Over the last few years, the number of filed bankruptcies in Canada has decreased. Not only have consumers borrowed less, they are turning to alternative debt relief options, such as debt consolidation. However, when debt has become so unmanageable that debtors can no longer afford to pay their minimum monthly payments, even if reduced by debt settlement, they are turning to consumer proposals, instead of bankruptcy.
Consumer proposals provide debtors with several of the same advantages that bankruptcy offers, without being required to surrender all of their unsecured assets to the trustee. Additionally, a consumer proposal is more flexible. You have the option of filing a consumer proposal as an individual, or jointly with another person. Of course, there are some advantages and disadvantages to filing jointly, so understanding the process of joint consumer proposals is important to determine which is best for you.
Who Can File Jointly For a Consumer Proposal?
The process for filing jointly for a consumer proposal in Canada is simple and common. In addition to filing jointly with a spouse, you could file a joint proposal with a business partner or family member, long as the consumer proposal standards of indebtedness are met. Additionally, the majority debt in the consumer proposal would need to be held by both parties. There is not a requirement set for the amount of debt to be held by both people, but the majority of trustees and creditors will reject joint consumer proposals if 90% or more of debts are not in both names.
Without a standard rule in place, a trustee and creditors often work with consumers who apply for joint consumer proposals, long as it is sensible for both them and you. Some common situations include filing jointly with a wife, husband, a business partner, child, parent or between siblings. However, if two business partners each have a large personal debt a joint consumer proposal has a high chance of rejection.
Is a Joint Consumer Proposal Right For Me?
Determining the best debt relief option for you depends on your circumstances. This includes any debt relief program, including debt settlement, debt consolidation, or a consumer proposal.
There are many who prefer a joint consumer proposal over filing alone because the requirements allow a larger amount of debt to be included. For example, the maximum allowed debt for filing alone is $250,000, but when filing jointly for a consumer proposal the maximum debt allow doubles to $500,000.
In addition, people can save significantly on administration costs when filing jointly, instead of single. All credit counselling adviser will inform you the period of time repaying debt decreases when increasing the amount of money going towards the debt when making a payment. The way a joint consumer proposal works, it joins both people int a single entity, thus lowering administration fees and enabling more funds to be paid toward the principal.
However, there is one major disadvantage when filing a consumer proposal jointly: it holds both people liable for making the payments as agreed. Therefore, if one fails to pay their part of the agreed terms, the other person will be liable to pay the entire minimum payment. For example, if the proposal agreement requires a minimum monthly payment of $1,000 towards the debt, and each person agrees to pay $500, but the other person failed to submit their portion of the payment, you are still responsible for the full $1,000 payment. If you cannot meet this payment amount, the consumer proposal will automatically be annulled after three missed payments, having further financial implications.
What Is My Best Option?
Prior to filing for a joint consumer proposal, it is recommended that you consider all other options first. Knowing which debt settlement program is available to you out of debt without having severe impacts on your credit rating is best. To learn more about what options are available for your particular situation, fill out our debt relief form and a professional adviser will provide additional information based on your unique situation.
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