Being in debt is a serious headache. Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. High debt values take a lot of time to get dissolved, and the debtor has to make changes to his lifestyle to pay back the money in time. It is not easy for many people to earn double to clear their debts. Debt settlement comprises offering a lump-sum expense to a creditor in exchange for a portion of your debt being forgiven. Typically the debt settlement offers range from 10% to 50% of what you owe. The longer you allow debt to go unpaid, the greater your risk of being sued. To clear your debt, you may also pursue consumer proposals. Here is a detail of how a consumer proposal works.
What is Consumer Proposal?
Licensed Insolvency Trustee, the LIT, builds an official, legal and formal process that works to develop a proposal for the debtor, to offer it to pay creditors a percentage or amount of what is owned by them, or it helps to get the time extended to pay off the debts, or sometimes, both conditions might get fulfilled.
How to File a Consumer Proposal?
A consumer proposal is in an official document thus you cannot just file it by yourself. Only LIT can help you to file a consumer proposal and you can reserve a free, no-compulsory conference with the LIT representative to determine if a consumer proposal is the right debt solution for you. If by any chance a consumer proposal doesn’t satisfy your needs, you can still withhold your filed proposal.
How the Process of Payment is Decided?
After you have filed for the consumer proposal to your creditors, they will then decide whether to accept your proposal or reject it. The creditors are interested to contribute to the process of proposal if they will receive more in a consumer proposal than if you filed for bankruptcy. The general time duration for the creditors to accept or reject the offer is almost forty-five days. If the creditors aren’t satisfied with your proposal, you can still modify your proposal and get it resubmitted. In case, if your proposal is overruled by the creditors then you must look for other debt clearance options, which might also include affirming bankruptcy.
What Debts Are Included in Consumer Proposal?
Usually, secured creditors are not affected by a consumer proposal. In most cases, you will remain to make payments to the secured creditors as per your usual agreements. Though, the consumer can choose to surrender and return your secured possessions, such as a vehicle or house, to the creditor and stop making payments for these assets. At times, the sale of assets kept by the secured creditors also gets included in the consumer proposal.
All your unsecured debts can be included in the consumer proposal. These debts include;
- Personal loans
- Credits cards
- Lines of credit
- Income tax
- Payday loans
- Student loans
- Highway tolls or bridge tolls
- Insurance Corporation of British Columbia (ICBC) debts
Consumer Proposal for Joint Debts
For joint debts, a joint consumer proposal is filed, and the non-filing partner would still be accountable for the debts. In case your partner isn’t part of the debts, then they are not affected by the consumer proposals and they are not related to your credit report by any means.
How to Get Credit under Consumer Proposal?
When you are under the consumer proposal, most people would not allow you to hold credit. Using credit in this situation might cause an increase in debt for you thus ruining the terms and conditions of the consumer proposal. Under consumer proposals, you might be able to attain a prepaid or secured credit card.
How to Get Out of Consumer Proposal?
If you want to terminate your proposal, you have to pay a lump-sum amount to your trustee or monthly payment as directed by your agreement. At any time during the proposal, you are permitted to pay off the outstanding balance and complete the process early, and step aside from the proposal.