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Category: Consumer Proposal

  • Making a Proposal, and We Don’t Mean for Marriage: Consumer Proposals

    Consumer ProposalsWhen debt becomes unmanageable, knowing where to turn can be tough. Knowing the options available to deal with that debt can be difficult – and that is why getting outside advice is often a great idea. One of the most popular options right now, one that requires additional assistance, is a consumer proposal.

    New to this concept but wondering what a consumer proposal is all about? A consumer proposal is a legally binding agreement between you and your creditors.

    Consumer proposals have grown in popularity over the last few years, and for good reason. There are a number of significant benefits to filing a consumer proposal:

    • Provides immediate relief from collectors – stops the calls and the letters.
    • Will stop interest accumulating from the date that you file.
    • Will stop most wage garnishments or frozen bank accounts.
    • May decrease the total amount of your debts.

    Process:

    1. Assessment and Qualification – a meeting with a debt consultant will assess your current financial situation and determine the best route to take. If you qualify, the paperwork can be started.
    2. Repayment Terms – based on your monthly income and current debts, a repayment plan will be established that you can afford and that will please your creditors.
    3. Filing the Documents – your licensed proposal administrator will file all of the required documents. This includes submitting the consumer proposal to your creditors.
    4. Creditors Vote – once the documents are received by your creditors, they have 45 days to vote to accept or reject the proposal. If the vote is 25% or more to reject, a meeting will be held to try and negotiate. Once accepted, you will be required to make the monthly payments to your administrator to be distributed to your creditors.
    5. Completed Proposal – once you’ve completed the consumer proposal you will receive a Certificate of Full Completion as proof of the completed proposal. Typically, after three years following completion, the consumer proposal will be removed from your credit report.

    What if you can’t keep up with the payments?

    If an unforeseen circumstance makes fulfilling payment arrangements impossible (job loss for example), the first thing to do is call your administrator. By law you can miss or defer two payments without consequence, but after that the proposal will be cancelled. At the first sign of trouble, speak with your administrator to find out your options.

    Consumer proposals can offer individuals the chance to start fresh and eliminate financial stress in a major way. If you believe that a consumer proposal might be an answer to your debt problems, don’t wait. The process can take time, so it is best to get it started right away.

    For more information about consumer proposals and the many benefits of filing one please call DebtCare Canada today at 1-888-890-0888.

  • Ontario Consumer Proposal – The Ins and Outs

    Consumer ProposalWith Canadian consumer debt levels continuing to climb, year after year, it is no surprise that many Canadians are turning to alternative repayment methods in an effort to get out of debt. However, some organizations have taken advantage of individuals without a full understanding of debt, and offer solutions that are less than acceptable.

    We strive to help individuals with debt problems with honest and realistic options that can eliminate financial stress. In this blog, we attempt to answer some of the most common questions regarding one of these very popular methods – consumer proposals – and provide you with some important information to help you make an informed decision.

    Firstly, what is a consumer proposal exactly? A consumer proposal is a legally binding arrangement negotiated between you and your creditors (though an administrator – a licenced bankruptcy trustee) which arranges for a partial repayment of your total unsecured debt. Essentially you promise to repay a portion of your debt, and your creditors will forgive the remaining amount.

    What does this mean? After meeting with a consumer proposal administrator and filling out the required forms, a proposal will be presented to all of your creditors (you can’t pick and choose here), who then have to respond and accept the agreement. If more than 50% reject it, you have to amend or adjust and refile. Once the proposal is accepted, you are required to pay a monthly payment to your administrator, who then pays your creditors.

    There are a number of substantial benefits of filing a consumer proposal:

    1. Most wage garnishments will immediately stop.
    2. Interest stops accumulating on your current debt from the date you file.
    3. Collection agencies and creditors can’t contact you for payment – it is against the law!
    4. Your home or other assets are protected – creditors can’t touch them.
    5. You are only required to pay back a portion of your debt.

    The downside: a consumer proposal does not include secured debts, such as a mortgage – only unsecured debts are covered. Furthermore, once you have filed a consumer proposal, your credit rating is going to be impacted. That being said, if you are in the position that makes a consumer proposal a valuable debt relief option, your credit has likely already been compromised. Consumer proposals typically mean an R rating on your credit report – but in many cases the benefits far outweigh the negatives.

    If you are in over your head and are looking for a debt relief option, a consumer proposal can be a very advantageous strategy. They are complex though, and can’t be conducted by anyone but a licenced bankruptcy trustee, and so seeking some assistance is essential. Bear in mind however that it may not be advisable to go directly to a trustee since he by law acts for the creditors as well as the debtor, and his fee is a percentage of the debt being repaid. Accordingly, there is an incentive for the trustee to maximize the amount being paid to the creditors in the proposal. An independent advisor, such as DebtCare Canada, acting in your interests only, can help you to structure your proposal before approaching a trustee.

