All week I’ll be highlighting some of the new bankruptcy rules that came into force on September 18, 2009.
Today’s Tip: Understand how the new consumer proposal rules can help you deal with your debts.
A consumer proposal is a negotiated settlement with your creditors, and is a great alternative to bankruptcy. Here’s a simple example:
You owe $50,000 on seven different credit cards, lines of credit, and unsecured bank loans. You have a job, but you don’t earn enough to repay them all in full with interest. Instead, you offer a proposal to your creditors where you pay $300 per month for 60 months, or $18,000 in total. It’s a good deal for you, because you deal with your debts for a lot less than the full amount owing. It may also be a good deal for your creditors, because if you can’t repay them in full, your only other option may be to declare personal bankruptcy in Canada, and if you do, they will get a lot less than $18,000.
A consumer proposal is not the perfect solution. There will be a note on your credit report for 3 years after you have paid the full amount of the proposal, so it will be difficult to borrow in the future until you have taken steps to rebuild your credit. However, if you can’t pay your bills and are afraid of a wage garnishment, a consumer proposal may be the perfect solution.
So what does this have to do with the new bankruptcy rules? Under the old rules, you could only file a consumer proposal if your total debts, not including the mortgage on your principal residence, were less than $75,000. Under the new consumer proposal rules, you are now eligible to file a consumer proposal even if you have debts up to $250,000.
This will make consumer proposals accessible to an even larger number of Canadians, so if you think a consumer proposal may be the solution for you, contact alicensed trustee today to arrange for a free initial consultation.
