Very soon we will all start receiving our slips to prepare our 2024 income tax return. Tax season can be a stressful time, especially when you realize you owe money to the Canada Revenue Agency (CRA). It can feel like a huge weight on your shoulders, and sometimes it might feel like you’re drowning in debt. If you’re in this position, it can be hard to know where to turn, and it may feel like your finances have reached a tipping point. You’re not alone, and there are options to help you regain control. One of these options is a consumer proposal CRA to eliminate your tax debt.
As a Licensed Insolvency Trustee (LIT), I help people explore their options for managing debt, and I’m here to explain how it can work for you to eliminate your financial difficulties, especially when dealing with the CRA.
Understanding a Consumer Proposal CRA
A consumer proposal is like a formal legal agreement between you and the people you owe money to (your creditors). It is a debt management plan to legally reduce the amount of debt you have to pay back [1]. It’s a way to combine all your unsecured debts into one monthly payment, making it more manageable.
Think of it as a new arrangement that gives you a chance to repay your debts – or a portion of them – on terms that are more reasonable for you. This is a federally regulated debt reduction program [4] managed by a Licensed Insolvency Trustee. With a consumer proposal, you often end up paying back significantly less than what you originally owed. A great benefit is that interest doesn’t keep adding up, which can save you a lot of money in the long run.
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How a Consumer Proposal CRA Helps with CRA Tax Debt
You might be surprised to hear that income tax debt is actually considered an unsecured debt, just like credit card debt and other consumer debts. This means that even though is can be called a government debt, it can be included in a consumer proposal CRA debt. One of the biggest advantages of filing a consumer proposal is that it immediately stops the CRA from taking further action to collect the debt.
This includes things like garnishing your wages, freezing your bank account or constantly calling you for payment. With this tool, instead of having lots of individual payments to different creditors, you make one single monthly payment to the LIT, making it much easier to manage your finances. The periodic payments are structured and typically spread out over a specific period of time of no more than five years . It also gives you legal protection from your creditors.
CRA Requirements and Considerations for a Consumer Proposal CRA
The CRA has specific requirements when it comes to consumer proposals. It is essential that all your tax returns are up to date before you file. This means that even if the CRA has made an estimate of what you owe because you haven’t filed (called a notional assessment), you still need to file proper tax returns. You must also be prepared to file your future tax returns and pay your taxes on time during the period of the proposal.
You can include an estimate for the income tax you owe for the current year, up to the date you file the proposal. The CRA will look at your past earnings to make sure that the income you report is accurate. The CRA will also check to make sure that your proposal offers fair and reasonable terms, and that you are not trying to pay as little as possible. It’s important to know that the CRA will only be able to reduce your tax debt through a formal insolvency proceeding and will not accept other informal types of debt settlements.
consumer proposal CRA
Benefits of a Consumer Proposal CRA
Filing a consumer proposal has several advantages:
It reduces your overall debt: You could end up paying significantly less than the total amount you owe.
It protects you from collection actions: A consumer proposal CRA means that they have to stop contacting you and cannot take further legal action against you.
It consolidates your payments: You make one single monthly payment instead of multiple payments to different unsecured creditors.
It stops interest: Interest on your debt will stop accumulating.
It offers flexible payment terms: You can discuss a payment plan that works best for you.
It can save you significant money: Many people save a considerable amount of money when they use a consumer proposal CRA.
Is a Consumer Proposal CRA Right for You?
It’s important to know that it is not right for everyone. To qualify, your total unsecured debt must be less than $250,000, not including your mortgage. Unsecured debts are things like credit cards and other consumer debt not secured by a specific asset. Secured debts, such as mortgages and car loans, are not included. The best thing to do is to think about your personal circumstances and get advice from a LIT. A LIT can help you figure out if it is the best option for you.
Documentation Required for Submission
If you’re considering this option, here are the steps to take:
Gather your financial information: Make a list of all your assets, and your debts. You should also be able to list your monthly income and expenses – in other words, your monthly budget, on an after tax basis.
Assessment of Your Financial Situation
Consult with a Licensed Insolvency Trustee: A LIT will review your information, discuss options with you and guide you through the recommended process.
Create a proposal: If the proposal route is right for you, you will work with your LIT to develop the proposal for your unsecuted creditors.
A LIT will explain how a consumer proposal CRA could affect your finances and help you decide if it’s right for you. It’s best to contact a LIT early so that you can address any issues before they become worse.
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Frequently Asked Questions about Consumer Proposals and CRA Debt
What exactly is a consumer proposal and how does it work?
A consumer proposal CRA is a legally binding agreement between you and your creditors (those you owe money to). It’s a formal debt reduction program, regulated by the federal government and administered by a LIT. Essentially, you offer your creditors a revised repayment plan, typically over a specific period of time up to five years.
This usually involves paying back a portion of your total debt, often significantly less than the original amount owed, and importantly, interest on your debts stops accruing. This creates a structured repayment plan, with one single monthly payment, and offers a way to manage your unsecured debts.
Can I include my Canada Revenue Agency (CRA) tax debt in a consumer proposal?
Yes, absolutely. Income tax debt owed to the CRA is considered an unsecured debt, just like credit card debt or bank loans. This means it can be included in a consumer proposal. A consumer proposal will protect you from further collection actions by the CRA, such as wage garnishments, court actions and persistent collection calls. The CRA will deal with tax debt through a formal consumer proposal and will not consider informal debt settlements.
What are the key benefits of using a consumer proposal to manage CRA debt?
There are several advantages. Firstly, you can significantly reduce the overall amount of tax debt you have to repay. Secondly, it provides legal protection from collection actions by the CRA. Also, it consolidates all your debt payments into one manageable monthly payment. Critically, interest stops accumulating on the included debts, which can save you a lot of money over time. Finally, the process allows for flexible payment terms, which are negotiated with your creditors via an LIT.
What are the CRA’s specific requirements for accepting a consumer proposal?
The CRA has a few key requirements. First, you must have all of your past tax returns. This is crucial, and even if the CRA has estimated your taxes via a notional assessment, you will still need to file your proper tax returns to get all tax filings up to date.
Second, you must agree to file future tax returns and pay your taxes on time during the course of the proposal. You can also include an estimate for the income tax you owe for the current tax year up to the date you file the proposal, even though that tax filing is not due yet. The CRA will also review your income and expenses, to ensure the proposal is offering fair and reasonable terms and that you are not trying to minimize payment.
What types of debts can be included in a consumer proposal, and what debts are excluded?
