Often they are scared that they are going to get garnishment, one of their creditors goes to court and starts feeding money directly off their paycheck. Often they simply looked at their credit card bill and they have realized that they have been making a minimum monthly payment for the last 12 months, but when they read on that statement that’s making the minimum monthly payment is going to result in not having any payments over the next 67 years or some ridiculously large number like that. Often that’s when they call us because they realize if they are not sinking, they are just treading water at the current moment and it’s just a matter of time before they will sink.
And all after that one, the thing that people are most concerned about when it comes to seeing a Bankruptcy Trustee is what the bankruptcy is going to look like, they are not many people out there that know as much as a trustee does and there are also many different types of bankruptcy because our neighbor down to the south in the State have a completely different bankruptcy system and that bankruptcy for a company which is much more publicized than an individual bankruptcy, are significantly different processes.
Right such when people sit down with me, they are quite often concerned that they are going to lose everything that they worked hard to do it, their homes, their vehicles and things of that nature and quite often people don’t necessarily lose those things or they are allowed to keep at least a reasonable portion of them.
We don’t take the clothes off people’s backs and we don’t take assets that are necessary for their living as there are certain provisions within the bankruptcy and insolvency legislation that allows people to keep things that are necessary for their everyday life.
If to add onto that, in most cases at least in Alberta, you find people often are able to keep vehicles during bankruptcy, they are even able to keep their house and it’s set out, so that there’s a mechanism to allow someone to have a reasonable lifestyle if you will. But still have a way to deal with this debt that’s obviously out of control.
So What is The Difference Between a Consumer Proposal and bankruptcy?
Alright, well a bankruptcy is probably the last or worst case scenario, right? It’s the option that you use if nothing else fits.
So essentially there’s a standard that has to be followed that comes from the legislation that requires you to make certain monthly payments to attend to other duties and once you’ve done those things, you’re simply discharged form the debt. The majority of the debt is written off by the creditors. A consumer proposal has been designed again through the legislation as an option or a way to try and avoid a bankruptcy.
And really, the best way to understand it, it’s a deal that’s made with the creditors, right? So the idea is for a court sanctioned and supervised process, you make an offer to your creditors to provide them a better recovery than they would receive in the bankers. The recovery typically isn’t paying the debts in full, in fact it’s usually paying a portion of the principal.
It also eliminates interest. So by doing those two things, a lot of someone can avoid bankruptcy, they can still provide more money to their creditors, but they can do it on a rate that’s a little bit more reasonable and fits better into their budget.