If you have high levels of debt and are facing the possibility of bankruptcy, filing for a consumer proposal can be one of the best ways to regain control over your finances.
Borrowers with high interest rates and outstanding balances can apply for a consumer proposal and begin to get out of debt. But what exactly are the requirements?
Understanding how to get approval for a consumer proposal quickly gets you on the path to paying off outstanding debt and avoiding further damage to your financial standing.
What is a Consumer Proposal?
A consumer proposal is an agreement made between creditors and you to reconcile outstanding debts. Consumer proposals fall under the Bankruptcy and Insolvency Act and can be arranged for full or partial payment.
Your creditors must first approve your proposal. A majority vote is needed to for approval, and you’ll need a trustee to assess your case and help you file your application. Once creditors approve your proposal, you have five years to repay the balance.
Consumer Proposal Conditions
A proposal comes with certain requirements. You must ensure that you make all payments on time. A default on your proposal can occur with just 3 missed payments and you lose your right to file a second proposal.
There are also limits on the debts that can be included in your proposal. For example, not all student loans will be covered in a consumer proposal. Mortgages, car payments, and other secured loans cannot be included in a proposal and will remain under their original terms.
There is also no guarantee of approval. Creditors can deny your consumer proposal depending on the specific policies of each creditor, who evaluate your case for approval.
Consumer proposals are available for people who owe a maximum of $250,000, not including mortgages. The amount you will have to pay is determined by the total amount you owe and your income.
Applying for Consumer Proposal
To apply for a consumer proposal, you’ll need to consult with a bankruptcy trustee to help guide you through the process. The trustee manages the proposal application paperwork and monitors creditor votes.
So long as you get more than half of the votes of creditors for approval, all creditors will have to abide by the agreement.
They’ll expect to receive payments that are higher than the amount they would receive through a bankruptcy agreement. So the amount of your proposal will be higher than the value of your assets, home equity, and surplus income.
Using a consumer proposal to overcome outstanding debt is the alternative to filing for bankruptcy, but you must meet the requirements and receive approval from your creditors.
By understanding what debts you can include in your consumer proposal, and the terms of repayment, you can ensure a successful application and soon be back on track to getting out of debt!