In these precarious times, manageable debt can become unmanageable very quickly. If you’re struggling to stay on top of your finances, filing for a Consumer Proposal in Red Deer may help you get things back on track.
What is a Consumer Proposal?
Consumer Proposals, or Consumer Debt Proposals, are negotiated settlements with creditors. On behalf of the debtor, a Licensed Insolvency Trustee (LIT) proposes a series of monthly payments. If this arrangement is accepted, as the appointed administrator, they will then distribute these payments to the creditors. The payments will run for a period of time: the maximum allowable is five years.
Creditors have 45 days to accept or reject the initial proposal. The total amount they receive under the proposal may be less than the total amount they are owed. But they may receive more of the money they are owed with a Consumer Proposal than in a Bankruptcy. In Bankruptcy, the distribution of funds is strictly prioritised and many creditors end up receiving very little.
So creditors may decide a Consumer Proposal is the best option open to them and accept the offers made. At that point, it will be ratified by a court and become a legally binding agreement. While the Consumer Proposal remains in place, the creditors will be unable to take further action against you as the debtor, providing you with invaluable breathing space and time to regroup. Consumer Proposals are designed to provide a solution to your financial problems and allow you to achieve a fresh start when the agreed payments are completed.
Advantages of a Consumer Proposal
The advantages of a Consumer Proposal include:
- You retain control of your assets
- Your monthly repayments will be lower than what you are paying to service your debt
- Your repayments will be fixed for the duration of the Consumer Proposal, regardless of your income
- At the end of the repayment schedule, you will be debt-free.
You will need to budget and spend cautiously for the duration of the proposal and participation in two financial counselling sessions is required.
Disadvantages of a Consumer Proposal
But while a Consumer Proposal can improve your financial situation, it does come with potential disadvantages, including:
- Length of time: A Consumer Proposal will usually take longer to complete compared to a Bankruptcy. This is because by lowering your monthly repayments, it will take longer to pay your debts back. But you can choose to pay off your proposal early.
- Credit score: A Consumer Proposal will show as an R7 rating on your credit score. This will remain on your credit report for three years after completion.
- Terms: You will need to adhere to proposal terms, and it’s important you keep on top of your repayments, otherwise your proposal terms will be terminated. You can defer up to two payments but if you fall three payments, your proposal will be ‘deemed to be annulled’, and you lose your creditor protection.
Alternative to Consumer Proposal – Bankruptcy
If you feel that a Consumer Proposal may not be the right option for your financial situation, you may consider filing for Bankruptcy as an alternative.
Bankruptcy is a legal status – a formal declaration to your creditors that you are unable to pay your debts – and it will protect you from enforcement actions for as long as it remains in place. But it is also a temporary status: you will, eventually, be ‘discharged’ and become solvent once more.
Speak to a Licensed Insolvency Trustee
A Licensed Insolvency Trustee (LIT) can provide you with invaluable support and professional advice on dealing with debt. They are licensed and regulated by the Canadian government. The initial consultation will involve a full review of your financial situation, examining your income, expenses and assets. You will then be informed of all the options available and together you can work out which is best for your unique financial situation.
Financial help in Red Deer
If you are considering a Consumer Proposal in Red Deer to help manage your debt, contact us today. Our highly reputable Licensed Insolvency Trustees are there to support you through the process and guide you onwards towards a brighter future.
