Consumer proposals are an option for those who have high outstanding debt balances. Additionally, they do not have the means to pay them back in full by the expected due date. Consumer proposals are legally binding documents that link you and your creditors stating the arrangements and means that you will follow to pay them. Usually, a consumer proposal lets you pay back less than the total amount you are supposed to pay, and it is only filed through the Licensed Insolvency Trustee. The following are reasons why you should opt for a consumer proposal.
1. Before Filing for Bankruptcy
Bankruptcy gives you the option of starting fresh and erasing all your unsecured debts, and it contains different requirements compared to a consumer proposal. In bankruptcy, you have to keep detailed information of your financial records and make a point of reporting all the monthly income to your trustee. Before you begin to file for bankruptcy, you need to understand what is a consumer proposal and what it entails, as it is can be a good alternative to bankruptcy. Once your creditors accept your consumer proposal, you are free to make the monthly payments as per the stipulated duration and rates. However, in bankruptcy, all the assets you own may be liquidated and the resulting amount paid to your trustee for the creditors to obtain.
2. Your Debt is Overboard, and You Need Relief
If left unattended, debt problems are a recipe for trouble in the future, especially if they are huge. For instance, skipping a credit card payment qualifies you for an additional overdue fee. The overdue fee, in turn, pushes your credit card off its limit and leads to pilling up of debts leads to an imbalance in your finances, making it hard to control the flow.
When this happens, the appropriate option is to seek professional help, opting for a consumer proposal. The consumer proposal is a regular system designed to help you control and bring a balance to your finances.
3. You Can Afford to Pay Off Some of the Debt
If your conscience is directing you towards paying off some of the debt to your creditors, a consumer proposal is the right way to go. Paying off the debt is important as you may need the creditors to assist you again in the future, which may not happen if you do not pay the amount you owe them. With the proposal, a formula is designed to allow you to comfortably pay the debt without much strain. However, filing for a consumer proposal is not advisable if your monthly income is not stable. Also, if you are planning to make changes in your life that will require a huge financial input, a consumer proposal is not a good option, and you may want to consider bankruptcy.
4. You Have Inadequate Funds to Pay Off all the Debt
To qualify for a consumer proposal application, the debt you owe your creditors should be more than all your assets. You cannot consider applying for a consumer proposal if you have enough funds that will comfortably settle all the debt you have.
A Licensed Insolvency Trustee helps you to work out the total amount you owe, the amount you can pay back, and the duration in which you will be able to pay back your debt. Most consumer proposals give you up to five years as the maximum time you have to pay off the debt. After application, your creditors will vote whether they agree or deny the consumer proposal.
5. You Want to Stop Your Creditors from Contacting You
The pressure from your creditors constantly calling you to inquire about their debt is insane. Hence a consumer proposal is a legal forum that protects you from debt collectors and gives you peace. There is no communication between you and debt collectors. With a consumer proposal, you only communicate through the Licensed Trustee.
For many, this is a relief, and you have the opportunity to concentrate on paying the debt without pressure.
Conclusion
Filing for a consumer proposal is not a good option if your income is not stable. With a consumer proposal, there is the flexibility of settling the debt before the time elapses. Which means you can potentially pay less than the total amount you owe. You do not have to consume all your life in debt. A good option is to opt for a consumer proposal. This can ensure both you and your creditors have their rights served fairly. When managing debt, ensure you look into all the options available to you before making a decision.
