Consumer Proposals in Toronto Can Help You Avoid Bankruptcy

Consumer proposals in Toronto can help you avoid bankruptcy and enable you to work out a formal agreement with your creditors to pay them a portion of what you owe them in full settlement of your debts. If your creditors accept your offer then your debts are significantly reduced to the amount you have agreed to pay them and your creditors are prevented from taking any legal action against you.

Consumer proposals are a much more favorable option compared to bankruptcy which lenders and financial institutions would often prefer a debtor to take. The arrangement benefits both parties. Creditors would rather you settle your debt by paying a reduced amount and get paid at least some of what they are owed, and you get to retain your assets and avoid drastically damaging your credit.

A consumer proposal is a legally binding process governed by the Bankruptcy and Insolvency Act. It is a formal agreement between yourself and your creditors that you will pay back a portion of the debt you owe at your own pace over a set period of time.

In recent years, consumer proposals have become a popular choice among highly-indebted Canadians. A big part of its popularity is the many advantages it offers, which can include:

• Eliminate unsecured debts for less than you owe
• Reduce your monthly payments;
• Keep your assets like your home or car
• Get immediate protection from your creditors
• Stop all legal action including collection calls and wage garnishments
• Avoid bankruptcy
• Allow you to start saving for your future

A consumer proposal is essentially a plan that can only be arranged and administered by a Licensed Insolvency Trustee (LIT). The LIT will develop an offer for your creditors to revise the terms of your debts, including negotiating a more affordable outstanding amount, payment schedule, and/or interest rate.

To put the plan in place, your trustee will first determine how much you can afford to pay back every month. He will take into consideration several factors, such as your living expenses and all your sources of income. Once he has determined the amount you can afford to repay, he will then set up how long your consumer proposal will last. He  can arrange the payment plan for three years or up to five years.

The plan is then proposed to your creditors. In order for the plan to take into effect your creditors will  have to accept the proposal. Creditors have 45 days to vote for or against your proposal. If majority of your creditors agree to your proposal (50%+1 based on the dollars you owe), then it is deemed to be accepted by all your creditors. If no one objects within 15 days following the acceptance, your proposal will be approved by the court. Once approval by the court is released, this starts the formal agreement and you and your creditors are bound by law to commit to the plan.

If majority of your creditors vote no against the proposal, it can be amended. Your trustee will call a meeting and you and your creditors can negotiate directly and come up with a fairer deal that both parties can accept.

For many people who don’t want to go bankrupt, consumer proposals in Toronto are a better debt solution. Speak to a Licensed Insolvency Trustee to make sure that it is an option that you can take to help eliminate your debt and gain control over your financial future.