People choose to file consumer proposals for different reasons. The most common are:
Consumer proposals stop garnishments immediately. The moment that your Trustee files your Consumer Proposal with the Office of the Superintendent of Bankruptcy a stay of proceedings comes into effect. This means that your creditors are stayed; in other words their collection efforts are legally paused. They can only contact your Trustee and can only vote in favour or against your proposal. This stay of proceedings remains in effect until your proposal is completed, rejected, or annulled due to non-payment.
Garnishments represent a creditor action, and these actions are prevented by the stay of proceedings. After filing a consumer proposal, your Proposal Administrator (who must be a Trustee in Bankruptcy by law) will contact your employer and instruct them to pause the garnishment. If you complete your proposal then the garnishment no longer exists.
If you have become ill, lost your job, or suffered a reduction in your income for any other reason your debt load may now seem overwhelming. If you’re in a position where you are now unable to repay your creditors in full with interest then it might be worth considering offering to pay them what you can afford. As long as you offer more than your creditors would receive if you filed for bankruptcy and your creditors accept your proposal then your consumer proposal erases all of your unsecured debt. Only Trustees in Bankruptcy, who can act as Proposal Administrators, under the Canadian Bankruptcy and Insolvency Act can help you erase your debt by paying less than you owe.
Bankruptcy carries a stigma. Most people have a reaction to the word. While Bankruptcy remains an excellent option for many individuals a Consumer Proposal is always preferred. That’s why the Trustees in Bankruptcy at Welker and Company always consider a consumer proposal first and bankruptcy last. Filing a consumer proposal allows you to stretch your repayment to creditors over as many as 60 months resulting in lower monthly payments. It also allows you to maintain a higher R7 credit rating then the R9 credit rating caused by filing for bankruptcy. Lastly, people prefer to pay their creditors as much as possible or at least offer to do so before considering bankruptcy out of fairness to their creditors.
When filing a Consumer Proposal you don’t have to surrender a single, solitary asset; you keep everything that you own. Your monthly payment accounts for any assets that you would have surrendered to your Trustee in Bankruptcy had you filed for Bankruptcy.
You don’t have to report your income after filing a consumer proposal as you do after filing for bankruptcy. That’s because your consumer proposal payments are fixed after being accepted by your creditors. In a bankruptcy, if your income rises you may be required to pay a portion to your creditors. Filing a consumer proposal allows you to rest assured that your payments are fixed and saves you the trouble of sending monthly reports to your Trustee in Bankruptcy.
While everyone’s reasons differ, we’ve tried to explain the most common reasons that someone may file a consumer proposal. To have your personal situation assessed by a licensed Proposal Administrator and Trustee in Bankruptcy send us an email or give us a call today. You’ve got nothing to lose except your debt!