Bankruptcy is meant to provide a fresh start for all Canadians who find themselves unable to pay their debts. However, Canadians with significant assets may not relish the idea of starting over without all they previously owned. For them, there is the Consumer Proposal option. Here are 3 things you need to know about it:
1. You keep all of your assets.
2. You are fully protected by law.
3. It's less costly than credit counseling solutions.
Asset Protection
Some Canadians who have considered filing personal bankruptcy in Canada and looked through the list of Provincial asset exemption allowances emerge in a state of dumbfounded shock. If you own a lot of things, you're going to have to give many of them up. There's no getting around it; vacation homes, boats and RVs, ATVs, and a whole lot of other adult toys will be seized and sold to pay back creditors part of what you owe.
To protect those assets, the Consumer Proposal option is an ideal solution for debtors whose income is still on solid ground and high enough to pay back some, but not all, of the unsecured debt owed. To see if your income is high enough and the amount you owe low enough, meet with a licensed bankruptcy trustee. They will assess your financial situation and if they can establish a single monthly payment you can realistically make over a 5 year period to pay back a r educed amount of what you owe, you qualify.
The trustee files a proposal with your creditors indicating the reduced amount they will receive. If you get agreement of a simple majority of your creditors by dollar volume, you get to keep your toys as long as you continue to make timely payments for the time agreed in the proposal.
Legal Protection
The fact that you don't lose assets is a significant advantage of the Consumer Proposal option, but in many ways, the legal protection may be even more significant. If you've done some research on bankruptcy options, you know a Consumer Proposal is essentially the same as a debt settlement plan offered by credit counseling and debt solution companies.
However, those plans don't protect enrollees from creditors changing their minds and coming after them to collect the original amount they are owed.
Few of these companies are regulated and consumer complaints against them are skyrocketing in the United Sta tes. In Canada as well, debtors have found themselves being sued even after months of paying into the debt settlement plan. That simply can't happen with a Consumer Proposal.
Cost
The final thing you need to know is that a Consumer Proposal will cost you far less than a debt settlement plan. In a proposal you pay the court costs and the trustee's fees. If the trustee gets a $10,000 debt reduced to $4,000, the savings is reflected in your monthly payment at no extra cost to you.
With a debt settlement plan you will pay a hefty commission - 30% or more - on the $6,000 reduction added to your payment. This savings can be substantial and makes the Consumer Proposal option even more attractive.
If you need advice on your Calgary bankruptcy problems, you can visit Bromwich & Smith at SolvingDebt.ca. You can also download their free ebook on 10 Things You Need to Know about solving your debt problems.
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