Consider getting a consumer proposal in Toronto and finally getting rid of your debts safely. Getting a consumer proposal protects you and the creditor when paying off your loans. The creditors get protection and assurance that they will get paid, while you also get the guarantee of settling your debts.
After agreeing, you and the creditor are required to fulfill the terms stated. That means your creditor won’t be able to back out of this agreement, and they can’t go after you once the debts are settled.
Your income and assets are protected from creditors, who tend to go after your assets even after payment. Through a Licensed Insolvency Trustee or LIT, the agreement is well-facilitated, and the LIT ensures that each party fulfills its roles.
How Does a Consumer Proposal Benefit You?
How does a consumer proposal work? It’s a legally binding agreement facilitated by a LIT where you must create a proposition for your creditors. The proposition should include terms and conditions about paying your debt.
Consumer proposals are not the same as bankruptcy since it’s more of a debt solution. Unlike being bankrupt, you don't have to declare anything when you go for a consumer proposal. Some people want to repay their debts but are concerned about declaring bankruptcy; consumer proposals are the solution.
When you’ve created and submitted your consumer proposal, there's no need to declare bankruptcy. As long as the debts you want to settle are unsecured, you can pay them off legally through consumer proposals.
Consumer Proposal vs. Bankruptcy
Many people who haven’t experienced bankruptcy or have to fuel for consumer proposals are often confused about how to differentiate the two. Below are some simple facts about the two to help you distinguish which option is better.
Consumer Proposals
- Formal Agreement
Consumer proposals are what you can call the formal agreement between the debtor and the creditor. You must create a proposition and submit it to your LIT for review. The LIT then shares the proposal with your creditors for checking.,
On the consumer proposal, you should state which creditors you can pay and your payment terms. A proposal should include all the details regarding the payment schedule, the amount to be paid, and the payment duration.
It’s the responsibility of your LIT to help you complete the proposition. The LIT is also your representative when it comes to facing your creditors. You and the creditors must agree to the terms and changes in the proposal before it gets approval.
- It Is Not Bankruptcy
Consumer proposals are not the same as bankruptcies. When you have submitted a consumer proposal, you no longer have to answer any questions about bankruptcy. You are also not affected by any action that applies to people who have declared bankruptcy.
Suppose there’s one thing that consumer proposals and bankruptcy have in common. In that case, they are both under the Bankruptcy and Insolvency Act. This act protects you from the courts, primarily if you can’t fully repay your debts.
- Creditors Vote on Your Offer
With consumer proposals, the LIT shows the offer to your creditors, and the latter have to vote on whether they agree. You can only settle your debts once the majority of the creditors accept your offer; the LIT will communicate these votes to you.
After getting the creditors' approval, you are expected to follow the terms and conditions stated in the proposal. The creditors as well need to cease contacting you about the debt. You are allowed to repay the debt in under five years.
Bankruptcy
- Debt Solution if You Can’t Repay Your Debt
Bankruptcy is for people who want to repay their debt but lack the financial ability to do so. People who are qualified for this option are those who have fallen under unfortunate circumstances where they can no longer pay their loans.
If you owe many creditors money and need a fresh start to gather your livelihood once again, file for bankruptcy. You have to consider that when you declare bankruptcy, it will also affect the status of your assets and properties.
- Debt Collection Stops
Once you file for bankruptcy, your creditors must stop all their collection activities targeting you. Your creditors will then be forced to accept that you can no longer pay the debt or can't fully repay the original amount agreed upon by both parties.
Your LIT will also help you communicate with your creditors and will be the one explaining your situation to them. On the downside, you must declare your assets so that your LIT can legally locate the exempt and non-exempt assets to cover your debt.
- You Can Still Have Debts Left
Note that bankruptcy will halt most of your debts after you file for bankruptcy, but that doesn't mean it will erase everything from your record. You are still responsible for paying some debts, such as taxes, child support, federal student loans, and other debts not stated as secured loans.
That’s why it’s crucial that you know which debts you should consider before filing for bankruptcy. Always review your situation and determine if you have creditors that won’t be affected when you file for bankruptcy.
- Bankruptcy Also Takes Time
Bankruptcy isn’t an overnight solution; it’s a long and arduous process of proving that you are bankrupt and fighting for your case in court. Sometimes you are forced to follow through with a 3 to 5-year payment plan before getting discharged from your loans.
Protecting Your Assets With Consumer Proposals
Unlike in bankruptcy, you don’t necessarily have to give up most of your assets. Creditors will only accept your offer in consumer proposals if your LIT can offer them money. In most cases, the amount will be greater than what they would get if you had filed for bankruptcy.
Some of your assets could be affected, but rest assured that your livelihood won’t be affected. Most debtors are worried that the creditors will take their houses away, but that’s not the case. Your primary income source and residence are often not included in the non-exempt assets.
When you’re unsure what to do, it’s always a good idea to ask. Trustees can help explain your best options and how to pay your debts in the least risky way. You can always talk with a consumer proposal agent in Toronto if you have any queries or want to learn more about the process.
