Find out what you need to know and what to look out for.
Consumer Proposal Ajax, Ontario – Other Options & Stuff You Need to Know
What is a consumer proposal, and could it be the best option for my situation?
If you are looking to consolidate your debts, one option available is to file a Consumer Proposal in Ajax. This is a legal process governed by the Bankruptcy and Insolvency Act between yourself and your creditors to pay back a portion of the debt you owe. The amount of debt that you repay is mainly based on your income and what assets you own.
A Consumer Proposal can only be setup by a bankruptcy trustee and costs around $1,500. You’ll pay an initial setup fee, and if it is accepted by your creditors, you will pay the balance to proceed. In addition, the trustee will keep 20% of your future payments as your Consumer Proposal administration fee. For the proposal to be legally binding, the creditors who own the majority of your debt must agree to the arrangement. If they do, then you will be required to repay the agreed upon amount over a maximum term of 5 years.
Advantages and Disadvantages of Filing for a Consumer Proposal
There are definitely advantages and disadvantages to filing a Consumer Proposal. Here are some that are important to be aware of:
It can substantially reduce the amount of debt you are required to pay your creditors
It’s not a private matter. A Consumer Proposal is filed as a permanent public record and is included on a searchable database
It costs more than filing for bankruptcy
The Court must approve it
Creditors can choose to reject the proposal. If they do, you may need to offer them additional funds to convince them to proceed
You might need to sell some of your assets (such as a vehicle, your home, or investments)
You may need to file for bankruptcy if you miss more than 2 payments
Secured debts cannot be put into a proposal
Student loans less than 7 years old can’t be included
It can put certain professional licenses at risk, and the permanent record of your insolvency may also affect some future employment opportunities
There’s Life Beyond Debt for Everyone
“When debts became a problem, I felt very overwhelmed – like I could not see the end of the tunnel. Picking up the phone felt like lifting a 10 pound rock, but they were very cheerful on the other end of the line. I came in, discussed my situation in privacy, and instantly got relief knowing I was in good hands.”
– Delores, Actual Client
Watch Out for the Big Debt Rip-Off
Consumer Proposals have become the newest way for a growing number of companies and their sales people to take advantage of unsuspecting, vulnerable Canadians. Don’t let this happen to you! A lot of companies offering debt relief are now claiming to provide Consumer Proposals as a great way of getting out of debt. But there’s a problem. Only a government licensed bankruptcy trustee is permitted to file paperwork for a Consumer Proposal. These debt relief companies bill people for thousands in fees only to refer them to a bankruptcy trustee who then charges his or her own fees.
How to Keep from Getting Ripped Off
Follow the three tips below plus start by speaking with a member of Credit Counselling Canada (an association of non-profit credit counselling agencies who do not work on commission). If a Consumer Proposal is truly one of your best options, one of their agencies can let you know and refer you to a reputable bankruptcy trustee for free.
Talk with a Non-Profit Credit Counsellor
Speak with a non-profit Credit Counsellor about your financial situation first. They will be able to review your situation with you and help you explore and understand all your options to deal with your debt.
Only Pay a Trustee for a Consumer Proposal
Never pay money to anyone for Consumer Proposal services except a licensed bankruptcy trustee. According to the law, only a licensed trustee is allowed to do the work and charge for Consumer Proposals.
Watch Out for Commission Based Debt Consultants
Ask how the person helping you is compensated. Many people who will seek to advise you on your debts work on commission. Make sure the “solution” they are suggesting is in your best interest – not theirs.
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How a Consumer Proposal Can Impact Your Credit
When you make payments on a Consumer Proposal, there is a note on your credit report in the public records section that you have filed a proposal. Anyone who has your consent to see your credit report will see the public records section as well.
In addition, your creditors may report a “7” rating on the debts included in the proposal. This means that they are receiving payments through a third party. The third party is your trustee. When you make a payment to your trustee, they disburse the agreed upon amount to each of your creditors after all applicable fees have been paid.
If you are making monthly payments to secured creditors (like paying for a vehicle loan) outside of your Consumer Proposal, those debts will be reported separately by the creditors that you are paying. If you can create and stick with a realistic budget, then it should make this easier.
If you are able to keep up a good payment history on any secured debts while you are paying off your proposal, this can assist you in re-building your credit more quickly afterwards.
Contact Us for More Information About Filing for a Consumer Proposal in Ajax, Ontario
Between financial difficulty and bankruptcy there can be many options. While a consumer proposal may be a good option for some, it isn’t the best option for everyone. To find out what options you have, call one of our professionally certified Credit Counsellors today. You can speak with a Counsellor in person or over the phone. Appointments with them are free, non-judgmental, and completely confidential.
For more information or to speak with a Counsellor, contact us in Ajax at 647-776-0485. You can also email or chat with us online right now.
Office Serving Ajax: Suite 520 – 425 Bloor Street East, Toronto, ON, M4W 3R4
Learn how Consumer Proposals and Bankruptcy are similar and how they are different. Also learn what you need to watch out for.
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