A consumer proposal is primarily designed for unsecured debts. These are debts not linked to an asset, such as credit cards, bank loans, payday loans, and CRA income tax debt. Secured debts such as mortgages and car loans, are not included in consumer proposals. Also, some debts cannot be discharged through a consumer proposal. These typically include child support, spousal support and any court-ordered fines or penalties.
How do I know if a consumer proposal is the right solution for me?
A consumer proposal is not for everyone. To be eligible, your total unsecured debt must be less than $250,000 (excluding your mortgage). The best way to determine if it’s right for you is to assess your individual circumstances and consult with a Licensed Insolvency Trustee (LIT). An LIT can assess your financial situation, review all your options and advise you if a consumer proposal is the best choice for you and what your proposal payments may be. It is beneficial to seek help early before debt problems become worse.
What are the first steps I should take if I’m considering a consumer proposal?
First, gather all your financial information: income statements, a comprehensive list of all your debts and your monthly expenses. Then, consult with a Licensed Insolvency Trustee (LIT). They will explain the process, assess your eligibility and help you develop a consumer proposal for your creditors. It’s important to address debt issues promptly and with a professional, rather than ignoring them, to prevent further issues developing.
Will a consumer proposal CRA completely eliminate my debt?
A consumer proposal does not eliminate all debts entirely. It eliminates or reduces the unsecured debts it includes; any secured debts such as a mortgage, and non-dischargeable debts, like child support, will still need to be paid. The proposal offers a structured way to repay a significant portion, or all of the unsecured debts included in it, and a reduction of the overall debt burden. Remember that the key goal is to agree a manageable repayment plan that is affordable.
Conclusion: Navigating the Consumer Proposal CRA Process
Dealing with CRA debt can feel overwhelming and scary, but a consumer proposal CRA can be a way to find your path to financial freedom. It’s important to seek help rather than ignore the problem. Taking action early can prevent things from spiralling out of control. Contact a Licensed Insolvency Trustee today to start exploring your options and take that first step towards a more secure financial future.
I hope you enjoyed this consumer proposal CRA Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.
You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern debt relief options to get you out of your debt troubles while avoiding the bankruptcy process. We can get you debt relief freedom using processes that are a bankruptcy alternative.
The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.
We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.
That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.
Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.
The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage.
Consumer Proposal Means Financial Recovery: Introduction
Have you ever felt like you were at rock bottom financially? I never forget that when our clients encountered their financial crisis it felt like climbing Everest without oxygen. They learn how bankruptcy and consumer proposals can severely impact their credit score in those moments. Many individuals have successfully rebuilt credit through patience, education, and support systems. A bankruptcy or consumer proposal means that with a focus on collaboration and a determined mindset, achieving a 100-point increase in your credit score in a year is an attainable goal!
Today, I want to share my insights and experiences on surviving that situation and how you can thrive because the debt relief solution of a consumer proposal means that you need to rebuild your credit after such a challenge. From understanding your current credit situation to establishing solid financial habits, I’ll guide you through every step. Discover how tools like secured credit cards and credit-builder loans can make a difference, and learn the importance of monitoring your progress.,
Consumer Proposal Means Financial Recovery: What is a Consumer Proposal?
A consumer proposal is a flexible approach to debt repayment. In a consumer proposal, the licensed insolvency trustee acting as the consumer proposal administrator, assists the debtor in their financial restructuring by negotiating with creditors to repay a portion of their unmanageable debt over an extended period.
Although only a portion of the total unsecured debts are being repaid (as a rule of thumb, say 25%), once all payments are successfully made and the debtor attends the two mandatory financial counselling sessions, they receive their Certificate of Full Completion. Once that certificate is issued, their entire debt is discharged.
In a consumer proposal, unlike bankruptcy, the debtor does not hand over their non-exempt assets. Like in bankruptcy, the debts eligible for inclusion in a consumer proposal include credit card debt, unsecured personal loans, and tax debt. Proposals must be filed through a licensed insolvency trustee and are legally binding once accepted by the creditors.
Our clients who have successfully navigated the path to credit recovery from being an insolvent person can inspire confidence and determination in others for their insolvent person journey. If they can do it, why can’t you? Remember, taking that first step is what truly matters.
A consumer proposal means you are taking the first step in solving your debt problems. After you have completed making all of the consumer proposal payments, attended the two financial counselling sessions and received your Certificate of Full Performance, comes the next step.
That next step is rebuilding your credit. It’s crucial to be patient, educate yourself on credit management, and seek support when needed. The road to recovery might look daunting, but it’s filled with hope and opportunities for growth.
Many individuals have successfully rebuilt credit through patience, education, and support systems. With a focus on collaboration and a determined mindset, achieving a 100-point increase in your credit score in a year is an attainable goal! Filing a consumer proposal means that you have spoken with one or more licensed insolvency trustees, retained the insolvency trustee of your choosing, and made full disclosure to the insolvency trustee to, do the filing. That is the first step on your path to financial recovery.
In this Brandon’s Blog, I discuss not only what a consumer proposal means and the process, but also provide tried and true tips on rebuilding while you are completing and after you have completed your consumer proposal.
consumer proposal means
Key Features of What a Consumer Proposal Means
Eligibility requirements
Every Canadian can qualify for a consumer proposal as long as they are insolvent and their total debt is at least $1,000 and not more than $250,000 (not including any mortgage against their principal residence).
Types of debts included
A consumer proposal means that you can eliminate pretty well most kinds of unsecured debts, including income tax debt, with a few exceptions. The kinds of debt that cannot be eliminated through a consumer proposal are:
Secured debt: Debts owing to your secured creditors that are secured by an asset, such as a mortgage on your house or a vehicle loan.
Child support or alimony: Payments to a spouse or former spouse for child support.
Alimony: Debt owed to a spouse or former spouse for alimony or spousal support.
Student loan debt: Most Federal student loans.
Court-ordered debt:
Any fine, penalty, restitution order or other order similar in nature to a fine, penalty or restitution order, imposed by a court in respect of an offence, or any debt arising out of a recognizance or bail or a court-ordered payment plan
.Any award of damages by a court in civil proceedings in respect of:
(i) bodily harm intentionally inflicted, or sexual assault, or
(ii) wrongful death resulting therefrom
Debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity.
A debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim.
Duration of repayment period
The duration of the repayment period for a consumer proposal means the length of time you have to make your monthly payments to your creditors under the terms of the proposal. This period of time cannot exceed 5 years (60 months).
