If you find yourself overwhelmed by the debts that you have accumulated, one way to avoid having to file bankruptcy is to put together a consumer proposal – a payment plan for your creditors. When you put that proposal together, that is the starting point for negotiations with your creditors. Amansad Financial provides a variety of options to help consumers who are in debt move out of their consumer proposals more quickly so that their credit score goes through a minimal amount of damage and our clients can return to prime lending choices for mortgages, auto loans and other forms of consumer credit. Below you will find answers to some of the most common questions that our clients ask about consumer proposals:
1. How often do creditors approve consumer proposals?
Actually, an approval rating around 95 percent or higher is not uncommon. The key is providing these four criteria:
Gives the creditors better terms than bankruptcy would provide
Satisfies your creditors’ minimum expectations
Provides proof that your payments fit your budget
Includes unsecured debts totaling less than $250,000
2. What are the advantages of fling a consumer proposal?
In addition to the fact that you don’t have to go through the bankruptcy process, there are several other advantages to a consumer proposal:
You retain control of your assets
You set the payment at a reasonable amount
You still have access to protection for creditors
You can pay the balance early if circumstances move in your favor
You have access to government assistance
3. How are a consumer proposal and bankruptcy different?
A consumer proposal keeps you in charge of your assets
You will still receive tax refunds
Monthly payments are generally lower than in a bankruptcy
You can pay off debts early in a consumer proposal
Your payments are fixed in a consumer proposal
You go through a creditor voting process in a consumer proposal, and the creditor cannot challenge your progress when you have paid off the amount
There is less paperwork to file with a consumer proposal, such as the fact that you don’t have to provide monthly reports of income and expenses to a Trustee.
4. What fees are associated with a consumer proposal?
You won’t face any up-front fees, and any cost to the Administrator or Trustee would be included in your proposal agreement. The Trustee will consider your assets and income with respect to your budget and what you can afford to pay. The process is much like what you would go through in a private mortgage refinance.
5. How long does the approval process take?
After all parties sign the proposal, the documents are filed with the government electronically and your creditor protection begins immediately. At that point, you don’t make any more payments to your creditors. Here are some key facts to know:
After you submit the proposal, creditors have 45 days either to vote or ask for a meeting
If one creditor does not vote, that vote is counted as a “yes.”
If 75 percent of creditors vote yes, and the court approves the proposal, then official approval has taken place.
If at least 25 percent of your unsecured creditors request a meeting, then one is required.
6. Can I choose certain debts to include in my consumer proposal?
The purpose of a consumer proposal is to get rid of unsecured debt, such as lines of credit, credit cards, tax liens and payday loans. Secured debt cannot be a part of a consumer proposal, and there are other obligations that cannot be included, such as:
Court ordered child support or spousal support/alimony
Court related obligations and fines
Student loans less than seven years old
7. What terms are available for consumer proposals?
The longest a term can be is 60 months, but you can ask for a shorter one if you agree as well. Because early repayment is possible, it can be better to choose a longer term than what you think you need and then pay it off early.
8. Are Canada Revenue tax debts eligible for inclusion in a consumer proposal?
Yes, you can include them, and Canada Revenue will be bound by the proposal terms.
9. Does a consumer proposal end wage garnishment?
According to the Bankruptcy and Insolvency Act, a consumer proposal will end proceedings that include collection calls and wage garnishments. Signing and filing the proposal with the government brings immediate creditor protection.
10. In addition to making my payments on time, what else do I need to do under a consumer proposal?
Actually, you can defer as many as two payments, but after that your protection ends and the consumer proposal is considered to have been dissolved. But in addition to making those payments, you need to attend two credit counseling meetings.
11. How long does the consumer proposal stay on my credit report?
It comes off your report three years after the proposal ends.
One thing to note – if your financial problems have come from circumstances you did not expect, talk to a Trustee to find out what your options are at that point. Home equity could give you access to a private mortgage to eliminate any unsecured debt, even if your credit score is low.
At Amansad Financial, our focus is on transitional alternative & private equity lending solutions to help property owners transition from point A to point B. So if you have the equity or a down payment on hand, private mortgage lending can be a helpful option as well.
If you are at the point where you are considering consumer proposal or bankruptcy, yet have good equity in a property reach out to Amansad Financial today. We will either be able to help or at least point you in the right direction if we cant.