Hi, All,

Just wanted to post here and say what I've said in some of my other posts. I have recently filed for a consumer proposal, and I am very glad I did. I've gone from approaching each month's budget with fear and trepidation, to feeling in control and being able to make progress once again.

This applies to both consumer proposals and bankruptcies. As soon as you start wondering if you need professonal advice, make an appointment with an insolvency trustee right away. You will be treated with respect. In fact, the trustee will treat you better than you've been treating yourself! I say this, because many of us feel ashamed and foolish when we are in financial trouble. Without going into the policies of many creditors, I'll just say that their techniques are designed with the knowledge that a certain percentage of their customers will become insolvent because of them. If you are that person, don't be embarrassed!

In the specific case of consumer proposals, creditors accept the majority of such proposals because, if they've driven you close enough to bankruptcy that you are allowed to file one, they know they'll receive more money than if you actually filed for bankruptcy.  This is largely because the term of a proposal (up to five years) gives you more time to pay as much as you can of what you owe them. Believe it or not, they welcome this, and many are quick to agree!

In the old days (and to some extent, now), you yourself or a credit counsellor (not a trustee) could approach your creditors with proposals to pay partial amounts, or over a greater period of time, etc.  The problem here is, even if the creditor seems to agree, agrees over the phone, or puts a "note" in your file - they are not legally obliged to honour their agreement with you. You may think your have cleared your debt with them, only to have them contact you in two years, demanding the remaining balance plus interest.

As opposed to yourself or credit counsellors, a registered trustee can make a legally binding agreement with your creditors on your behalf. This is very important. When you work with a trustee, your arrangement is protected by the Bankruptcy & Insolvency Act (BIA).

If anyone has any questions that I can answer, fire away. And don't forget the wealth of information on the Bankruptcy-Canada site.

Best wishes to all,
~Wendy

Hi fergiak,

When I wrote my entry above, I was writing from my own perspective, where it was the high interest on the credit cards that had driven me past the point of no return. My lifestyle had become a frugal as I could make it.

Everyone's situation is different, so it's impossible to predict whether you'll feel as if you're "living from paycheck to paycheck" under the terms of a proposal.

The trustee's duty is to recommend a course that will be fairest to your creditors, but it also has to be a course that is possible for you to follow. Otherwise there would be no point in trying it.

He or she will look at what your monthly expenses are, not including luxuries you can live without, in order to determine what your "surplus income" is. The payments towards your proposal will come from this "surplus income". The payments will not consume ALL of your "surplus income", however, because we all know that surprises can come up (car repairs, home repairs, etc.).

Now, if all or part of the reason that you've become insolvent is that you spend beyond your means on things you can't actually afford, you may indeed feel pinched under the terms of the proposal - you will have to form new habits. However, if you've arrived at insolvency because the compound interest on the debts eventually made paying them out of your reach, and in the meantime you had been enjoying few or no "luxuries" - you may feel that funds have been freed up for your use once the proposal is filed.

It's all a matter of perspective.

Let us know how it goes with the trustee!
~Wendy