A Consumer Proposal Process Means There Are Both Advantages (Pros) and Disadvantages (Cons)
The first step in considering what a consumer proposal means for you and if it is the right choice for your situation is to have a consultation with a licensed insolvency trustee. The licensed insolvency trustee will explain the entire process to you about filing the proposal, the proposal terms you will need to include, the role of the unsecured creditors voting and the approval and implementation process.
There are three main advantages to a consumer proposal. They are:
Asset protection: In a consumer proposal,, unlike in a bankruptcy, you get to keep your assets. In this way, your assets are protected against loss.
Lower monthly payments: In a consumer proposal, as you are only repaying a portion of your total debt, you will enjoy lower monthly payments. Once you fully complete your consumer proposal, all of your unsecured debts are eliminated (other than for the exceptions listed above).
Legal protection from creditor harassment: Filing a consumer proposal means that you are given protection against your creditors from beginning or continuing any legal action against you. This includes protection against any creditors who may already have a judgment against you from continuing their collection action. This also means no more of those harassing collection calls.
Disadvantages (Cons) of a Consumer Proposal
There are also three main disadvantages to this debt relief solution. They are:
Impact on your credit rating.
Limitations on certain debts (already discussed above).
Long-term financial implications
It is the impact on credit score and the long-term financial implications that I discuss in the balance of this Brandon’s Blog. However, I also provide you with financial and debt solutions to come back from the initial disadvantages stronger and better than before.
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Consumer Proposal Means Understanding the Impact of Bankruptcy and Consumer Proposals on Your Credit
When you find yourself in financial distress, the thought of filing for bankruptcy or a consumer proposal can feel overwhelming. But how does this decision affect your credit? In this section, I’ll break down the initial effects on your credit score after filing and explain how your situation before filing plays a role. We’ll also debunk some common myths surrounding bankruptcy.
Initial Effects on Your Credit Score After Filing
Filing a consumer proposal means you can expect your credit score to drop. But how much? The answer depends on various factors. Let’s look at some of the initial impacts:
Difficulty obtaining credit: After filing, lenders will see a significant risk in lending to you. You will probably be denied credit until you have completed the consumer proposal.
Impact on your score: Credit scores typically range from 300 to 900. Filing can drop your score significantly, especially if you had a good score previously.
Public record effects: A consumer proposal remains on your credit report and affects your credit rating for up to five years after completion. This can influence future borrowing and lender decisions.
To put it into perspective, credit score ranges are:
300 – 499 Poor
500 – 699 Fair to Good
700 – 749 Good
750 – 900 Excellent
How Your Situation Before Filing Plays a Role
Your credit score before filing for bankruptcy heavily influences the aftermath. If you had a high score of 700 or above, filing may significantly reduce it, but you still might remain in the fair to good range afterward. However, if your score was already poor, to begin with, filing might not change your situation much.
It’s important to reflect. Were you already struggling with debts? Did you miss payments often? These factors can worsen the impact of filing. Understanding this helps in preparing your financial future. I’ve often found people think all hope is lost with a bankruptcy label. But it’s not true!
Consider this: Filing can be a fresh start. If managed wisely, you can rebuild your score. But knowing where you stand is crucial – I suggest you check your score regularly. Tools found on sites like Credit Karma or Borrowell allow you to monitor your credit score as a soft inquiry so it does not affect your credit rating. They tap into a credit bureau like Equifax or TransUnion to make this easy for you. From your phone, you can monitor your credit score and credit reports.
Debunking Common Myths Surrounding What a Consumer Proposal Means
Stigma and Myths
The stigma around a consumer proposal or bankruptcy can lead to prevalent myths. Let’s clear some of them up:
Myth: Bankruptcy or a consumer proposal means you’ll never get credit again. Reality: Mos people rebuild their credit scores after they are discharged.
Myth: Bankruptcy or a consumer proposal means that all your debts vanish. Reality: Not all debts. See my list above.
Myth: Bankruptcy or a consumer proposal means it is a sign of failure. Reality: Many successful people have filed. Often, it’s a strategic move.
“Bankruptcy is not the end; it’s a new beginning.”
Recognizing these facts can help you face the decision with a clearer mind. An insolvency process can feel like a heavy weight, but understanding how to navigate the aftermath is empowering.
The Importance of Understanding The Timeline
Understanding how long it takes for your credit to recover can help you set realistic expectations. Generally, it takes several years to improve your score substantially. During this time, maintaining healthy financial habits is vital.
Explore options such as secured credit cards, consistent bill payments, and monitoring your credit report. This proactive approach can yield significant benefits over time.
In conclusion – well, not really a conclusion since we’re just getting started – successfully recovering from a bankruptcy or consumer proposal means that you entered the process fully understanding all of its implications which a licensed insolvency trustee can advise you on. The journey to financial recovery starts with understanding your credit and taking actionable steps.
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Consumer Proposal Means You Need To Take Practical Steps to Rebuild Your Credit Post-Bankruptcy or Consumer Proposal
Rebuilding credit might sound daunting, especially after going through personal bankruptcy or a consumer proposal. I get it. It feels overwhelming, yet it’s crucial for your financial future. The good news? You can take actionable steps to mend your creditworthiness. Let’s dive into some practical strategies that can help.
1. Sign Up for Credit Monitoring Services
First things first. One of the best actions you can take is to sign up for credit monitoring services like Credit Karma or Borrowell. Why? It’s simple. Regularly monitoring your credit helps you understand how your actions affect your score.
These services often provide a free credit report and insights into your credit history. You can track changes and ensure no fraudulent activity affects your credit. Plus, you’ll receive tips on improving your score. It’s like having a personal trainer for your credit!
2. Open a Secured Credit Card
Next, consider opening a secured credit card. This type of card requires a cash deposit, which acts as your credit limit. Essentially, you’re borrowing against your own money. It might feel strange, but it’s a powerful tool for rebuilding credit.
Manage it wisely! Use the card for small purchases and pay off the balance each month. This shows lenders that you can handle credit responsibly. Remember, 35% of your credit score is affected by payment history, so regular, on-time payments are crucial.
3. Establish Automatic Payments
We all have a lot going on in our lives. To avoid missing payments, set up automatic payments for bills and loans. This ensures you make your payments on time and helps maintain a positive payment history.
Plus, consider establishing a monthly budget. It’s not just about paying bills. A budget allows you to see where your money is going. When you stick to a budget, you create financial stability, making it easier to manage debts and expenses over time.
