How would filing a consumer proposal in Sarnia help me?

by Joel Sandwith on September 23, 2010

A consumer proposal can be an excellent solution for financial difficulties. For many of the people I speak with is exactly the fresh start that they need.  More and more these days, people are choosing consumer proposals over bankruptcy to resolve their debts.  In fact, I recently posted a blog about how the number of people filing personal bankruptcy has fallen, but the number of people filing consumer proposals has actually risen.

The idea behind a consumer proposal is essentially to ‘make a deal’ with your creditors.  Consumer proposals are a legal option under the Bankruptcy and Insolvency Act, and must be administered by a licensed trustee in bankruptcy.

Consumer proposals can be set up with all sorts of different terms and clauses, but the most common form is a monthly payment over a set period of time, up to five years.  The key is to determine how much to offer to your creditors.  This is done with input from your trustee, and takes into account several factors, such as:

  • How much would your creditors receive in a bankruptcy?   For example, if you have $20,000 in a bank account, your creditors would be unlikely to accept a ‘deal’ that pays them only $10,000.
  • Do your creditors have minimum amounts they would expect?  For example, it is unlikely that any creditor would be willing to take five cents on the dollar, so the offer you make must be reasonable.
  • Most importantly, how much can you afford to pay?  It certainly doesn’t make sense to offer a proposal payment of $500 per month if the most you can afford is $300.

The ideal situation for a consumer proposal is when you can afford to make some payments to your creditors, and wish to avoid bankruptcy.  If those factors line up, a consumer proposal may be a great solution for you.  Here’s an example:  if you have an income of $3,000 per month, and living expenses of $2600 per month, but your credit card payments are $800 per month, a consumer proposal might be very helpful to you.  In this example, a consumer proposal of between $300 and $400 per month might be affordable for you, and make your creditors happy as well.

Filing a consumer proposal also stops collection activity.  If you are getting phone calls about your debts, or if you are having your wages garnisheed by a creditor, those actions are ‘stayed’, or stopped by the filing of a consumer proposal.

Consumer proposals can also help you protect your assets.  Have a look at this blog post by a colleague of mine in our Guelph office about a couple he met with who were concerned about keeping their house.  He was able to help them with a consumer proposal at a monthly payment they could afford, while keeping their home!

Are the payments on your debts making it so you have to borrow money to live?  If so, please give us a call at 310-PLAN (7526) or locally in Sarnia at 519-344-1058.  Let’s get started on a plan to deal with your debts.

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