Who Is a Good Candidate for Consumer Proposal?
January 19th, 2016 by Wendy O.
You’ve been struggling with your finances for many months, but things are not getting easier. You’re losing sleep while you worry about your situation. You’re embarrassed to tell anyone at home or at work. You’re afraid Bankruptcy may be next!
You are in good company. Over a million Canadians have experienced insolvency and filed for Bankruptcy or Consumer Proposal in the last decade. Most of them are responsible, hard-working individuals, like you, who have encountered unexpected circumstances.
Also, most Canadians who experience serious financial difficulties believe that Bankruptcy may be the only answer – but, there is another possible solution: Consumer Proposal. An increasing number of Canadians each year choose Consumer Proposal over Bankruptcy.
Consumer Proposal is a Bankruptcy alternative – and it’s been around for quite a while. However, it has become much better known in the last 5-10 years. While insolvency rates in Canada are currently (and thankfully) shrinking, the proportion of Consumer Proposals to Bankruptcies is actually growing – partly due to better consumer education.
Consumer Proposal, like Bankruptcy, is a formal, legally binding process that is administered by a Licensed Insolvency Trustee.
The Trustee will work with you to develop the Proposal, which is an offer to pay creditors a percentage of what is owed to them, or to extend the time you have to pay off the debts, or both. The term of a Consumer Proposal is five years or less, and it can cover up to $250,000 of unsecured debts.
Would Consumer Proposal work for you?
I filed a Consumer Proposal in 2009. As my Trustee explained to me during my first appointment, a Consumer Proposal can be appropriate choice if you have a regular income. He told me, “consider your income as if it were an asset – one that actually is more valuable to your creditors than the assets you could liquidate during the shorter term of a Bankruptcy.”
My creditors accepted my 5-year Consumer Proposal, since they received more money than if I had filed for Bankruptcy. If you are insolvent but have regular income, you too may be a good candidate for Consumer Proposal.
Consumer Proposal has significant advantages over Bankruptcy
The most fundamental advantage is that you retain control of your assets and finances. You have more flexibility in how you deal with assets such as your home or car – in most cases, it is possible to keep them. Conversely, in a Bankruptcy the Trustee acts as a Receiver (and distributer) of your assets, and you are required to make monthly reports to the Trustee about your finances.
Another advantage: the major credit bureaus, Equifax and TransUnion, report information about Consumer Proposals for a shorter time than they do Bankruptcies. Consumer Proposals are reported for three years after they are completed, whereas first Bankruptcies are reported for six or seven years after discharge. However, this advantage is balanced by the fact that most Consumer Proposals take longer to complete than most Bankruptcies.
Third advantage: if you have filed a Consumer Proposal, you can legally and truthfully answer “no” to the question, “Have you ever declared Bankruptcy?”
And one final advantage – one that was meaningful to me, and might appeal to you, too: with Consumer Proposal you are able to pay your creditors as much as possible of what you owe them. For me, although Bankruptcy would have been less expensive and likely quicker as well … Consumer Proposal just felt better.
Your Trustee will help you make the best Proposal you can – one that your creditors are most likely to vote “yes” to. The vast majority of Consumer Proposals are accepted by the creditors, for exactly this reason.
So, if your money woes are not improving, Bankruptcy may not be in your future after all. Stop worrying and book a free appointment with a Trustee. Consumer Proposal may be right for you, as it was for me.