Why Monitor Your Credit Regularly?
Regularly monitoring your credit is not just about keeping an eye on your score. It’s about fostering financial habits that contribute to long-term stability. Think of your credit score as a reflection of your financial health. Just like a doctor checks your vitals, keeping tabs on your credit ensures you’re not heading into dangerous territory.
Here’s a sobering thought: Did you know that 30% of your credit score is affected by credit utilization? This refers to how much of your available credit you’re using. Keeping your utilization below 30% can significantly improve your score.
“Creditworthiness is about more than just the score; it’s about stability and responsibility.”
This statement encapsulates the essence of what rebuilding credit truly means. It’s not merely about achieving a high score; it’s about developing the habits that lead to financial stability. By signing up for credit monitoring services, using a secured credit card, and keeping your bills on autopilot, you’re paving the way to a financially stable future.
Remember, rebuilding your credit is a journey, not a sprint. Take each step seriously, and watch your financial situation transform over time.
A Consumer Proposal Means There Are Common Pitfalls in the Credit Rebuilding Process
The journey to rebuilding credit often feels daunting. I can tell you that recognizing common pitfalls is crucial for success. Whether you have just filed for bankruptcy or a consumer proposal, avoiding these mistakes can save you time, money, and frustration.
Ignoring Your Credit Report Post-Filing
It’s easy to think that filing for bankruptcy or a consumer proposal means that your problems are over. You might believe your credit will automatically improve. But, let me tell you: this is far from the truth.
Many consumers take a hands-off approach after their insolvency proceedings.
They assume, mistakenly, that their credit will fix itself over time.
However, doing nothing is risky. Doing nothing is as harmful as bad credit itself.
Until you check, you won’t know if there are errors on your report. Ignoring this aspect can lead to missed opportunities and continued low scores. Regular monitoring is essential. Besides, knowing what errors to look for can save you time and money in the long run.
Applying for Too Much Credit at Once
After bankruptcy or a consumer proposal, the temptation to apply for multiple lines of credit can be overwhelming. I get it. You want to rebuild fast! But lack of patience can lead to major setbacks.
When you apply for several credit accounts at once, it signals to lenders that you are desperate for credit.
This can negatively impact your credit score.
Think of it like trying to fill a glass with water. If you pour too quickly, it spills—making a mess instead of filling it up. Similarly, too many credit applications can create chaos in your credit report.
Not Keeping Track of Payments and Due Dates
Life gets busy; I understand that. Yet, not tracking payments can be disastrous for your credit score. If you’re missing due dates, interest rates can skyrocket, and penalties can add up quickly.
Using apps or calendars to set reminders can help.
Consistent, on-time payments are one of the biggest factors in rebuilding good credit.
Imagine trying to repair a car without regularly checking the engine. Without a consistent monitoring system in place for your bills, you might find yourself in the same situation – stalled when you could be moving forward.
Why Monitoring Your Credit Matters
The statistics on credit monitoring are alarming. Most consumers neglect regular checks of their credit reports. This neglect often leads to longer resolution processes for issues that could have been addressed sooner.
Keeping tabs on your credit can lead to faster resolutions of any issues that arise. It’s a proactive approach that can prevent minor problems from snowballing into major setbacks.
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After A Consumer Proposal Means You Need Long-Term Strategies for Sustaining Good Credit
Managing your credit is not a sprint; it’s more like a marathon. Just like any long-distance race, you need a solid strategy to reach the finish line successfully. In this section, I’ll share essential tactics to help sustain and improve your credit over the long haul. Here’s what I believe are the core pillars for sound credit management.
Avoid Unnecessary Debt
Debt can be a double-edged sword. While some debt can help you build credit, unnecessary debt can easily trap you in a cycle of payments and stress. But how do you distinguish between necessary and unnecessary debt? Well, think about your needs versus wants.
Necessity: This includes mortgage payments, student loans, or essential living expenses.
Unnecessary: High-interest credit card balances for luxury items or impulsive spending.
Learning to distinguish these types of debt is critical. Have you ever found yourself reaching for your credit card for that new gadget? Sure, it’s tempting, but ask yourself: is it worth it? Maintaining good credit hinges upon making wise choices about how to use available credit.
Build an Emergency Savings Fund
Imagine you’re in a tight spot. An unplanned expense pops up—a car repair, for instance. Without savings, you might resort to using credit cards. This can be disastrous for your credit score. That’s why building an emergency fund is essential!
Here’s why:
Buffer Against Debt: An emergency fund helps you avoid high-interest loans or credit card debts.
Financial Stability: With a savings cushion, you can face unexpected costs without worrying about your credit utilization.
Peace of Mind: Knowing you have money set aside creates confidence in your financial decisions.
How much should you save? Aim for at least three to six months’ worth of expenses. It may sound daunting, but every small step counts. Deposit a little each month, and you’ll find it adds up faster than you think.
Seek Professional Advice for Complex Situations
Sometimes we all need a little help. If you’re facing a complex financial situation, consider talking to a professional. They can guide you through financial planning and help you navigate tricky credit management issues.
Licensed Not-For-Profit Credit Counsellors: These professionals can provide personalized advice and create plans tailored for you.
Financial Planners: They’re skilled in long-term financial strategies to help you achieve your goals while maintaining good credit.
No shame in asking for help, right? Knowing when to seek professional input can save you time, money, and stress in the long run.
Accountability is Key
Long-term strategic planning is vital. It’s easy to lose sight of your financial goals without accountability. Consider creating a credit management plan. Write it down, and review it regularly. How is your score trending? Are you sticking to your budget? This ongoing check can keep you responsible.
Statistically, consumers who actively participate in managing their credit improve their scores significantly within just a few years after the insolvency process. This fact challenges the notion that bad credit is a life sentence. Stability in income and judicious credit usage are hallmarks of strong credit health.
Isn’t that a powerful reminder? Consistent, wise use of credit while maintaining a stable income is the true recipe for good credit health.
The Journey Doesn’t End
Once you’ve implemented these strategies, remember that the journey doesn’t end here. Continuously working on your financial habits is essential for lasting credit improvement. Adopt a mindset of growth, and be proactive. Before you know it, you’ll be on a solid path toward thriving credit health!
A Successful Consumer Proposal Means Inspirational Success Stories: Rebuilding Against the Odds
When it comes to rebuilding credit, many people feel overwhelmed and hopeless. However, there are countless stories of individuals who have risen from the ashes, proving that anyone can improve their financial situation with determination and the right support.
