When it comes to difficult financial situations, we often find ourselves alone. There may be feelings of fear, or shame that stop us from turning to friends and family for support. We are here to tell you that there is no need to feel disgraced if you find yourself in a tight financial situation. This is the time that you need to take time to research and read available information so that you can make the best-informed decision.
No two financial situations are the same so with that knowledge in hand, we are aware that there is more than one solution. Commonly people are aware of the term Bankruptcy. More often these days, you may hear the term Consumer Proposal. What is it, and is it a viable option?
What is a Consumer Proposal
Simply put a consumer proposal is an alternative to bankruptcy. A Licensed Insolvency Trustee, like one at Bromwich+Smith will negotiate directly with your creditors to lower your total debt owed.
Signs that a Consumer Proposal might be right for you:
- Have experienced a loss of income due to job loss, sickness or injury
- Are struggling to make more than the minimum payments in household bills, or in some cases unable to pay at all
- Have maxed out credit cards, or are unable to get more credit
- Rely on credit for everyday expenses
- Can’t afford interest payments
You can also take MyMarble’s free CreditMeds assessment to see if a Consumer Proposal is right for you.
It is important to know that as soon as you reach out and start the process of a Consumer Proposal, all creditor action including collection calls and interest charges are stopped. If you re experiencing creditor phone calls, other aspects of your life are likely affected. You may be afraid to pick up the phone, have reduced appetite, or problems sleeping. Once these calls stop you can start getting your life back on track.
What happens during a Consumer Proposal?
The process starts off with a free consultation to determine the details of your current financial situation. A debt relief specialist will put together a proposal from your creditors that will first be presented to you for approval. Once terms are accepted by you and the proposal is submitted, your creditors will then vote to accept the current terms or will counter offer the proposal to terms that are satisfactory for the majority. Typically, if a proposal offers your creditors more than they would receive in a bankruptcy, they are usually accepted.
Your proposal will give you the ability to pay what you can afford in monthly payments with up to five years to pay, instead of what your creditors were demanding. This locked in amount allows you to know exactly what is owed so you can make manageable payments and get on with your life.
Unlike in a bankruptcy, a consumer proposal Doesn’t involve your assets or other possessions. Simply put you will be able to keep your house and vehicle.
Consumer proposals can only be obtained through the help of a Federally Licenced Insolvency Trustee like Bromwich+Smith, and this service is paid by a government tariff. A Consumer Proposal will remain on your credit for three years after you complete your proposal, instead of the six years that comes with a completed bankruptcy, and there are many ways to rebuild your credit through this process.
Who can qualify for a Consumer Proposal?
- You must be a person to file (businesses may not file consumer proposals).
- You are insolvent, meaning you are unable to pay your debts as they become due.
- Have total debts less than $250,000 (excluding the mortgage on your principal residence).
- Have a stable source of income, to ensure that you will be able to make monthly payments.
- Have no prior proposal proceedings that are still open.
What happens next?
While in a consumer proposal, you will want to start growing your credit up again. You can achieve this in many ways, including vehicle financing. While you may not be approved through the bank or dealership, there are specialized agencies that will work with you during a consumer proposal to approve our financing.
Another way we suggest to starting to build your credit back up is with a secured credit card, which can grow into an unsecured card once your proposal is closed.
Keep any credit cards balanced, by staying under 50% of your approved credit limit and paying off balances in full.
Make a point of checking your credit score every year. Mistakes are more common than you may thing, and by staying on top of your report you will be able to have the errors amended quickly.
Often it is the fear of the unknown often makes us freeze and avoid acting. Now that you know about Consumer Proposals, take action to get your debt behind you. A consumer proposal isn’t the right step for everyone, but it is often a great option. No matter how difficult or complicated your financial situation may seem, there are options available to help you rebuild and thrive.