You’ve been having trouble paying your credit card bills for a while, and things are not getting better. You begin to worry that you may eventually go bankrupt – something you never imagined could happen. Then a friend tells you that there is an option called Consumer Proposal, where you pay a percentage of the total you owe, over a period of up to five years – and then your debts are cleared.
Why Would a Bank Accept Consumer Proposal?
October 6th, 2015 by Wendy O.
Sounds Too Good to Be True!
This sounds good, but could it be true? Why would your creditors "let you off," paying only a portion of what you owe?
As one would expect, it has to do with maximum profit for the creditors. But how?
Here’s the thing. If you are persistently unable to fulfill your monthly payment obligations, you are insolvent. If you are insolvent, you can file for Bankruptcy. If you file for Bankruptcy, your creditors may get very little – but they’ll have no say in the matter.
So, of course, creditors strongly dislike Bankruptcies. They would like to receive more money. Consumer Proposal offers them that opportunity.
The key is, with Consumer Proposal, a debtor with a regular income can make payments for up to five years (the full 60 months is typical). This allows him or her to pay more than they would if they filed for Bankruptcy, as a first Bankruptcy usually lasts either nine or 21 months.
The most important thing creditors look for in a Consumer Proposal is that they will receive more money than they would if you simply went bankrupt. Your Trustee will advise you if your financial situation allows you to make (and perform the terms of) a Consumer Proposal that accomplishes just that.