Bankruptcy Kitchener Blog by Scott Schaefer

A consumer proposal is an offer to creditors to settle an individual’s debts. A consumer proposal is a legal binding agreement that is filed with the government and which subsequently receives court approval. This is why you need to see a licensed trustee in bankruptcy to file a consumer proposal.

More Details:

Which creditors are included: A consumer proposal is made to the unsecured creditors and does not include secured creditors such as mortgages and car loans. Therefore debts such as credit cards, loans, lines of credits, overdrafts, income taxes, and payday loans are included in the consumer proposal as unsecured debts. Each creditor receives a percentage share of the consumer proposal.

How do they work: A consumer proposal is an offer the debtor makes to his unsecured creditors. To have the creditors agree to the proposal, you would have to offer to repay a higher portion of the debts than the creditors would expect if you had filed for bankruptcy.

Why would you offer to pay more? Bankruptcy might mean losing assets like your house, car, investments, etc. The payments in bankruptcy increase if your income increases. A consumer proposal is intended to be fair to both sides. You get to keep your assets and have certainty regarding the cost. Your creditors receive more money in total compared to bankruptcy.

How long can a consumer proposal be? The longest a consumer proposal can be is 5 years. Most times, the payments are on a monthly basis over that time. That’s a big part of the appeal of a consumer proposal – one monthly payment to take care of your debts. However, payments in a proposal can also be a lump sum. Another option is to do a combination of a lump sum and monthly payments. There is a lot of flexibility in how the terms of a consumer proposal can be structured.

Costs: The “cost” of a consumer proposal is paid through the consumer proposal. That is, a payment over and above the amount offered in the proposal is not required to be paid to the Trustee. The government sets the amount a Trustee can collect from the proposal which is called a tariff.

Why does someone need to see a Trustee in Bankruptcy for a consumer proposal: The government has provided me with a license to help individuals through their financial restructuring. When I meet with people, we review all options available so that they can find the right solution for them. If someone needs a fresh start through a consumer proposal, this is something that only a trustee can file. The reason for this is to maintain integrity and strong ethics throughout the process.

Conclusion: We strongly believe that residents of Kitchener Waterloo should first consider a consumer proposal before considering personal bankruptcy. Consumer proposals are the best alternative to bankruptcy when needing a fresh financial start. A consumer proposal is not the correct option for everyone, but for many people it’s the perfect solution to burdening debt problems.

Image what it would be like if you could create a plan for the future that you are wishing for. Please do not hesitate to contact myself to discuss your situation to see if a consumer proposal is right for you. Our Kitchener office has been open since January 1999 and we have helped many people from the Kitchener Waterloo area gain financial control and a fresh start through filing a consumer proposal.

To learn more about consumer proposals please see my blog postings under consumer proposals or visit consumer-proposals.org for a website dedicated to consumer proposals or hoyes.com for further information and blogs.

5 Comments »