2 Reasons You Should Consider A Consumer Proposal

19 January 2015
 Categories: Finance & Money, Articles

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Everyone runs into financial trouble from time to time, but dry spells last longer for some people than they do for others. If you are out of work or struggle with an ongoing health condition, you might find yourself drowning in past-due bills and collection calls. However, there might be a way to avoid bankruptcy. Here are two reasons you should consider a consumer proposal:

1: You Can Make Things Right With Your Creditors

If you file bankruptcy, your debts are essentially wiped away. However, what do you do if you can afford to pay back part of your debt, but not all of it? The great thing about a consumer proposal is that it allows you to create a payment plan detailing what amount you can pay and when. Not only does this arrangement allow you and your creditors to feel better about the situation, but consumer proposals also stop wage garnishments, collection calls, and angry past-due letters.  

Here are a few other benefits to creating a consumer proposal payment plan:

  • Extended Repayment Timeframe: Your debt took a long time to accumulate, so you might not be able to pay it back in a few months. The great thing about a consumer proposal is that your repayment plan can be spread over a period of five years.
  • Consumer Proposal Administrator: If you are like most people, you might not like contacting your creditors. Fortunately, when you create a consumer proposal, a plan administrator will do all of the talking for you. They will take your monthly payment and send funds where they are supposed to go, so that you don't have to have uncomfortable conversations with your creditors.
  • Frozen Interest Rate: Each different line of credit you carry might have a different interest rate. While your normal credit card might only be sitting at an 8% interest rate, that furniture store might be charging you 30%. Another nice thing about consumer proposals is that they give you the opportunity to renegotiate the interest rate on your loans, which is locked into place as soon as the consumer proposal is finalized.

After you have met all of the deadlines detailed in your consumer proposal and paid back the agreed amounts, you will be issued a Certificate of Full Performance, which you can use to have your credit rating restored.

2: You Can Get Rid Of Unsecured Debt Without Losing Your Assets

To you, each bill might carry equal weight, but there is a big difference between different types of debt. To qualify for a consumer proposal, you need to have between $10,000 and $250,000 of unsecured debt.

Secured debt is any debt that is backed by an asset. For example, your home and car are both examples of secured debts. If you default on your mortgage or forget about your car payment for several months, your lender can simply repossess your home or car to satisfy the lien. Sometimes people figure that they don't qualify for a consumer proposal because they still owe hundreds of thousands of dollars on their home alone. However, secured debts aren't factored into the equation when it comes to filing a consumer proposal.

Unsecured debts can be any amount of money that you owe to another person or business entity that isn't backed by an asset. Common examples of unsecured debts are credit cards, payday loans, and income taxes. By filing a consumer proposal, you can work with your creditors to pay back a portion of your debt, without worrying about putting your secured assets in jeopardy.

A consumer proposal, filed with the help of professionals like Exelby & Partners Ltd, will allow you to take the reigns on your financial situation, and give you the opportunity to make things right with your creditors.