Lessons We Can Learn From Others
What can we learn from people we have helped through a consumer proposal who have successfully rebuilt their credit? Here are a few key takeaways:
Patience is Key: Rebuilding credit takes time. Quick fixes are often temporary. Keeping a long-term perspective helps you stay motivated.
Education Equals Empowerment: Understanding credit reports, scores, and the factors affecting them is essential. Many successful rebuilders became self-taught credit experts.
Don’t Be Afraid to Ask for Help: Reaching out for support can be life-changing. Whether it’s financial advisors, credit counselling, or support groups, don’t hesitate to connect with experts.
The Importance of Support Systems
Having a support system during recovery is vital. Friends, family, and professionals provide encouragement and guidance. They help you remain accountable and often offer innovative strategies you might not think of on your own.
Imagine if you don’t seek financial advice when you are facing financial challenges. You would still feel trapped in your financial mess. Instead, proactive steps link you with a knowledgeable licensed insolvency trustee, allowing you to deal with your situation effectively. I believe that with the right help, anyone can bounce back from financial hardship.
We can all relate to needing support at some point in our lives. Having someone to lean on can make all the difference when you feel like giving up.
Staggering Data on Credit Recovery
Are you worried about whether rebuilding your credit is even possible? According to statistics, many successful rebuilders see a 100-point increase in their score within the first year. Isn’t that encouraging?
Consumer Proposal Means Financial Recovery: Conclusion
Hearing stories from individuals who have successfully conquered their outstanding debts and navigated the path to credit recovery can inspire confidence and determination in your journey. I have many that I can share with you. If they can do it, why can’t you? Remember, taking that first step is what truly matters.
I hope you enjoyed this collection agency lawsuit Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring due to distressed real estate or other reasons? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.
You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding the bankruptcy process. We can get you debt relief freedom using processes that are an alternative to bankruptcy.
The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.
We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.
That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.
Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.
The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.
Reviving a Canadian consumer proposal: Introduction
If you’re fighting with financial debts and want to stay clear of filing for bankruptcy, a consumer proposal might be a great alternative to take into consideration. A current Court decision in Ontario highlights the significance of making your Canadian consumer proposal payments on time to guarantee its success.
In this Brandon’s Blog, the situation is analyzed, as well as the factors that determine whether a Court can revive a consumer proposal more than five years after it was filed are discovered. This Brandon’s Blog provides useful information for people seeking a fresh financial start.
What a Canadian consumer proposal is all about
A Canadian consumer proposal occurs as an intricately structured contract, between an individual and their unsecured creditors, with the single function of agreeably resolving their burdensome financial debts. Once agreed to, it stands as an irrevocable pact, wielding the power to instantly save the beleaguered debtor from the unrelenting pursuit by his or her creditors, while simultaneously affording the debtor the ability to systematically repay a portion of their debts over an extended period of no more than 5 years. After making the required payments laid out within the Canadian consumer proposal, the outstanding unpaid amount is erased.
To launch a Canadian consumer proposal, one must employ the services of a duly licensed insolvency trustee, also referred to as a LIT or Trustee. The LIT meticulously scrutinizes the person’s financial world and then crafts a detailed debt settlement repayment plan for them.
The benefits of a Canadian consumer proposal
Going with a Canadian consumer proposal presents a person with the bankruptcy alternative that provides a myriad of advantages that can be likened to a world of financial peacefulness:
Immediate Shelter: Upon the submission of a Canadian consumer proposal, a debtor finds themselves wrapped up in a bulletproof shield of creditor protection. It legally protects them against the claims of their creditors. This bars creditors from starting or continuing any legal actions to recover what is owed to them. This includes collection calls and other collection actions on things like credit card debt or income tax debt.
Financial Debt Settlement: The borrower’s obligations go through a metamorphic reduction, changing them right into a workable sum that the borrower can repay over some time. As a result, just a portion of the debts are paid back. After making all the required payments, the unpaid balance is written off.
Structured Settlement Blueprint: The Canadian consumer proposal allows the debtor the opportunity to get into a binding agreement with their creditors to fix their debt problems across an extended period, not surpassing the five-year mark. This gracious break grants the borrower the latitude to pay an amount they can afford, all while finding support in the eyes of their creditors. The debtor also benefits through the two mandatory financial counselling sessions.
Unified Monthly Commitment: Instead of juggling a myriad of creditors paying them inconsistent amounts, a consumer proposal streamlines the borrower’s financial trip. Right here, the debtor need only make the agreed-upon regular payments to their appointed Trustee. The LIT manages to pay the funds out according to the ratified debt settlement plan.
Eligibility requirements for a Canadian consumer proposal
The Office of the Superintendent of Bankruptcy and the Bankruptcy and Insolvency Act (Canada) (BIA) clearly lay out the eligibility requirements for this Canadian consumer proposal legal process. People coming to grips with frustrating debt and satisfying particular financial standards could find themselves suitable prospects for starting a consumer proposal.
These prerequisites include an overall debt level ranging from $1,000 to $250,000 (not including any mortgages or lines of credit secured against the person’s principal residence), while at the same time not being able to pay their debts as they come due. An essential element for restructuring one’s financial debts within the realm of a Canadian consumer proposal is having a consistent source of income.
Additionally, individuals cannot file a second consumer proposal if they are already in one. Also, if a debtor defaults on making all the payments under a consumer proposal, they cannot file another one (more on this soon). It is necessary to understand that each person’s circumstances are unique. So consulting with a Trustee is of the utmost significance in determining one’s eligibility as well as figuring out the personalized plan for debt reduction, including the amount that needs to be paid.
Types of debt covered by a Canadian consumer proposal
A Canadian consumer proposal addresses unsecured debt responsibilities. This includes credit card indebtedness, unsecured personal loans and lines of credit, payday loans, and the worry of income tax obligations. It is incumbent to recognize that secured financial encumbrances owing to secured creditors, such as home mortgages and vehicle loans, do not drop within the ambit of consumer proposals.
Nevertheless, if a debtor’s unsecured debts are significantly affecting their ability to pay off their secured debts, the consumer proposal might yet manifest as a probable option. Student loans do not typically get discharged with consumer proposals, except in cases where the borrower has stopped being a full or part-time student for no less than 7 years.
In summation, the Canadian consumer proposal emerges as a pragmatic solution for people facing monetary problems, earnestly in search of a break from the weight of their insolvency.
