3 Important Things To Know About Consumer Proposals

10 Nov

Consumer proposals are the most popular alternative to bankruptcies, and they allow people to get out of debt without paying 100% of what is owed. If you have decided to get out of debt and have considered bankruptcy, you may want to look into a consumer proposal before you make your decision. This option offers many benefits, and here are three things to expect from it.

You Will Only Pay a Portion

While bankruptcy might allow you to become debt-free without repaying any of the money you owe, it also leaves behind long-lasting consequences. Through a consumer proposal, you will not have to deal with the negative consequences that normally accompany bankruptcies, but you will have to repay some of the money you owe.

Through a consumer proposal, you will make an offer to your creditors regarding how much you can repay. Along with the amount you offer to them, you must also state how many months you need to pay this amount in full.

According to Bankruptcy Canada, most creditors will accept reasonable offers. A reasonable offer is generally one that amounts to 50% of what is owed. This doesn’t necessarily mean that you will have to repay 50%, but this is the percentage creditors usually hope for when they receive proposals.

Your Offer Is Based On Your Financial Situation

Creating a consumer proposal is not something you should do alone. It’s better to hire this out to a firm that offers debt solutions, and this type of firm will help you create a proposal that creditors will hopefully agree to.

When you create the proposal, the company you work with will look at your income and expenses. They will subtract the expenses from the income, and this is the amount they will use to determine how much to offer the creditors.

It’s important to leave some extra money in your budget when making this calculation. For example, if the difference in your income and expenses is $600, you should not offer to pay $600 a month to your creditors. This would leave you penniless after paying your bills, and you could end up getting in financial trouble again.

It Requires Only a Majority Vote

A consumer proposal is not designed for only one creditor you owe; it is actually designed for all of them. When they receive it, they will each have a chance to vote on it, and the votes will determine if it is accepted or not.

If the majority of your creditors vote to accept it, the plan must be accepted by all creditors. Majority in consumer proposals refers to terms of dollars. For example, imagine if you owed 10 creditors. If you owed 51% of the money to one of these and this creditor accepted the offer, the other nine creditors would automatically have to accept the offer.

Within a few years, a consumer proposal could help you become debt-free. If you are interested in learning more, contact a company like Exelby and Partners that offers debt-relief services.

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