Ottawa bankruptcy is just one alternative for individuals who are in debt, and should not be the first choice. Personal bankruptcy should only be used if all other bankruptcy alternatives have been exhausted. Below we explain in detail how a Consumer Proposal (also known as Proposal to Creditors), one of the most popular alternatives to bankruptcy, works.
At Surgeson Carson Associates Inc., consumer proposals are used by one third of our clients. The best candidates are those who have a stable income, and can afford to pay back their debts, but need a certain amount of time to do. To qualify, debtors should also have debts in excess of $5,000 to a maximum of $75,000.
Consumer proposals were created to rid debtors of unsecured debts. These debts include credit card debts, lines of credit, personal loans, and income taxes. Only under special circumstances are secured debts (car loans, mortgage etc) included in a consumer proposal.
Consumer proposals have several advantages including the following:
- A maximum period of 5 years
- Frozen interest from the date of filing
- Usually accepted by creditors
- Wage garnishments stop
- Deals can be made to only pay back a portion of the debt. (generally creditors will want at least 50% paid back).
- Creditors are “stayed” and cannot take further legal action against you.
You will need to find a bankruptcy trustee in your area before beginning the process, as it is the trustee who will carry out the proposal. The trustee will start by analyzing your financial situation and determining how much you can afford to pay back each month. If both you and your creditors agree on the numbers, the trustee will file the proposal.
Under the Bankruptcy Insolvency Act your creditors will then have 45 days to vote on your proposal. If a majority agrees that it is acceptable, it is deemed acceptable by all creditors. If there are no objections, your proposal will be approved about 15 days later. All creditors must be included in the proposal.
If 25% or more of your creditors do not accept the proposal, a meeting of creditors will be called by your trustee. It is mandatory that you attend this meeting. The trustee will help you and your creditors come to an agreement over the amount of monthly pay back.
Throughout the duration of the consumer proposal you are allowed to miss up to two payments; the trustee will simply add the two payments onto the end of the proposal. If you miss three or more payments, the proposal is annulled by the court. Creditors can then appeal to the court to have your wages garnished, and interest is added to all debts dating back to the day you filed.
When you file the proposal, your credit rating will be altered to reflect your current situation, and will likely remain that way until the proposal is done. You will also have a note on your credit report for up to seven years from the date you filed.
Trustee fees are determined by the Superintendent of Bankruptcy, but typically they will be paid out of the proceeds of your proposal.
If you are having financial problems and think a consumer proposal may be your best option, please contact us today. Our bankruptcy trustees in Ottawa offer consultations in both official languages, and the first one is free of charge. We will review your personal situation, explain you all the available options, personal bankruptcy and alternatives to bankruptcy, and help you choose the alternative that best fits your specific situation. |
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