Annulment of a Canadian consumer proposal
The annulment of a Canadian consumer proposal is the cancellation of the commitment binding a debtor to their creditors, as laid out in section 66.3 of the BIA. This termination transpires when the borrower either falters in the discharge of their duties or due to a change in their circumstances, making them incapable of sticking to the agreed-upon payments.
The beginning of the annulment procedure can be initiated by the LIT, functioning as the consumer proposal Administrator of a Canadian consumer proposal, or, by any of the creditors. When annulled, the borrower gives up the sanctuary provided by a Canadian consumer proposal, protecting them from legal proceedings.
Debtors need to comprehensively grasp the implications of annulment and get expert advice if they encounter difficulties in meeting their commitments. The annulment of a consumer proposal has significant financial consequences and should be avoided whenever feasible.
The Canadian consumer proposal before the Ontario Court
Background
This case, Re Cumberbatch, 2023 ONSC 5287 is very instructive. It involved a hardworking individual battling financial difficulties, who made a consumer proposal to manage her debts effectively. As she struggled to meet her monthly debt obligations, she realized that a consumer proposal could provide her with much-needed relief and a structured repayment plan.
In the case heard by the Associate Justice, his pronouncement in this circumstance conveys very useful insights. This case featured a person trying to come to grips with the unrelenting stress of financial misfortune, who, in a positive step, filed a Canadian consumer proposal as a strategic method of efficiently navigating her financial obligation problems. As she faced the tough task of meeting her financial responsibilities, the realization dawned upon her that a consumer proposal might function as the cure-all, delivering the much-coveted respite that a skillfully created structure for financial debt negotiation provides.
She approached a LIT who assessed her financial situation, including her income, expenses, and outstanding debts. After careful evaluation, the Trustee determined that she was eligible for a consumer proposal and worked with her to develop a reasonable and manageable debt repayment plan.
Before diving into the Court’s reasoning, let’s first provide some background information about the case. The consumer proposal was initially filed by the debtor to deal with her outstanding debts.
However, due to a collection of unanticipated events, the debtor defaulted under her Canadian consumer proposal by not keeping up with her payments. The debtor defaulted in making payments to the Administrator under the consumer proposal.
As a result of missing 3 months of payments due the consumer proposal was deemed annulled by subsection 66.31(1) of the BIA.
Jurisdiction to revive a Canadian consumer proposal
In the realm of bankruptcy and insolvency law, consumer proposals provide individuals with an alternative to personal bankruptcy. A consumer proposal, as defined under the Bankruptcy and Insolvency Act (BIA), allows debtors to negotiate with their creditors, proposing a plan to repay a portion of their outstanding debts. However, there are instances where a consumer proposal becomes dormant or inactive, leading to questions regarding the Court’s jurisdiction to revive such proposals after the initial five-year period.
The issue of jurisdiction was significantly addressed by the Supreme Court of Canada in the landmark case of A. Marquette & Fils Inc. v. Mercure. In that case, the Supreme Court of Canada stated about the BIA (then called the Bankruptcy Act):
“has its origins in the business world. Interpretation of it must take these origins into account. It concerns relations among businessmen, and to interpret it using an overly narrow, legalistic approach is to misinterpret it.”
In making this commentary, the highest Canadian Court said the purpose of the BIA, is to provide a framework for the effective administration of insolvency matters and to facilitate the rehabilitation of debtors. The Court acknowledged that the successful completion of a consumer proposal is aligned with this purpose, as it allows debtors to repay a portion of their debts in an organized manner.
Bankruptcy courts, applying this philosophy to consumer proposals, have determined that they have the jurisdiction to revive a Canadian consumer proposal that was annulled. The thorny issue before the Court in this case was that more than 5 years had passed since this Canadian consumer proposal was filed. The Court needed to consider if it had the jurisdiction to revive a consumer proposal that on the calendar, would take more than 5 years to complete.
Factors considered by the Court in deciding whether to revive a Canadian consumer proposal
In establishing whether to exercise its jurisdiction to revive a consumer proposal, the Court developed several factors to consider:
The debtor’s persistence in attempting to finish the proposal within the five-year duration.
The reasons for the consumer proposal becoming inactive.
The prejudice or lack thereof to creditors in reviving the proposal.
Any other pertinent factors, such as the debtor’s existing financial circumstance.
The Court emphasized that the decision to revive a dormant Canadian consumer proposal needs to be led by factors to consider fairness to both debtors and creditors. The Court needed to take on a balanced and discretionary approach when exercising its jurisdiction.
Recognizing the Court’s jurisdiction to revive a Canadian consumer proposal supplies higher clarity to debtors and creditors alike, eventually contributing to a much more reliable and equitable insolvency system.
Factors considered for reviving a Canadian consumer proposal
The LIT who acted as the consumer proposal Administrator in this Canadian consumer proposal process, made the application to the Court to revive the proposal. The Court had to take into consideration whether to provide this restoration and also evaluate the effect of reviving the proposal.
In figuring out whether a revival of that consumer proposal was appropriate, the Associate Justice meticulously analyzed different variables. These aspects played a significant role in deciding upon the expediency and justness of revitalizing this consumer proposal. Some of the crucial elements the Court took into consideration included the reason for annulment, the amount already paid under the proposal, and any creditor opposition.
Reason for annulment of the Canadian consumer proposal
The Court paid attention to the reason why the consumer proposal was initially annulled. Reasons that can lead to annulment are usually non-payment by the debtor of at least 3 months’ worth of payments or non-compliance with other provisions of the proposal. If the reason for annulment results from situations beyond the debtor’s control, such as an unexpected further financial setback such as job loss or a substantial life event, the Court may be inclined to revive a Canadian consumer proposal once the debtor shows the ability to continue and complete the outstanding payments.
However, if the reason for annulment is an outcome of the debtor’s deliberate non-payment or unyielding disregard for the proposal, the Court will probably decline a revival application. In such instances, the debtor will need to offer a convincing argument backed by evidence to show why the revival is appropriate.
Amount paid under the Canadian consumer proposal
Another vital aspect is the amount paid by the debtor under the consumer proposal before it was annulled. The Court examines whether the debtor has made a considerable contribution towards their financial obligations as agreed upon in the Canadian consumer proposal. If the debtor has fulfilled their payment responsibilities before the annulment and has shown an authentic initiative to meet their remaining financial commitment under the consumer proposal, the Court is more likely to consider the revival as a practical option.