    Want some more information about the ins and outs of a consumer proposal, or any other realistic debt relief method? Call DebtCare Canada today – we can help you out: 1-888-890-0888.

  • Will a Consumer Proposal Ruin my Credit?

    Consumer ProposalMany of us have been there – finances are tight, and even making the minimum payments on your credit products has become difficult. Maybe you are opting to make payments on one card each month, or are continually increasing your available limit just to be able to keep your head above water. Whatever the situation, know that there are solutions, one of which is the consumer proposal.

    Maybe you have already looked into this option but are asking yourself, ‘will a consumer proposal ruin my credit.’ Among the many things to be considered with this form of debt relief, the impacts are important. That being said, it definitely isn’t the only thing you should be thinking about.

    The Process: The process is fairly straightforward. A consumer proposal must be conducted by a trustee in bankruptcy, but it is always smart to have your own representation – someone who can negotiate on your behalf and keep your best interests in mind. A proposal is drawn up that addresses your debt, and this is forwarded to your creditors. Once the majority of your creditors have approved the proposal (they have 45 days to accept or reject it), it is filed and you begin making monthly payments to a trustee, and that is then handed over to your creditors. Most proposals are made over five year terms, but can be paid off in full at any time.

    The Benefits: There are many benefits of a consumer proposal. Firstly, it reduces your debt. Since you make a proposal to your creditors with an amount that matches your budget, this can mean a significant reduction in the overall amount that you owe. Secondly, it stops interest. Often, especially with regard to credit card debt, it is the interest that kills you, and so with a consumer proposal the interest is stopped and you can actually make significant payments of the principal, rather than the majority continuing to go to interest. Furthermore, a consumer proposal means a single monthly payment, rather than a bunch of payments on different days (again, a great deal of which goes directly to interest).

    The Impacts: Will a consumer proposal ruin my credit? Firstly, if you are considering a consumer proposal, your credit may not be in the best shape as it stands currently, and so before getting even further in over your head, it is best to gain control of your finances. The consumer proposal, like any credit activity, will show on your credit. It will remain on your report for 3 years following the date it is paid in full (so it is better to pay it off quickly). Although it is not considered positive credit activity, you can actually start rebuilding your credit as soon as you enter into a consumer proposal.

    If you are thinking about a consumer proposal but are worried about the impacts on your credit, please contact DebtCare Canada today for a free consultation: 1-888-890-0888.

  • How Investment Advisors Can Better Protect Clients’ Portfolios in a Consumer Proposal

    Consumer ProposalWhen we think about making investments there are so many products to choose from. Whole life insurance, segregated funds, TFSA’s, RIF’s, mutual funds and more… Financial and Investment advisors representing clients considering investments know that they are entrusting them to help them best gain a positive yield, balance risk and also consider their long term financial well-being.

    When the economy is great and times are good people are in the mood to invest. Sometimes though the economy can take a turn for the worse and aside from the fact that your clients may not be in the mood to invest for a while, they may find themselves in other financial trouble.

    While the Canadian economy performed well during the last recession it is a known fact that Canadian households are carrying significant debt, in excess of $40k per household, on average. When financial times are tough – someone loses a job, a divorce takes place, etc. – usually unsecured debt is the first thing to be sacrificed – it is easy to stop making payments on these in an effort to meet other financial responsibilities.

    This is one reason why it pays for financial advisors and financial planners to have a strong relationship with companies who are equipped to guide their clients through tough financial times. Most people don’t know that many investments are actually protected through a consumer proposal or bankruptcy. Consumer proposals are an excellent way to gain legal protection for a client who is having a serious financial problem and help them retain their assets, such as their home, vehicle and some investments including RRSPs.

    The challenge is that some financial and investment advisors send their clients directly to bankruptcy trustees in these circumstance which can be a huge mistake. Trustees have an obligation to protect the interest of your clients’ creditors. In the case of consumer proposals the fee is earned based on the amount of the consumer proposal. The more that they secure for your clients’ creditors, the better.

    When you work with a debt consultant, the debt consultant represents your client. This means that the client receives a safe review of their income and assets and can have things structured before seeing the trustee to sign on the dotted line. This enables your clients to have areas of concern identified and addressed before these issues can impact their ability to get protection.

    We all want to ensure the best for our clients so just referring your client to any debt counsellor to help is not necessarily the right answer either. Like your industry, there are good advisors and bad ones. It is prudent to interview and forge a relationship with a debt consultant that you can trust to refer your clients to.

