Consumer Proposal Qualification

June 18th, 2014 by Questions

I am wondering if we would qualify for debt settlement. My husband and I make 110,000 in salary before tax. Our home is worth 260,000 and our mortgage is at 203,000. We have 35,000 in cc debt, owe 6,000 of income tax, 23,000 loan and 74,000 loan. We have 15,000 in resp saved for our 2 kids. What is our best option?

Posted from: Quebec


One Response to “Consumer Proposal Qualification”

, Jillian Taylor-Mancusi, Trustee | B.A. | C.I.R.P said:

By asking whether or not you qualify for a debt settlement, we are assuming that you are referring to a consumer proposal under the Bankruptcy and Insolvency Act, sometimes referred to as a credit proposal. A trustee would require much more detail then you provided to determine whether a proposal would be your most appropriate option. However in general terms we can make the following assumptions, your total indebtedness, excluding your mortgage debt is approximately $138,000.00. Your ability to pay pursuant to Directive 11R of the Bankruptcy and Insolvency Act and based on an assumed net monthly income of $7,150.00, would be approximately $1,700.00 on a household basis. Your realizable assets in a bankruptcy would be approximately $74,200.00 this includes the realizable equity in your house, the RESP, and 21 months of required payments. This is significant because in a proposal generally you must pay more to the creditors then what they would receive in bankruptcy. Therefore, a viable proposal would likely consist of $1,700.00 per month for 48 months or more to a maximum of 60 months. The creditors would be sent all of the relevant information by the trustee and have an opportunity to vote for or against the proposal. If a majority of the dollar amount of the claims of the creditors were in favor of the proposal, the proposal would be binding on all of the unsecured creditors. In a proposal the assets do not vest in the trustee and as such the proposal would not require the sale of your home or the liquidation of the RESP.

There are exceptions depending on the nature of the debt, details with respect to non-discretionary expenditures in your budget etc. therefore it is necessary to sit down with a Trustee in bankruptcy to examine the details of your situation to ensure such a proposal would be viable.

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