Bankruptcy can be one of the worst things that can happen to a person financially. If you are considering an Edmonton personal bankruptcy, you should be aware of your other options. One option that may help you avoid bankruptcy is a consumer proposal.
What is a consumer proposal?
A consumer proposal is a legally binding agreement that allows Canadians facing financial distress to avoid bankruptcy by proposing a settlement amount to creditors. With the help of a licensed trustee, you develop a payment plan to repay a portion of the debts you owe. There are eligibility requirements that must be met before you can develop a consumer proposal, and this type of arrangement is designed primarily for those who have money to pay a portion of their debts over a period of time not less than five years.
Once you prepare a plan with your trustee, your creditors will review it and decide whether they will accept it or not. If it is accepted, you will make payments to your trustee rather than your creditors.
Who qualifies for a consumer proposal?
In order to be eligible for a consumer proposal, you must meet certain requirements. First, you must be able to prove that you are insolvent, meaning you don’t have the income to pay your bills on time each month. Your debts must also be less than $250,000 and you must have a regular form of income to illustrate your ability to pay your debts back.
What are some of the pros and cons of a consumer proposal?
The main benefit of a consumer proposal is that it allows you to keep your assets. This way, you can keep your home, vehicles, and other assets you may have otherwise been forced to surrender. In addition, all collection activities are brought to a stop, including harassing phone calls and wage garnishments.
Keep in mind that like bankruptcy, consumer proposals will also have a negative effect on your credit. Although the effect is not as bad as a bankruptcy, it will still remain on your report for several years and may make it difficult to obtain any line of credit for some time. Additionally, not all debts are absolved; student loans, alimony and child support, and mortgage payments must be paid.
A consumer proposal is an alternative to bankruptcy that allows you to pay a portion of your debt while retaining your assets. To find out more about whether a consumer proposal is right for you, talk to an Edmonton bankruptcy trustee.
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