Are Consumer Proposals a Good Idea?
Did you know that over 1 million Canadians file for bankruptcy every year? In more than half of these cases, the individual could have filed a Consumer Proposal and avoided bankruptcy. Consumer Proposals are a type of debt relief option available to Canadian consumers. Let's take a closer look at what Consumer Proposals are and whether or not they are a good idea.
What Is A Consumer Proposal?
A Consumer Proposal is a formal, legal agreement between you and your creditors. It allows you to repay your debts for some time, usually five years. You must agree to make monthly payments to your trustee, who will distribute the money among your creditors.
Who Can File A Consumer Proposal?
To file a proposal, you must be an individual who owes at least $5,000 in unsecured debts (debts not backed by the property). You cannot have filed for bankruptcy in the past six years.
What Are The Benefits Of Filing The Proposal?
The main benefit of filing a Proposal is that you avoid bankruptcy. Filing a Proposal also allows you to:
-Repay your debts over time
-Keep your assets
-Protect your credit rating
-Reduce or stop interest and fees
-Work with your creditors to create a repayment plan that fits your budget
-Avoid legal action from your creditors
-Get help from a trustee who will manage the process and negotiate on your behalf
What Are The Disadvantages Of Filing The Proposal?
The main disadvantage of filing a Proposal is that you must make monthly payments to your trustee for five years. This can be difficult if your income is low. Additionally, your creditors may not agree to the terms of your proposal, in which case you will have to file for bankruptcy.
How Does The Proposal Work?
Once you have filed a Proposal, the process will begin. Your trustee will send a copy of your proposal to your creditors. They will have 45 days to accept or reject the proposal. If they reject it, you will have to file for bankruptcy. If they accept it, the proposal will become legally binding. You must make monthly payments to your trustee for five years. At the end of five years, your debts will be discharged, and you will be free of your obligations to your creditors.
Who Administers The Proposal?
The Office of the Superintendent of Bankruptcy (OSB) is responsible for the administration of these Proposals. The OSB is a federal agency that oversees bankruptcy and insolvency in Canada.
Are There Any Restrictions On Who Can File A Consumer Proposal?
Yes, there are some restrictions on who can file a proposal. You must be an individual who owes at least $5,000 in unsecured debts, and you cannot have filed for bankruptcy in the past six years.
What Is The Process For Filing The Proposal?
The process for filing a Proposal is as follows:
-Gather all of your financial information
-Complete a Consumer Proposal form
-Have a meeting with your trustee
-Submit the proposal to your creditors
-Wait for their response
Can It Be Revoked?
Yes, the proposal can be revoked. If your creditors reject the proposal, you will have to file for bankruptcy. If they accept it, you can still withdraw the proposal if you wish. However, doing so may have consequences for your credit rating.
Are There Any Costs Associated With Filing This Proposal?
Yes, there are some costs associated with filing a proposal. You must pay your trustee a monthly fee, which will be distributed among your creditors. You may also have to pay legal fees and other administrative costs.
How Long Does It Take To Process This Proposal?
It usually takes about four to six months to process it. The process can be longer if your creditors reject the proposal or if there are any disputes.
What Are The Consequences Of Not Following The Terms Of The Proposal?
If you do not follow the terms of your proposal, your trustee can file a motion with the court to have it annulled. This will result in bankruptcy proceedings.
So, Are Consumer Proposals A Good Idea?
That depends on your situation. Consumer Proposals offer some benefits, such as the ability to repay your debts over time and protect your credit rating. However, they also have some disadvantages, such as the requirement to make monthly payments for five years. Additionally, your creditors may not agree to the terms of your proposal. If this is the case, you will have to file for bankruptcy. Before making a decision, you should speak to Reynolds & Associates Inc to see if a consumer proposal is right for you.