Canadians are managing their personal finances better than in previous years. While last year’s poll by the Canadian Imperial Bank of Commerce (CIBC) showed that 72% of Canadians were in debt, 49 % of respondents said they have made big lump sum payments to creditors.
The survey also reveals that those who have incurred larger debts are likely to have made extra lump sum payments in the past twelve months.
If you’re in the same situation, maybe you ought to consider a consumer proposal. The Office of the Superintendent of Bankruptcy Canada defines consumer proposals as an offer to pay creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both. The terms of the consumer proposal cannot exceed five years.
LOWER MONTHLY PAYMENTS IN CONSUMER PROPOSALS
The most common consumer proposal involves a debtor proposing lower monthly payments over a longer repayment period.
This type of proposal is beneficial to both debtors and creditors, because the creditors receive something from the debtor and the debtor avoids going bankrupt. Once the consumer proposal is approved, make payment directly to the trustee who distributes the money to your creditors.
Some creditors are willing to accept consumer proposals because they’d rather get paid a lower amount compared to not get paid at all. If creditors reject a proposal, the next logical move might be for the debtor to declare bankruptcy.
WHAT HAPPENS AFTER A CONSUMER PROPOSAL IS FILED?
Creditors have up to 45 days to ask for a meeting of creditors. If there is no request for a creditors’ meeting, the proposal is automatically accepted. If there is a requirement for a meeting of creditors, then your proposal is put to a vote. Creditors are not allowed to pursue legal action against the debtor until the offer is rejected or annulled. If the majority of your creditors vote to accept your proposal, it’s binding on all of your creditors, even if they voted against it. You then make your payments to the trustee who distributes the money to your creditors. At the end, you receive a certificate of full performance which means you are legally discharged from your debts.
The consumer proposal does not prevent creditors from taking legal action in relation to certain debts like alimony, child support, or student loans. Although a consumer proposal may seem like an ideal debt settlement option, not everyone may qualify.
Trustees like Yanch, Dey & Associates Ltd., can provide sufficient information and ideal debt solutions to enable you to make a more informed decision.
ABOUT THE AUTHOR
Kelly Dey is a licensed trustee in bankruptcy throughout Ontario.
As a Licensed Insolvency Trustee, she is licensed and regulated by the Superintendent of Bankruptcy to administer proposals and bankruptcies. She continues to actively consult and provide guidance to those seeking to file a bankruptcy or consumer proposal in Ontario.
Yanch Dey & Associates Ltd. offers a wide range of bankruptcy and debt management services in the GTA, Durham Region and County of Northumberland.