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I’m falling progressively behind on payments, but I don’t want to file for bankruptcy. What should I do?
Although bankruptcy is a popular way to get out of debt, it is not the only solution. Consumer proposals are also a common choice and may be more appealing to those who do not like the idea of filing for bankruptcy.
What is a consumer proposal?
A consumer proposal is basically a legally binding deal with your creditors, to pay back your debt over an extended period of time.
How do I know if I qualify for a consumer proposal?
Anyone is eligible for a consumer proposal, but it is best for those who have debt in excess of $500, and who can afford to pay the debt back if given a certain amount of time.
Why should I choose a consumer proposal instead of bankruptcy?
Consumer proposals have many advantages. Some of these include a maximum period of five years, interest gets frozen at the date of filing, wage garnishments stop, and creditors are “stayed” from pursuing legal action.
How does a consumer proposal work?
Your trustee will first meet with you to determine how much you can afford to pay back monthly. They will them formulate a reasonable proposal for your creditors.
What if they do not like the proposed plan?
Under the Bankruptcy & Insolvency Act your creditors have 45 days to vote for or against it. If 50% or more decide it is practical, it is considered accepted by all creditors. However, if 25% or more do not believe it is feasible, you will need to attend a meeting of creditors to work out a plan that is workable for everyone.
What happens if I miss a payment?
It is okay to miss two payments during the course of the proposal, but no more than that. If you miss anymore than two payments, the proposal will be annulled, interest charges will be added to all debts, and your creditors can apply to have your wages garnished.
What is the effect on my credit rating?
Unfortunately your credit rating will suffer slightly throughout the course of the consumer proposal. Your credit report will be revised to reflect your situation, and a note will remain on the report for up to seven years from the date you filed.
What will it cost to file a consumer proposal?
Trustee fees are placed by the Superintendent of Bankruptcy, but for the most part the trustee will be paid from the proceeds of your proposal. The cost to you will be determined by your monthly income, the size of your family, and your assets.
As you can see, filing a consumer proposal can be quite complex, and it is easy to get confused. We highly advise consulting a licensed bankruptcy trustee in St. John’s before proceeding.
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