On the other hand, if the debtor has fallen short of making significant payments or has constantly defaulted on their obligations, a revival probably will not be viewed favourably by the Court. The debtor needs to offer a legitimate reason for their previous repayment shortcomings and show the ability to fulfill the balance of the payments they originally agreed to.
Creditor opposition
The Court thinks about the level of resistance from creditors about the resurgence of the consumer proposal. Creditors play an essential function in the overall decision-making process. If a considerable variety of creditors reveal solid opposition to the revival, it can heavily affect the Court’s decision.
Nonetheless, the Court likewise considers the reasons behind creditor resistance. If creditors are opposed entirely as a result of their positions or an unwillingness to engage, the Court may offer much less weight to their arguments. On the other hand, if the creditors raise valid issues concerning the debtor’s conduct, ability to fulfill their obligations or the fairness of the recommended revival strategy, the Court will thoroughly evaluate these issues.
This Canadian consumer proposal disposition: The Court’s decision in the case of Re Cumberbatch
When it comes to Re Cumberbatch, the Associate Justice made an important choice about the revival of a Canadian consumer proposal.
The Court very carefully assessed the situation surrounding the annulment of the consumer proposal and the reasons presented in support of a revival by the Administrator. It recognized that the unintentional expiry of the proposal was not an intentional act, but instead an oversight. The Court took into consideration the best interests of all stakeholders, consisting of the debtor, the creditors, and the Administrator.
Among the key variables that influenced the Court’s decision was the reality that given that the debtor validated that she would be able to pay the balance of her Canadian consumer proposal, its revival supplied the very best possibility for the debtor to pay off a portion of her debts in an organized and structured fashion. The Court recognized that the debtor had made significant initiatives to satisfy her commitment via the original proposal, and reviving it would allow her to continue on the path toward debt resolution.
Furthermore, the Court additionally took into consideration the interest of the creditors. Reviving the consumer proposal provided a structure where they would certainly receive more of a repayment than if the consumer proposal was not revived and the debtor filed for bankruptcy.
This approach by the Court prioritized fairness as well as guaranteed that the debtor’s financial situation was managed responsibly. The Court likewise followed the Supreme Court of Canada decision as well as others, to use its jurisdiction in a reasonable as well as business-like fashion in deciding that it could revive this Canadian customer proposal, even though doing so means it would take more than 5 years for the consumer proposal to be completed.
So with this set of facts, it is feasible for a Canadian consumer proposal to be revived and finished, in more than 5 years.
Canadian consumer proposal: Conclusion
In the matter of Re Cumberbatch, the Court’s deliberation regarding the approval of the Administrator’s request to reinstate the consumer proposal exemplifies the unwavering dedication of the judicial system to equity and the facilitation of avenues for debtors to remedy their fiscal obligations through the Canadian insolvency legislation. This particular case vividly underscores the paramount importance of procedural precision. Furthermore, it underscores the imperative need to ensure that unforeseeable external factors, which lie beyond the debtor’s sphere of control and yet obstruct the successful completion of a Canadian consumer proposal within the stipulated 5-year timeframe, do not constitute an impediment to the equitable resolution of debt-related affairs.
I hope you enjoyed this Canadian consumer proposal Brandon’s Blog. If you’re struggling with managing your overwhelming debt in a high-interest environment, don’t worry – there are some things you can do to take control of the situation. First, it’s important to create a realistic budget and track your expenses. From there, you can prioritize your debt repayment and make consistent payments to chip away at what you owe. It’s also a good idea to seek professional financial advice to help guide you through the process. Just remember, managing debt is a gradual process that requires commitment and determination, but you can do it! So don’t hesitate to reach out for help from financial professionals.
Individuals and business owners must take proactive measures to address financial difficulties and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.
Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses with debt problems that are in financial distress. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns are obviously on your mind.
The Ira Smith Team understands these financial health concerns. More significantly, we know the requirements of the business owner or the individual who has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.
It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges, ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now!
We have helped many entrepreneurs and their insolvent companies who thought that consulting with a Trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.
We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.
The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.
Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.
Consumer debt proposals eliminate your debt stress
Are you stressed out and overwhelmed by debt and don’t know how to begin to eliminate it? We know your pain and can help you because this Brandon’s Blog “Consumer Debt Proposals: The Ultimate Solution for Managing Debt” has got you covered! I provide realistic advice on how to manage and even get rid of debt through a binding debt settlement agreement.
I describe what consumer debt proposals are all about and also look at other debt-relief options like debt consolidation and credit counselling. I will also talk about the recent Canadian government’s warning about taking on high-interest debt from certain companies.
Consumer debt proposals: How Does a Consumer Proposal Work?
If you’re in a tough spot financially, in Canada you can submit a consumer proposal if you owe $250,000 or less (not including any debt registered against your home is one of the types of secured debts that must be paid according to your secured loan repayment terms). It’s an official way to get some debt relief, and it’s all legit according to the Bankruptcy and Insolvency Act. Basically, you work with a Licensed Insolvency Trustee who helps you come up with a plan for paying off what you owe. Then you negotiate with your creditors and hopefully, they accept the proposal.
Making a consumer proposal that unsecured creditors will accept is one of the debt solution alternatives to bankruptcy that requires a few steps to get it done:
Reach out to a qualified Licensed Insolvency Trustee and book a no-cost debt assessment consultation.
During the appointment, answer any questions the Trustee may have truthfully and to the best of your ability.
The Trustee will work with you to come up with a payment plan that fits into your budget and allows you to pay off your debt.
Once you’ve submitted your consumer proposal, your creditors will look it over and then decide if they want to accept it as is or negotiate an adjustment (higher) to your periodic payments to eliminate the amount you owe. They have the option to do either one.
Your creditors can decide to:
Agree to the terms you have proposed (cast their vote in favour).
Decline the terms (vote no).
Decline the terms and suggest a meeting with creditors.
Take no action (which is the same as voting yes).
Your consumer proposal is automatically approved unless more than 25% of the dollar value of the claims of your creditors indicates that they would like to have a meeting of creditors. In that case, that is what will happen.
Once you’ve taken the step of filing for a consumer proposal, you’ll be able to rest easy knowing that you have immediate legal protection from creditors and debt collectors through this financial and legal process. This is called a stay of proceedings where your creditors cannot chase you for the money you owe.
Filing under the bankruptcy process in Canada isn’t your only option! You can work out a legally binding agreement with your creditors through the popular alternative and powerful alternative of consumer debt proposals. With a consumer proposal, you and your creditors can come to an agreement on what portion of the debt you can pay off- and the rest will be written off!
consumer debt proposals
Consumer debt proposals: The voting process
When it comes to a consumer proposal, it’s important to understand the process of how creditors come to a decision to accept or reject the plan. This section will provide insight into how the voting process works.
