Filling for a consumer proposal is not as easy as it seems, because it is a legal process that can only be administered by a Bankruptcy Trustee. Borrowers who are in deep debt and don’t qualify for a debt consolidation loan or a DMP (debt management program) can file a consumer proposal.
In such cases, the Bankruptcy Trustee files a Consumer Proposal and sends it to your creditors for requesting them to accept less payment than what you owe them. The creditors who hold at least half of the debt must agree to this proposal, if it is not so, then the borrower need to look for other debt settlement alternate like filing for bankruptcy. But the borrower must consider that it is a last alternate before filing for a bankruptcy status, so take it seriously because:
- Based on your income, there is still need to pay the debt in bankruptcy; moreover, an administrative charge might be charged.
- You will be given an R9 record on your credit rating while filing a Bankruptcy and after the release of a first-time bankruptcy, this record remains with you for 6 years.
- You will mislay non-exempt possessions like RESPs and aids that you made to your RRSP in last 1 year. Moreover, you will also mislay tax refund for the year you filed the bankruptcy, your HST cheque, home equity in excess of $10,000, and last year’s refunds that may still be outstanding.
- You have to perform some duties during bankruptcy, such as; reporting your income, making payments and attending credit counseling. If you fail to perform such duties, you will not be discharged.
When all your creditors accept the proposal, you will be given 5 year period to pay back the agreed amount. If you fail to do so, then you will not be able to file another one.
The Credentials Need to File a Consumer Proposal
- Your debt must be more than $5,000; however, it should not exceeded than $250,000 (Do not include your home credit).
- You must have a good occupation to make monthly repayments to your creditors.
- You must not be capable of affording a debt consolidation loan due to high debt.
- You present circumstances show that you are not able pay full debt, including interest to all your creditors.
- You do not want bankruptcy or even do not want to lose your home, car, and other assets, as your income means you will be subjected to excess income payments.