Are you overwhelmed by debts? Can you make payments toward your debts but not the interest payments? Are you considering debt consolidation or bankruptcy? Before filing for bankruptcy, you may be interested to learn if you qualify for a consumer proposal. In Nova Scotia, New Brunswick and elsewhere in Canada, consumer proposals are growing in popularity as a preferred alternative to bankruptcy.
A consumer proposal is a legal process administered under the Bankruptcy and Insolvency Act that allows you to make a negotiated settlement to pay all or a portion of your unsecured debts over a time period not exceeding five years. The agreement made with your creditors entails paying at least a portion of your debts and usually excludes any interest.
Securing a consumer proposal is often a win-win situation for both your creditors and for you in comparison to filing for personal bankruptcy. Creditors tend to prefer a consumer proposal over bankruptcy because it allows them to get a greater financial benefit than what they would receive through bankruptcy. This benefit may be in the form of a one-time lump sum payment, more frequent payments than in bankruptcy, reduced administration fees, or paying more than required under bankruptcy. As the debtor, you will also likely prefer a consumer proposal over bankruptcy. One of the advantages is a lesser impact on your credit rating, specifically an R7 credit rating instead of a more harmful R9 credit rating from the credit bureau. Further, a consumer proposal does not risk equity in your home or other assets
To qualify for a consumer proposal, you are required to have:
Debts greater than $1,000 but less than $250,000, excluding the secured debts owing on your principal residence; and
The demonstrated ability to make regular payments.
If you owe more than $250,000, then you may want to consider a Division I Proposal.
A Trustee or Debt Counselor at WBLI Insolvency Consultants Inc. can help you decide if a consumer proposal in Nova Scotia or New Brunswick is right for you. A consumer proposal allows you to continue your life without threatening your ability to keep your home, car or other assets and so it’s a viable debt solution for many people.
What to Expect When Filing a Consumer Proposal in New Brunswick or Nova Scotia?A consumer proposal is written with input from you by a Trustee in Bankruptcy who acts in the capacity of Proposal Administrator. The Proposal Administrator files your consumer proposal with the Official Receiver and your creditors, who have 45 days to respond with a voting letter to either approve or reject the proposal.
The filing of a consumer proposal provides you with immediate protection from creditors. No more telephone calls, collection activities or legal action by your unsecured creditors, including no wage garnishments are permitted during the consumer proposal process.
A meeting of the creditors is held if it is requested by 25 percent of the dollar value of your creditors (not 25 percent of your creditors). The creditors meeting is held to discuss the proposal with you and your Trustee and approve or reject it. The court may also be asked for approval but this rarely happens.
Consumer proposals are commonly accepted by unsecured creditors, but if the proposal is rejected, it can be withdrawn, rewritten and attempted again or you may file for bankruptcy.
If, after 45 days a meeting is not called, it is assumed that the proposal has been accepted. Once it is accepted, you must make payments as agreed (monthly or lump sum) and total repayment amount agreed must be completed within a maximum time period of 5 years. If the proposal is accepted and you default on those terms, then the proposal is deemed defaulted by you and your creditors can pursue legal action.
What a Consumer Proposal Can’t Do
While it can help you manage many of your debts, there are a few types of debt that a consumer proposal cannot apply to. Debts which are excluded from a consumer proposal (unless a creditor agrees to include it) include:
Child and spousal support payments;
Secured debts for assets being retained such as home mortgages; and
Certain student loans.
Also, you can’t pick and choose which creditors to include in the consumer proposal
You also cannot select which creditors to include in the consumer proposal.
A WBLI Trustee can answer any other questions you may have about filing a consumer proposal in Nova Scotia or New Brunswick and can meet with you if you are simply overwhelmed by debts. WBLI Insolvency Consultants Inc. is here for you!
Do You Want to Find Out More About a Consumer Proposal? A Discreet Consultation With WBLI Can Help.
Call 1.800.495.5909 or 902.482.2000
WBLI has 17 offices for a consumer proposal or personal bankruptcy across Nova Scotia and New Brunswick. We can come to you as well.