Consumer Proposals As A Debt Settlement Plan In Canada
Consumers proposals are legal abiding debt settlement agreements, which are filed with a certified bankruptcy trustee, to pay back a creditor a certain proportion of what you owe in interchange for complete debt forgiveness.
Payment of proposals are interest-free and could be spread out over a maximum of five years. To this effect, this can lead to about 70% to 80% of savings.
Your terms of payment depend on the negotiation between what you can afford to pay and what your creditor expect to get. Acting as an administrator for consumer proposals, your certified bankruptcy trustee will meet with you to help determine how much you have to offer and to evaluate your financial condition.
A consumer proposal plan offers debt relief for Canadians struggling with paying monthly debts while avoiding going bankrupt. In Canada, the consumer debt proposals are the only program for debt settlement approved by the government.
It is common to see a settlement of 20 to 30 cents in the dollar, but debt proposals differ. Final agreements are based on what you own and your income. However, all debt proposals to a creditor are unique.
Will A Consumer Proposal Do Away With Debt?
Consumer credit proposals deal with an unsecured creditor and can get rid of practically all debts such as:
- Student loan debts
- Tax debts include Personal Tax, HST and Source Deduction payment
- Payday loans
- Bank loans
- Credit card loans and Unsecured Line of credit
Furthermore, a consumer proposal does not have an effect on a secured car loan or the mortgage on your principal residence.
Benefits Of The Consumer Proposal Plan
As a significant factor in filing insolvency, a debt proposal offers a lot of advantages over other options of debt relief. Some of them include:
- It prevents bankruptcy
- It puts an end to calls from wage garnishments and collection agencies
- It lawfully binds all creditors to your offer including the Canada revenue agency and payday lenders
- It freezes interest on debts
- It merges debts into a low-end monthly payment
- It keeps all your properties including any equity in your residence
- It reduces your liability by up to 70 to 80 percent.
What Are The Qualification Requirements To File A Consumer Proposal In Canada?
As a regulated program acknowledged by the Canadian government, proposals have a particular requirement you will meet to be eligible and qualified for filing consumer proposals. Below, we will look into these eligibility requirements:
- You must either have a property in Canada or be a resident of Canada.
- Excluding your mortgage, your unsecured loan should not surpass 250,000 dollars.
- You must be insolvent. This means that you can no more keep up with debt payments as they become due, or your debts must be higher than the value of any asset you have.
- You must be capable of paying a part of your debt.
A consumer proposal program is a perfect choice for someone who has a high income that he or she will be required to make a considerable monthly surplus income payment. It is also an excellent choice for one who would want to avoid going bankrupt.
Consumer proposals are lawful processes under the Insolvency and Bankruptcy Act. When experiencing financial issues with accounts in arrears of payments or accounts in collections, consumer proposals helps to prevent creditors from pursuing you continuously for payment.
In conclusion, the first step to rebuilding credit is getting out of debt with a consumer proposal. As in the case of any program of repayment such as debt management plans, consumer proposals will have an effect on your credit report for the time being, while most clientele, however, realizes improvements on their credit score immediately after the program is completed.
What is BANKRUPTCY?
As an honest but unfortunate debtor, you may choose to use the legal process of bankruptcy, regulated by the Act, to obtain a discharge from your debts (subject to reasonable conditions). Declaring bankruptcy means that your secured creditors cannot take legal steps to recover what you owe them, such as seizing your property or garnisheeing your wages.
If you owe more than $1,000 and have carefully reviewed all your options, declaring bankruptcy may be the right choice to make.
Perhaps the most common question those considering bankruptcy ask is, “Will I lose all my assets?” Happily, the answer is no. There are several exemptions from seizure. They are:
- Household furnishings to a value of $13,150
- Personal effects to a value of $5,650
- Tools of trade to a value of $11,300
- Motor vehicles to a value of $6,600
- Farmers’ business assets to a value of $29,100
- Certain life insurance policies
- Most pensions
- Certain RRSPs
If you’re involved in a close financial relationship, it is possible to file a joint assignment that will be dealt with as one file. Your debts must be substantially the same, and the trustee must believe it is in the best interest of all parties.
Talk to us
Talk to us about the services we offer for Debt Management, Consumer Proposals and Bankruptcy. There is a path that’s right for you. Together, we will find it.