Are you considering filing a consumer proposal as a means to resolve your debt problems? A licensed insolvency trustee at Bernier & Associates in Ottawa can help. In this article, we give you more information about this practical method for resolving debt and discuss the time commitment it involves, its impact on your credit score and more.
Consumer proposals, a summary
A consumer proposal allows you to hold on to major assets such as your home and vehicle despite having major debts. This process, which is laid out in the Bankruptcy and Insolvency Act, involves reaching out to your creditors to settle your various consumer debts (such as your credit card balance). However, to be eligible, your total debt, excluding the mortgage on your principal residence, must not exceed $250,000.
If this applies to your situation, a consumer proposal could allow you to put your finances in order while avoiding personal bankruptcy. Taking this course of action, and thereby avoiding a declaration of bankruptcy, is generally advantageous for creditors too, despite their not receiving the total amount owed.
The duration and terms of a consumer proposal
A consumer proposal doesn’t oblige you to adhere to a set payment plan to resolve your debt. Rather, the repayment terms are based on your ability to cover your debts. In fact, filing a consumer proposal can reduce your debts by as much as 50%. Repayment can be made through monthly no-interest payments, a single lump sum payment, the sale of personal assets or a combination of these. Whichever repayment option you choose, you’ll need to pay the full amount within 60 months (5 years) of the date the consumer proposal was filed.
After you’ve filed, you’re protected from your creditors and they won’t be allowed to harass you. In addition, you can't be terminated by your employer for having filed a consumer proposal. Moreover, all debt-related legal proceedings or wage garnishments are suspended. However, a consumer proposal will be automatically cancelled if three payments are missed consecutive or not.
How a consumer proposal impacts your credit score
Once you file your consumer proposal, your credit rating will fall to R9, the lowest possible level. After you’ve made your final payment, it will rise to R7, indicating that you’ve settled your debts through a formal agreement with creditors and are now debt-free. This credit rating will be with you for a period of three years, after which the consumer proposal is deleted from your file.
Need advice about how to deal with debt? We can help!
If you need a licensed insolvency trustee to help you file a consumer proposal in Ottawa, turn to the experienced team at Bernier & Associates. We’ll answer all your questions and do everything we can to help you to regain your financial freedom. Contact us for more information.