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Jun 06, 2017

Buried under loads of debt? A consumer proposal could dig you out

Many Canadians, including high net-worth individuals in Ontario, have realized that their debts rise at a higher rate than their incomes. You and many others whose debt loads have increased significantly over recent years might have shifted focus from investing and saving to finding methods to deal with high levels of debt.

While exploring your options, your may have come across consumer proposals – a debt management tool that could allow you to regain financial stability. Contrary to what you may have been told, personal bankruptcy is not the only solution. In fact, a consumer proposal might prevent bankruptcy.

What is a consumer proposal?

A consumer proposal has been part of Canada’s insolvency legislation since 1992. It offers a debt settlement solution for those with money coming in every month, but not enough to settle all their debts. This form of debt relief can provide you with some significant advantages similar to bankruptcy while also helping you avoid a number of bankruptcy’s disadvantages.

How can a consumer proposal benefit you?

The Bankruptcy and Insolvency Act provides the opportunity for debtors to enter into settlement negotiations with unsecured creditors such as those who provide many of your personal loans, credit cards and more. The aim is to develop a proposed debt repayment solution on terms that creditors will agree with and that you can afford. Here are some of the advantages of a consumer proposal:
 
  • Enables you to negotiate affordable payments over a longer term
  • Does not automatically require you to give up your assets to pay creditors, as is often the case with bankruptcies
  • Reduces the potential long-term negative impact on your credit profile, compared to that of a bankruptcy filing

Procrastination in attempting to qualify for filing a consumer proposal may put you in a position in which aggressive collection agents may begin hounding you and could potentially begin to garnish a portion of your income. Being proactive is the course or wisdom, as it may result in a successful filing that could bring make your debt obligations more manageable while exerting less impact on your overall lifestyle.

You might have many unanswered questions about consumer proposals and whether this option or a bankruptcy filing would be best for your current circumstances. You may wonder how to fend off creditors’ aggressive recovery efforts. If so, consulting with an experienced insolvency lawyer is a wise first step.

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