    For more information about how you can better protect your clients’ portfolios please contact Michael Goldenberg, president of DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • Getting Out of Debt Blog Series #1: Consumer Proposal

    Getting Out of DebtWith summer winding down and consumer debt levels remaining at all-time highs, we thought it was a good time for a back-to-basics ‘getting out of debt blog’ to help you ease into fall with less worries on your plate. This first blog in the series will talk about the consumer proposal, giving you the ins and outs to help you better understand your options for getting out of debt. Other blogs in this series will focus on debt consolidations, debt settlement and bankruptcy.

    What is a consumer proposal? In a nutshell, a consumer proposal is a proposal that is administered by a trustee where you offer your creditor(s) a sum of money to be repaid over a term of 5 years. This sum could be less than the total debt you owe. Also, a consumer proposal will stop legal action being taken against you by unsecured creditors who are included in the proposal, stop collection agency harassment and freeze the interest accumulating on your debt.

    A consumer proposal has to be conducted by a licensed trustee in bankruptcy – you cannot negotiate one on your own. A financial consultant can consult with you on your financial options and if a consumer proposal is the solution you elect, he or she can co-ordinate a fair deal for you with a trustee.

    Unlike bankruptcy, once a consumer proposal is in place you have no ongoing obligation to the trustee whatsoever – you simply have to make your monthly payment. Consumer proposals can be repaid in full at any time. This is a major plus for folks who want to rebuild their credit quickly. A consumer proposal will be completely removed from your credit report 3 years from the date it has been paid in full. Beginning with a secured credit card or RRSP loan, those who make consumer proposals have many options available to them for rebuilding credit.

    With anything there are caveats. A consumer proposal must be accepted by your majority creditor. Because trustees represent you and your creditors it is important to understand how consumer proposals work and to have your own representation through the process. Negotiating a proposal that is accepted by your creditor(s) and that is the best deal for you is key. Having representation ensures that you have someone who has expertise in this area to ensure that you do get the best deal and that all aspects of your financial situation have been considered.

    Filing a consumer proposal is, for many people, a smart solution for getting out of debt. That being said, it needs to be approached correctly, and you will need the help of a professional to carry it out.

    For more information about consumer proposals or other ways of getting out of debt, please contact DebtCare Canada by calling 1-800-890-0888.

  • Is a Consumer Proposal a Debt Consolidation Loan?

    When looking for a solution to a financial problem or accumulated debt, you will find that there are many services available that offer different things. Banks and finance companies traditionally offer debt consolidation loans, while trustees in bankruptcy deal with debt through bankruptcies and consumer proposals.

    Debt consolidations involve consolidating debt into a single payment and debt consolidation loans have very similar characteristics to consumer proposals. A consumer proposal involves a proposal being made to your creditors wherein you agree to repay a portion or all of your debt through a single, fixed monthly payment.

    A consumer proposal is much like a debt consolidation loan because:

    • You begin owing a fixed sum of money.
    • You begin making a single monthly payment.
    • You can pay it off at any time.

    Some of the benefits that are offered through a consumer proposal that are not offered by debt consolidation loans are that in many cases a consumer proposal will reduce the overall debt owing, will stop collection action, will freeze the interest accruing on debts, and more.

    One of the drawbacks of filing a consumer proposal vs. taking out a consolidation loan is that it will impact your credit and your relationship with your creditors. Because creditors are not being paid according to the original terms of your agreements with them when accepting less than what they are owed and/or being repaid over a longer period of time, they will not likely do business with you in the future. In addition, the consumer proposal will be reported on your credit report for 3 years from the date it is paid in full.

    Now, one must weigh the impacts on credit against getting out of debt. If you owe so little debt that you could pay off all of your creditors in 3 to 4 years and have good enough credit to get a debt consolidation loan, then a debt consolidation loan may be the right answer. However, a consumer proposal may be the best answer if:

    • Your credit is already damaged to the point where you cannot get a debt consolidation loan, or;
    • You have so much debt that you cannot consolidate it all, or;
    • You have so much debt you just can’t see a way to pay it off in a reasonable amount of time.

    When it comes to making a choice with respect to how to deal with your debt it is important to recognize that each person’s financial situation is different. A debt consolidation loan or consumer proposal may not be the right answer for you at all. The best thing that you can do is consult a financial counsellor/consultant to perform an unbiased review of your finances, give you some practical advice, and provide the resources and representation to see your plan through.

    For more information about consumer proposals and debt consolidation loans or if you need a debt consolidation please contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca.

