal
Although joint consumer proposal may seem like your best option, here are some of the cons that you simply can’t neglect.
Creditor votes ‘no’
A creditor may be willing to accept a proposal from one person but due to prior difficulties of the other ask for a lot more money to accept his proposal. In under such a circumstance there are chances that the creditors will say no. This would not have happened if both the parties had filed the consumer proposal individually.
Divorce or separation
Suppose the husband and wife had filed for a joint consume proposal and then went through a divorce, then that could be a potential problem. If one spouse kept making half payments while the other rejected to do so, the whole proposal will be nullified. So the key to remember is consider all the pros and cons beforehand and make sure that if such a time comes, you both will fulfill your obligations.
Credit Rating Impact of Filing a Joint Proposal
In most cases joint or individual consumer proposals have similar substantial impacts. All your debts are reported as an R7 and after you make all the payments the proposal remain for three years on your credit report.
The only difference can be observed if one spouse pays off all his debts before the other. For example one spouse paid off debt in two years and the other in 4 years. Proposal on the second spouse will obviously remain longer on his credit report.
However, if one spouse wants to rebuild credit faster, it will be more sensible to file two separate proposals and devote all the additional funds into paying one off first. But it is always wise to pay off all the debt as soon as possible which is why joint proposals present a preferable option.
by admin | Consumer Proposal, Uncategorized
An alternative for someone who is unable to pay his debts is full but can pay a small sum of it, Consumer proposal is his best option. It is a legally-binding agreement between the creditors and individual where one negotiates to pay a fixed percentage of money within fixed time duration to settle the debt.
Debts included in your consumer proposal
All unsecured debts are included in consumer proposal such as credit cards; loans from friends and family, store cards etc. However, all the secured debts such as housing and leased vehicles are to be paid in full and are not part of the consumer proposal directly dealing with the creditor.
Benefits of filing consumer proposal
What makes consumer proposals better than any other option? Following are the reasons.
They key benefits of filing a consumer proposal includes:
• Avoiding bankruptcy: consumer proposal saves you from the trouble of filing for bankruptcy. If you already fled a bankruptcy before, consumer proposals will save you from filing a second time consuming one.
• Taking control of your financials: Consumer proposals release you from the stress of multiple debts. With that gone, you are able to concentrate all your efforts into focusing towards the future and making changes to avoid such a circumstance.
• Freezing of more Interest the moment you file: once you file a consumer proposal, all your loans, credit cards and taxes stop accumulating addition interests.
• Your assets are secure: Consumer proposals provide you with the ability to hold on to your saved or invested in assets. With consumer proposals you can be sure of keeping your home, vehicle and RRSPs (Registered Retirement Savings Plan) safe. AS long as your assets have NO equity and RRSP is purchased more than 12 month before filing proposal.
• Time Extension for payments: It is the best way t manage your debts. Consumer proposals provide a time of 5years i.e. 60 monthly payments. You also have the opportunity to pay lumps sum money if you want to. Such elasticity enables one to mange his financials easily.
• Creditors cannot take legal action: It restricts your creditors from the day you filed for a consumer proposal. It puts an end t the stressful calls from collection agencies warning you of taking your assets away.
• Consolidated payments: Filing a consumer proposal means that all your debts have been consolidated and you have to pay only a single payment every month to the Trustee to pay off your debt. This will provide you with a free hand at saving more money. Discuss your options with a trustee if you want to make lump sum payments at a time.
by admin | Consumer Proposal, Credit Counseling, Uncategorized
Debt traps:
The Hidden Expenses Business Dictionary defines debt trap as “An incentive structure that lures individuals into accepting long-term debt obligations under conditions that strongly favor the lender. Victims of debt traps are often prevented from discharging the debt through techniques such as unusually high or variable interest rates, changing payment plans, and unreasonably high penalties for late payments.”
In simpler words, debt trap is a scenario where the debt becomes impossible to pay due to high interests’ payable making it difficult to be paid, thus becoming a trap.
Avoiding a Possible Debt Trap
There are still days left before the month ends? Where did all the money go? There are times when we are left with little or no savings because we spent too much on expenses that we didn’t plan in advance or realize while spending from our monthly budgets. This is when we start relying on credit cards, loans; money-borrowing from friend without realizing we are slowly moving towards a debt trap.
Irregular Expenses (miscellaneous): Irregular expenses are regular expenses that are often forgotten. These may be the reason why you have an infuriating urge to tear down your monthly budget list into pieces as you fall short of money while on a budget. But what did you miss?
• Gifts: Birthdays, anniversaries, baby showers, etc
• Fees: Gym membership, occasional public transport fee, home supplies, etc
• Tax estimates •
Pet expenses
• Lawn maintenance
• Contributions: charity, fundraising Unexpected Expenses (emergency savings): Self explanatory, these are the expenses incurred on emergency basis. You fall, you are taken to the hospital, and the bills and prescriptions payable are unexpected liabilities. Obviously you didn’t plan on incurring these costs.
These may include:
• Vehicle Insurance claims, warranties
• Home insurance
• Repairs: Home, vehicle, appliances etc
• Job lay-off
• Accidents etc
Ideal Budget Planning
The simplest of expenses can be stressful. Your husband invited his boss for dinner; your daughter wants a new uniform for school; your pet falls sick. Irregular expense is always there in the back of your mind. You know that in the next three months your car insurance is due. However we often forget these tid bits. On the other hand, you cannot at any cost avoid the emergency expenses.
Weekly budgets are also a useful tool for planning short term goals. Assign what expenses are to be incurred in the following week and try to save as much as you can on things that are not priority-oriented. This way, you will have money saved up in a piggy bank or a cabinet in your kitchen for emergency or miscellaneous expenses. Now, if any emergency expenses incur, you have enough saved up.Once the month ends, make sure to analyze where most of the expenses went and how much you saved.
So how is budgeting helping me avoid a debt trap?
Let’s say you want to go out for a movie, a ‘miscellaneous expense’. No need to rely on credits cards and worry about the interest rates or payday loans. You will have the money you saved and be free from going into debt. Also, you will feel a noticeable reduction in your stress levels once the money worry leaves your mind.
