Are you considering the benefits of a consumer proposal to help get out from under massive debt, but without losing assets? Then you will want to learn every aspect of the consumer proposal process so you will know exactly what steps to take, what will happen, and what to expect during and after applying. Below is a quick guide explaining the basics of a consumer proposal process.
Qualifying for the Consumer Proposal
It is important to remember; consumer proposal is not available to everyone with significant consumer debt in Canada. The amount must be at least $1,000 and under $250,000 for individuals, or $500,000 if married. If you have more debt than this, you would not qualify for the consumer proposal, but you could still qualify for bankruptcy. Additionally, you must have enough income to make a monthly payment of some type, but most debt is forgiven upon approval.
Consumer Proposal Process
The following steps should be taken to ensure the consumer proposal is accepted by the creditors that matter:
- Contacted the licensed bankruptcy trustee to set up an assessment of your situation.
- At the assessment appointment, make sure to provide accurate answers to the questions asked by the trustee fully and honestly.
- If it is determined by the trustee that you have the criteria to qualify for the consumer proposal, you should ask if any other debt relief options would be better, comparing advantages and disadvantages to other possible programs. You may find that consumer credit counselling, debt consolidation or debt settlement programs would be better suited.
- Make a final decision based on the recommendations of the trustee as to which option is best, or to move forward with the consumer proposal.
Things the Trustee Will Ask
The bankruptcy trustee will ask for certain information, this allows them to arcuately determine if a consumer proposal is your best option, or if you will even qualify. This information includes:
- All assets
- All your liabilities
- All regular household income and expenses
- Marital status
Each of these four factors have a direct effect towards determining if a consumer proposal is right for your situation. Therefore, if your list of debts is less than your assets and/or income, the trustee will recommend a different debt relief program over consumer proposal.
Preparing a Proposal
If all other options have been considered and the consumer proposal is the best option for your unique situation compared to filing bankruptcy or another alternative, then the next step is to begin developing the settlement offer with your trustee.
In this part of the process, you and the trustee will review your income and expenses to create a proposal based on what the trustee believes is reasonably affordable for you to pay each month, and requests for reduced debt principal. Additionally, an Assessment Certificate will be made by your trustee, a legally required document stating all of the required information was gathered. This document also acts as your agreement to the consumer proposal after learning of any other possible options.
After a proposal is developed, it is then sent out to your creditors. If accepted, interest stops and the new terms begin on the specified date. If all payments are made on time, you will likely pay off the debt quicker, save money and not have to stress over a proposal annulment that has a severe impact on finances.
Have You Reviewed Other Options?
Although a consumer proposal has various advantages, the disadvantages are still more severe than other options. If you’re unsure which option is best for you, fill out our debt relief form and we will get in touch with you with more information.
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