  • Consumer Proposal VS. Bankruptcy – How Are They Different

    If you have been facing financial challenges you may have been exploring financial options to deal with debt. Two of these options include a consumer proposal and bankruptcy. We are often asked the differences between filing a consumer proposal vs. bankruptcy in Canada, which prompted us to write this article.

    Before discussing the differences between filing a consumer proposal vs. bankruptcy it is important to understand that both are legal processes to deal with debt that are administered by a trustee in bankruptcy. The trustee in bankruptcy is an officer of the court appointed by the Superintendent of Bankruptcy who oversees the Bankruptcy and Insolvency Act and regulates the insolvency professionals who administer it.

    The trustee in bankruptcy administers bankruptcies and consumer proposals; they do not represent you in the process. One of the trustee’s responsibilities is to make a fair deal that pays your creditors the most money possible. Trustees also earn more money based on the size of the consumer proposal that you file. The larger the payments you make under the consumer proposal they negotiate, the more money they make administering it.

    A bankruptcy or consumer proposal is a viable method to use to deal with debt. Both will stop most collection action, will leave you with a single monthly payment, and will stop the interest accruing on unsecured debts.

    When comparing the differences between filing a consumer proposal vs. bankruptcy the option you choose will generally depend on your income and assets. Those with minimal income, no assets and a significant amount of unsecured debt may be a better candidate for a bankruptcy. One big drawback with bankruptcy is that, if your income surpasses a certain level, your trustee may assess you as having surplus income. Having surplus income means that, if your income exceeds the threshold, not only will your monthly payment in bankruptcy increase but the trustee may also require that you remain bankrupt longer. The same applies to equity in assets, such as a home. If you have equity in your home the trustee will assess surplus income which will increase the amount that you have to repay in bankruptcy. This is why higher income earners or those with assets often opt for consumer proposals.

    Many individuals don’t realize that in a bankruptcy or consumer proposal you can generally keep your assets, homes or cars included.

    Consumer proposals involve offering your creditors a proposal that includes a sum of money that you will repay as a final settlement on your debts. Consumer proposals are based on your income, cash flow, and the ability to make a monthly payment over 4 to 5 years. Some benefits of a consumer proposal include:

    • It can be paid off early – a bankruptcy can’t.
    • It is a final agreement – bankruptcies will continue until your bankruptcy trustee discharges you. If your income increases, it could increase the amount you have to repay in your bankruptcy and the length of time that you are bankrupt.
    • You can rebuild credit sooner – consumer proposals are removed from the credit report 3 years after they are paid in full, bankruptcies stay for 6 years from the date you are discharged.
    • In the case of a higher income earner or individual who has assets, a consumer proposal will involve a smaller monthly payment than bankruptcy.
    • If the majority of your creditors accept the consumer proposal, your other creditors are automatically included whether they like it or not.

    When investigating the differences between filing a consumer proposal vs. bankruptcy it is best to speak to an independent financial professional who can guide you through your options and represent you throughout the process. Bankruptcy trustees are shrewd negotiators and have experience filing these every day. Having your own representation can help to ensure that you get the best deal. The fact that a bankruptcy or consumer proposal may not be your only financial option is also important, which is why an independent and objective financial opinion will help you to make more informed financial decisions.

    For more information about filing a consumer proposal vs. bankruptcy or if you need help with a financial problem, please contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca

  • Debt Relief in Canada Blog Series Part 1 – Is a Consumer Proposal the Answer?

    Debt relief in Canada is a subject that is constantly in the news for many reasons, whether it is the government reporting on the fact that Canadians are carrying historically high levels of debt, reporting on debt reduction companies and what to watch out for, reporting on changes to CMHC lending guidelines to stop those who are loaded with debt from buying homes that they really can’t afford, and more…

    Unfortunately, most people who have too much debt don’t realize that they have a problem until managing minimum payments starts to become challenging, resulting in a debt problem turning into a debt emergency. There are many options for debt relief in Canada, but each one is different, and the right one for you will really depend on your own personal circumstances.

    Making a consumer proposal is one option for debt relief in Canada, but the question is: is a consumer proposal the answer?

    A consumer proposal is a type of proposal that is made to your creditors and is administered by a bankruptcy trustee who represents both you and the creditors that are included in your consumer proposal. Consumer proposals are crafted based on your ability to repay your debt realistically. Consumer proposals are repaid monthly, usually over a period of 3-4 years. With that being said, a consumer proposal can be paid off sooner if your financial situation changes. Consumer proposals are removed from your Equifax credit report 3 years from the date that they are paid in full, which provides a further incentive for those who are in a consumer proposal to pay it off early. Because consumer proposals allow you to make a single monthly payment that fits within your budget and enables you to rebuild your credit faster, consumer proposals are a very popular option for debt relief in Canada.

