The Top Ten Questions about Consumer Proposals
Searching for answers when you’re having financial difficulties is a grim task. You’ll hear scary words like “bankruptcy,” “unsecured debts,” and “asset liquidation”. Thankfully there are a lot of options available for those that find themselves mired uncomfortably in debt. A consumer proposal is an alternative to bankruptcy, and although it is similar in some respects, it’s a less invasive and more flexible process.
The Top Ten Questions about Consumer Proposals:
1. Is this the same as a bankruptcy?
The answer is no. All your assets are protected in a consumer proposal whereas in a bankruptcy they are assigned to the Licensed Insolvency Trustee (LIT) for them to liquidate and give the funds to your creditors.
The consumer proposal is the formal ALTERNATIVE to bankruptcy where the debtor makes an offer to the creditors to avoid bankruptcy.
2. Who can help me choose between a consumer proposal and a bankruptcy?
Only a Licensed Insolvency Trustee can file a consumer proposal or Bankruptcy. However we believe It is essential that anyone considering bankruptcy, consumer proposals, or other related financial proceedings, seek their own professional representation. Licences Insolvency Trustees have a duty to represent the interests of the creditors. 4 Pillars sole mandate is to represent the interests of the debtor.
3. So, my debts won’t be wiped out?
Your debts will be negotiated to a less devastating amount and paid off interest free over a period of up to 5 years. Additionally, a consumer proposal may not apply to all of your debts. Exceptions include penalties from legal proceedings, alimony and child support.
4. Do I still have to liquidate my assets?
No. Unlike bankruptcy, a consumer proposal offers you more freedom regarding your assets. You may opt to keep them or you may choose to sell them to pay off your proposal faster. It is up to you. Any assets you acquire after the proposal will not be affected.
5. How will this affect my spouse?
Not at all. However, if the debts are shared, as a couple you might want to consider filing a joint proposal. This will give your spouse the same abilities to clear their own debts.
6. Will my wages be garnished?
No. In fact, one of the consumer proposal’s particular advantages is that it puts on stop to any kind of wage garnishment the moment you sign it..
7. What if my income or living situation change? Will the creditors ask for more money?
No. Unlike a bankruptcy, you are under no obligation to report a change in your living situation or income after filing. Any additional income you subsequently earn is also yours to keep.
8. How much does it affect my credit?
Your credit score will drop IF it is at a high number before filing. If you have been missing payments to your creditors then your score will be low anyway. Most people who file a proposal are not able to get credit anyway due to the debts they have. Also you can recover your credit score but you cannot recover the dollars you pay each month towards the high interest on your debts!
How long will I be making monthly payments?
This depends on the specific details of your proposal, which can vary to some extent, but a consumer proposal cannot last more than 5 years. You can also pay it off faster if your financial situation improves without any penalty or re-negotiation.
What happens if I default on my payments during a consumer proposal?
If you get more than three payments behind your consumer proposal can be annulled, and your creditors are free to chase you for payment of the amount owing plus interest.
Everyone is concerned about money. It’s better to have all the facts in order to make the right decisions, and it’s better to ask for help rather than to continue the downward spiral. Money problems are best tackled with experience and knowledge. Your local financial professionals are nearby to help. Contact your 4 Pillars tri-cities office today.
