Its A Good Thing We Have Consumer Proposals

Often, when people think of insolvency, they relate it directly to bankruptcy. This can be very deflating to those who find themselves struggling with debt, but want to avoid having to file for bankruptcy. Nobody likes to feel that they are between a rock and a hard place – and when you are not aware of the other debt solutions available to you – it can be difficult to actually imagine or plan for a future of financial freedom.

One of several options available to those experiencing financial distress, is a Consumer Proposal.

Trustees are very glad we have the ability to use Consumer Proposals as a tool in addition to bankruptcies. Proposals are very flexible and provide us with more options in dealing with issues that might be more complex in a bankruptcy scenario.

By way of example:

a) When there is "Non-Exempt Equity" in a home (The equity in your home is the value of the home less any mortgages or loans owing on it. Every province has laws stating how much of that equity is exempt from creditors.), a proposal allows for the debtor to make reasonable payments towards this amount and keep their home. The amount to be paid under the proposal is determined at the time the proposal is accepted. This total amount can be paid down faster if funds are available and there are no lingering issues to deal with as there sometimes are in the case of bankruptcy.

b) Where there is a source of lump sum funding available (e.g. from RRSPs or family members), the entire Consumer Proposal can be completed in less than three months. This can be particularly helpful. In the case of a second bankruptcy, for example payments could be required for two to three years and stay on a person's credit history for 14 years after that.

c) Consumer Proposals only stay on a person’s credit history for three years as opposed to six years in a bankruptcy situation.

d) Consumer Proposals include all unsecured creditors (who get to vote on the proposal) - there is no requirement to deal directly or individually with any creditor as there might be under some of the Debt Management plans currently being promoted online.

e) Finally, as compared to credit counselling, a Consumer Proposal allows a debtor to settle their unsecured debts for less than 100 cents on the dollar whereas my personal understanding is that most credit counselling programs call for paying 100 cents on the dollar, although normally without interest.

Trying to navigate through the stress of unmanageable debt can be overwhelming. Often people feel that bankruptcy may be their debt solution, when this is far from being the case. A Consumer Proposal is a very flexible option (by design). If you feel like you are stuck in a cycle of debt feel free to contact your local MNP Trustee for a free, no obligation consultation. We will help you assess your financial situation and explain all of your options available to you so you can choose the route to financial freedom that best suits your needs.