    Since consumer proposals are based on your ability to make a monthly payment and not on your total debt load, oftentimes consumers can reduce their overall debt through a consumer proposal. In a simple, very general example, if your total unsecured debt is $20000 and you can afford to pay $200 per/month for 5 years based on your budget and the consumer proposal guidelines, the total value of the consumer proposal would be $12000, meaning you would reduce your debt by $8000. Each case is different, and your consumer proposal must be fair to your creditors as they have a say as to whether or not they will accept it.

    When you make a consumer proposal, your creditors will receive your consumer proposal by mail and have 45 days to respond and vote as to whether they accept or reject your proposal. If a creditor does not respond to the consumer proposal within 45 days, they lose the ability to vote and the proposal is considered accepted. In addition, if the majority of your creditors accept the consumer proposal, it will be approved.

    Consumer proposals are suited to individuals who have higher incomes, as they are subject to surplus income in bankruptcy.  When a consumer has surplus income his or her payment in bankruptcy will be much higher and this is what makes a consumer proposal a more attractive option for a higher income earner. Consumer proposals are also better suited to an individual who has some secured creditors and to someone who has the ability to repay a good portion of his or her debt but simply cannot manage the contractual payments that they currently have with creditors.

    For more information about options for debt relief in Canada or to see if you qualify for a consumer proposal please call DebtCare at 416-903-4000 or visit www.debtcare.ca.

  • What Does A Trustee Do?

    If you have financial problems and have thought about consulting a trustee in bankruptcy, you may be curious about the role that they play in helping you deal with your financial problems, and may be asking yourself “what does a trustee do anyway?”

    The first thing to know is that a trustee in bankruptcy does not represent you. You may have seen advertisements by trustees that make it seem as though they want to help you. What does a trustee do? Well, they are a court appointed officer that administers bankruptcies and consumer proposals. They have an obligation to act in the best interest of both you and your creditors.

    Let’s look at a bankruptcy as an example. When you visit a trustee to file for bankruptcy they review all of your household income, debt and other financial details and then advise you on what your monthly payment in bankruptcy will be. You make your monthly payment to the trustee in bankruptcy each month. If you have assets or surplus income for example, what does the trustee do? They will ensure that they collect equity in those assets or surplus income for the benefit of your creditors. They are not there to protect your income and assets, they are simply administrators of the bankruptcy process. If they can collect more money through your estate for your creditors, they will.

    Consumer proposals are also administered by trustees in bankruptcy. When you visit a bankruptcy trustee directly to discuss a consumer proposal, they will assess your income, debt, assets and other personal household and financial information. What does a trustee do next? They will suggest an amount of a consumer proposal that they believe will be accepted by your creditors. This does not always result in the best deal for you, and if you visit a trustee directly you will have little to no negotiating power because they are simply administering your consumer proposal, so what they present to you is what they will be prepared to go forward with. They are not there to get you the best deal.

    Do you do your taxes without the help of an accountant? Not likely. If you were charged with a crime would you defend yourself without a lawyer? Probably not. Dealing with a trustee in bankruptcy is no different; you should not do so unrepresented.

    Having independent financial representation when considering a consumer proposal or bankruptcy is crucial because it enables you to have your personal and financial information reviewed by a professional who represents and is hired by you and who understands bankruptcies and consumer proposals. They can vet your personal and financial information, identify any issues before a trustee is made aware of them, and help you come up with a proposal to present to the trustee that you can live with.

    Do not answer the question “what does a trustee do” the hard way. Filing a bankruptcy or consumer proposal is an official process. Once you have committed to either one of these processes there is no turning back, so it is important to do everything in your power to ensure that you enter into the process with all of the necessary information. The more informed you are, the better financial arrangements you will be able to make, which will save you thousands.

    If you have more questions about this article “What does a trustee do?” or if you need representation in a consumer proposal or a bankruptcy please visit www.debtcare.ca or call 416-907-2582.

  • Why You Should 100% Be Represented in a Consumer Proposal Canada!

    If there is one way to get out of debt it is through a Consumer Proposal Canada. Listen up! This is not a process you should go into unrepresented. Watch this short video by Michael Goldenberg, President of DebtCare Canada, where he discusses why going to a trustee directly for a consumer proposal can have big financial consequences. A Consumer Proposal (Canada) is a great idea if you have a financial problem, but there is a lot of information you need to know before doing so, and DebtCare Canada can help to educate and represent you through the process.

    If you would like more information about making a consumer proposal (Canada) contact DebtCare at 416-907-2582 or visit www.debtcare.ca.