A consumer proposal is a perfect alternative to bankruptcy. It is a better way of negotiating debt reduction and making the payment up to five years. Unlike bankruptcy, the terms of the proposal allow the person to retain their assets. It is usually an agreement between you and the creditors on a payment plan for part of the debt.
One of the basic requirements of planning for such a proposal is the presence of a bankruptcy trustee who has to be licensed. For the proposal to be fully legally binding, the creditors must first accept it before proceeding.
The truth is, before coming up with the consumer proposal, your credit rating may be an R-7, but after making the necessary payment, it will improve though it depends on your commitment to pay. Below are some of the necessary steps towards a consumer proposal.
1. Find an Advisor
A proposal needs a licensed trustee who will assess your status and be able to advise accordingly. The major objective of this is to ensure that you do an extensive analysis of the situation and get to formulate the terms and conditions or the proposal. Ensure that it has factored in your ability to pay. Lastly, get to come up with a plan that has a likelihood of being accepted by the creditors.
2. Filing the Proposal
Once you and the trustee have come up with the proposal, the next step is filing it in court. During this period, the creditors can’t take any action against you. This is because; you are under protection of the Bankruptcy and Insolvency Act which makes you immune to any legal cases regarding debts.
3. Presentation to Creditor
After that, the trustee will present the proposal to the creditors. It is during this period that the trustee explains your financial status.
4. Reaction of the Creditors
Once the creditors receive the proposal, they will have approximately 45 days to respond. The advantage during this period is that the debt owed does not gain interest at all during the 45 days. A meeting is then possible if a creditor who holds 25% of the debt requests for it.
5. Acceptance of the Proposal
Once a creditors’ meeting is held, the primary requirement is a 51% majority for the proposal to be approved by the court. Immediately the proposal goes through, then you can start making the necessary payments monthly.
6. Credit Counseling Sessions
Two compulsory credit counseling sessions are held by the trustee that will enlighten you on how to manage your debt. Once that is done, he/she will offer a certificate to show compliance which will free you of the debts.
Consumer proposals are a great way of debt relief because you can pay comfortably on a monthly basis without the fear of your assets being frozen or auctioned. Always get a trustee who will be able to advise you accordingly and help you come up with an irresistible proposal.