Unmanageable debt can creep up on you. You may be hoping for an upcoming promotion or bonus or even a new job. But in the meantime your debts keep piling up. Soon enough you realize you’re in a financial hole. It’s something that happens to so many people.
When you get to this point you may assume that filing for bankruptcy is the only way out. But that’s not true! There are several different strategies that may apply to your financial situation better than bankruptcy.
One of the most popular bankruptcy alternatives is a consumer proposal. A consumer proposal is a negotiation.
In Canada only a Licensed Insolvency Trustee also known as an LIT can administer a consumer proposal.
Your LIT will negotiate with your creditors on your behalf. As a result, a fixed settlement is reached that is legally binding. Not only will a consumer proposal give you much more flexibility but it has its benefits:
- Legal Protection: It is legally binding and provides immediate legal protection from your creditors.
- Reduce Overall Debt Load: With the help of your administrator you will be able to arrange a significant reduction in the overall sum owed.
- Keep Your Assets: You will not be required to forfeit any assets – in a bankruptcy this can happen
- Garnishments Stop: In most cases wage garnishments are stopped so will all collection calls or letters.
There is one key factor in a consumer proposal negotiation. It comes down to how much a creditor is likely to get if you go bankrupt. If that number is lower than the consumer proposal then the creditor will likely accept.
Creditors also consider the assets that you have and who else you owe money to.
Once the negotiation is done many people have their debts reduced by as much as 80%. However, you must be able to make the negotiated monthly payments.
Bankruptcy payments are different. When filing for bankruptcy your payments are based on your income and assets. This means that your assets may or may not be exempt from the process.
But, with a consumer proposal, once you reach a settlement the amount is fixed and cannot be changed. Plus you get to keep your assets if you so choose.
A consumer proposal can last anywhere between 3 and 5 years. But, you are free to pay it off earlier with no penalties.
A consumer proposal can give you the relief that you need. So, if you think this is the right choice for you, contact us.
Call us for a free consultation with one of our LITs to discuss your financial issues.