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How Do Consumer Proposals Work?

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Everybody misses a bill now and again, but when it’s more than absentmindedness at work, financial troubles can quickly spiral out of control. Bankruptcy is arguably the most widely-known mechanism to help those who are struggling with unmanageable debt, and there are cases where it’s the best option.

However, there are alternatives to bankruptcy, like consumer proposals, that you might want to consider first.

How Does a Consumer Proposal Work?

When putting forth a consumer proposal, a bankruptcy trustee will negotiate with your creditors on your behalf with your creditors. At the end of these negotiations, there will be a legally binding agreement in which you agree to pay a portion of your debts, and your creditors agree to forgive the remainder. Once the terms are fulfilled, you are legally released from your obligations. It is important to know that this option is only open to those who owe less than $250,000.

How is the Proposed Repayment Amount Determined?

In any situation where debt has gotten out of hand, a detailed examination of your household finances is in order. To come up with an amount that you can afford, and help you stay out of debt in the future, you will work with a licenced insolvency trustee to go over your income and expenses to figure out what’s left. Bear in mind that this amount will probably high. That is because your creditors have the reasonable expectation that you will repay all that you can. Getting out of debt will require some serious belt-tightening in most cases.

Are Consumer Proposals Ever Rejected?

When you file a consumer proposal, your creditors have 45 days to decide to accept or reject your terms. Creditors accept most of the consumer proposals they are offered with the understanding that, when it comes to getting repaid, some is better than none. Having said that, consumer proposals have been known to be rejected. Usually, this is because of suspicious behaviour on the debtor’s part, like fraud, reckless behaviour or gambling.

A high debt load can cause an overwhelming amount of stress, especially when you are having trouble making payments on that debt. We can help you with credit counselling, consumer proposals, and with filing for bankruptcy if that is deemed the best course of action in your circumstances. It all starts with a call to our offices in Kelowna or Kamloops to arrange a confidential, no-obligation consultation. Contact us today!

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