Is a Consumer Proposal Right For Me? –
Why File a Consumer Proposal
As the most popular alternative to personal bankruptcy in Nova Scotia there are many good reasons for why a consumer proposal could be right for you.
Firstly, consumer proposals are regulated by the government and are the only debt settlement program to be approved by the government.
As many as 50% or more of debtors across Nova Scotia are seeking debt relief through a consumer proposal.
Although there are certain drawbacks to a consumer proposal, the advantages usually far outweigh the disadvantages.
Why Should I File a Consumer Proposal?
If you qualify for a consumer proposal, a consumer proposal offers several main advantages over a bankruptcy:
- A consumer proposal allows you to repay a portion of your total unsecured debt.
Most debtors only pay around 30 cents on the dollar that they owe.
In addition, you have up to 5 years to make the payments and no interest will be charged;
- A consumer proposal is a negotiated debt settlement that is approved by the government, your creditors and yourself.
The consumer proposal is a beneficial situation for both you and your creditors;
- A consumer proposal is a legally binding agreement between you and your creditors.
If your consumer proposal is accepted (over 98% of proposals filed are) all creditors are bound to the agreement;
- Interest charges are frozen once your proposal is filed;
- A consumer proposal often increases cashflow, which can allow you to catch up on mortgage payments and other house bills which can help you prevent foreclosure.
Although mortgage debt is not included in a proposal your payments on your unsecured debts will be vastly reduced;
- A consumer proposal allows you to consolidate all of your unsecured debts into 1 easy, affordable monthly payment.
What Are The Major Advantages of a Consumer Proposal?
The top 5 reasons you should consider a consumer proposal over bankruptcy or other debt relief solutions:
A Consumer Proposal Allows you to Keep Your Assets
All assets are protected in a consumer proposal, even those that would be lost in a bankruptcy filing.
That’s right – with a consumer proposal you can get debt relief and keep all of your investments, all of the equity in your home, your car and any tax refunds you are owed.
All of those assets could potentially be seized by your Trustee during a bankruptcy.
Increase Your Cashflow
When you make a consumer proposal with your creditors you will make a legally binding agreement to pay a portion of your debt.
Debts are often reduced as much as 70% or more and interest charges are frozen.
The reduced payments will lower your monthly debt payments and increase your monthly cashflow.
Get Creditor Protection
A consumer proposal is a legal process under the Bankruptcy & Insolvency Act.
As such, you receive the same creditor protection you would under bankruptcy.
A consumer proposal will put an end to the collection calls, wage garnishments and lawsuits against you for debt repayment.
No Surplus Income Requirements
Bankruptcy has a requirement for bankrupts who earn more to pay more.
This is known as surplus income and if your income is over a certain limit you will be required to pay 50% of your surplus income to the bankruptcy estate.
If you have a high income or expect your income to increase a consumer proposal could provide more cost effective debt relief than going bankrupt.
Many Canadians are looking for debt relief but do not want to file for bankruptcy for various reasons.
A consumer proposal is a perfect alternative for people that can afford to pay a portion of what they owe.
Creditors will accept your consumer proposal in almost all cases because they will receive more than in a bankruptcy and a consumer proposal allows you to get out of debt affordably and easily.
It Sounds Too Good To Be True – What Are The Disadvantages of a Consumer Proposal?
Consumer proposals are quickly becoming a popular debt relief alternative to bankruptcy although a proposal is not for everyone.
Under a consumer proposal you must pay your creditors more than they would receive in a bankruptcy.
However, you can extend the time for debt repayment under a consumer proposal to up to 5 years.
This could still result in lower monthly payments.
A consumer proposal will take longer to complete than bankruptcy.
This means that a record of your insolvency will remain on your credit report for longer.
A proposal does not impact your credit as badly as filing bankruptcy.
A consumer proposal will result in an R7 rating on your credit report, while bankruptcy results in the worst R9 rating.
For debtors with few assets and a low income filing personal bankruptcy will likely be your best choice.
When you meet with one of our friendly Licensed Insolvency Trustees you can learn how both bankruptcy and a consumer proposal will impact your situation.
Your Trustee will make sure that you have all the information necessary to make the right decision.
The Trustee will explain all of the pros and cons of both bankruptcy and a consumer proposal and will answer all your questions and address any concerns or worries.
Is a Consumer Proposal Right For Me? – Talk to a Licensed Trustee Today
If you would like to learn more about whether a consumer proposal is right for you, the best thing to do is talk with a Licensed Insolvency Trustee.
You need to work with a LIT who will act as your consumer proposal administrator.
You will always meet with a Certified and Licensed debt help expert at Bankruptcy Nova Scotia.