October 3rd, 2011 by Questions
Why is there debt settlement and consumer proposals? Which is better to do? Can we do these options if one of two of us has lost their job?
Posted from: Manitoba
October 03, 2011 at 5:23 pm, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:
Before I answer this I must point out that I am biased. I am a licensed trustee, and administer a large number of proposals at any given time. Having said this, this phrase ‘debt settlement’ is a term that people find confusing. The problem is that a consumer proposal is one way of settling your debt. But, you can try to settle your debt on your own. You can contact your creditors directly and trying to negotiate a debt settlement of sorts. This can be done individually, by a credit counselling firm or by a consultant.
While administering or negotiating these types of debt settlements informally like this sounds simple, it is more complicated than most people realize. The problem behind this is that there is not legal basis for this informal type of settlement. This means no common format, no way to get all your creditors to participate in the same settlement offer and no protection for you as the consumer if they parties you have negotiated don’t want to honour any notion of a settlement.
All of these problems result from the same issue, there is no legal mechanism that governs these types of informal settlements. As a result we find negotiating these informal’s can be difficult to do.
This is where a consumer proposal is different. It is provided for in the legislation, so it is legally binding on both parties (meaning you are protected from a creditor refusing to consider a settlement offer or accepting a settlement offer and then transferring you to a different employee who knows nothing of the agreed upon settlement and conveniently cannot find anyone who does). Because it is provided for in the legislation it also comes with court protection, which means the creditors cannot make any collection attempts during the proposal period, they are forced to deal with the trustee who administers the proposal. Another benefit is the legislation provides a voting mechanism that only requires a majority of the creditors to cooperate.
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