Once a consumer proposal is submitted, creditors are allowed 45 days to express their decision. They can either accept the proposal or reject it in one of the following ways: replying to the Licensed Insolvency Trustee with their acceptance, not responding at all (which is seen as approval), communicating their rejection or requesting a meeting of creditors.
At the creditors’ meeting, creditors will have the opportunity to decide whether to accept the consumer proposal as is or to make adjustments to it.
Consumer debt proposals: What happens if your offer is approved?
If your proposal gets the green light, you’ll need to abide by what you promised – whether that’s a single payment or regular installments to the Licensed Insolvency Trustee. Plus, you must meet any other conditions that were laid out in the proposal.
In a successful proposal, you can keep your assets (as long as you keep paying what you owe to creditors who have a lien on your assets), and go to the two financial counselling sessions held by the Licensed Bankruptcy Trustee. Of course, you’ve got to pay the Licensed Bankruptcy Trustee on time over the entire period of time your proposal is for.
Failure to do so could result in the revocation of the proposal, the accrual of interest and fees, and even legal action. It’s important to remember that while a consumer proposal can provide much-needed relief, it’s ultimately up to you to stay current with the payments you promised to make.
consumer debt proposals
Consumer debt proposals: What happens should your consumer proposal be declined?
If 50% or more of the creditors vote to reject the consumer proposal, then the Licensed Insolvency Trustee must issue a notice and the consumer proposal dies. In this situation, creditors are free again to pursue collection actions against the debtor.
If 25% or more of the creditors request a meeting, that meeting is referred to as the Meeting of Creditors. At this meeting, an agreement will try to be reached by a majority of the creditors. If the agreement can not be reached, the debtor may need to amend the proposal and resubmit it or look for other ways to solve their financial issues.
If a consumer proposal is declined, it means that the creditors do not agree with the terms of the proposal put forth by the debtor. The main reasons for rejection may be that the debtor is not offering enough money or has proposed an unsuitable repayment schedule.
It is important to note that if you fail to fulfill the requirements of your consumer proposal, it will be deemed null and void. However, it does not free you from your existing debt, and the failure to adequately repay your loans or pay off debts within the terms of the agreement could affect your credit score. Collectors for debts are within their right to renew collection calls and seek legal action for retrieving the debts that they owe. They can sue you and if they get a judgment, they can then get a wage garnishment against you. It is never recommended to default on a consumer proposal.
Consumer debt proposals: If you fulfill the requirements of your consumer proposal
If you fulfill the requirements of your consumer proposal, you will have successfully completed the agreement between yourself and your creditors. This means that you will have made the agreed-upon payments and met all other terms of the proposal. The balance of your unsecured debts that you did not pay off is also eliminated if you fulfill the requirements of your consumer proposal.
One of the benefits of fulfilling a consumer proposal is that you will have lower regular payments monthly, which are based on what you can afford, rather than high monthly payments regardless of your income. Additionally, you will have protection from creditors, as they will not be able to contact you or take money directly from your wages.
After fulfilling a consumer proposal, it will come off your credit report maintained by the Canadian credit bureaus three years after the completion. This report will show that the consumer proposal has been successfully completed and you can rebuild your credit rating and credit score simultaneously.
You will also receive from the Licensed Insolvency Trustee (LIT) acting as the Administrator in your consumer proposal a “Notice of Successful Completion of Consumer Proposal”. This is a very important document, as you will be able to provide it to current or future credit grantors to prove that you successfully completed your consumer proposal and avoided personal bankruptcy.
It is important to note that if you fail to fulfill the requirements of your consumer proposal, it will be deemed null and void. However, it does not free you from your existing debt, and the failure to adequately repay your personal loans, lines of credit or pay off debts within the terms of the agreement could negatively affect your credit score. Creditors are within their right to use collection activity and use legal action for retrieving the debts that you owe. It is never recommended to default on a consumer proposal.
consumer debt proposals
Advice for Consumers: Considerations for Debt Relief and Credit Repair Services
Improving your credit score or credit rating will take time, and requires showing creditors that your habits have improved and that you are paying back your debt on time. Be cautious when seeking help to pay off debt or repair your credit, as some companies may offer misleading solutions. I have been warning about the dangers of such “for-profit” debt settlement companies for years now.
One option for getting help with debt is a debt management plan, which is an informal proposal made by a non-profit community credit counselling agency credit counsellor to your creditors on your behalf. This plan consolidates your debts into one affordable monthly payment and in some cases, you may not have to continue to pay interest on your debt.
However, consumers should be aware that the “for-profit” debt settlement companies may charge high fees, including upfront or advance fees, and may not be able to get creditors to reduce your debt. Additionally, it is important to note that even while using a debt management plan, you are still required to keep making payments on any other debts you owe, which may result in no change to your credit score.
Overall, it is important to be cautious when seeking help to pay off debt or repair your credit and to thoroughly research any company or solution before proceeding. It is also important to consider the potential consequences, fees and overall effectiveness of the solution. A LIT during an initial no-cost consultation will provide many of the services that a “for-profit” debt management company charges for.
Consumer debt proposals: Organizations or firms cannot guarantee the resolution of your financial obligations
Be aware of companies or agencies that claim they can quickly resolve your debt problems by negotiating a deal with the companies you owe money to and letting you only pay back a fraction of your debt. These promises may not be reliable, so it’s best to be wary.
It’s important to remember that if certain creditors don’t agree to your payment plan, you may need to work out a different agreement with them directly. Alternatively, you can consult a LIT about doing a consumer proposal.
It’s also worth keeping in mind that anyone can call themselves a debt consultant, but that doesn’t mean they have the proper training or they’ll be able to help you with your finances.
consumer debt proposals
Consumer debt proposals: No company or agency can give you a fast and easy boost to your credit rating
No Canadian debt consultant, company, or agency can promise a fast solution to your credit score. Improving your credit rating takes time and commitment; you have to show a history of paying your debts punctually.
If you’re looking to boost your credit score, one option to consider is a non-profit credit counselling agency. A credit counsellor can offer a variety of services like one-on-one advice, group sessions, and tips on how to better manage your debt. Just keep in mind that simply talking to a credit counsellor won’t do the trick.
If you’re looking to give your credit score a boost, try paying off some of what you owe. Bringing down your debt-to-credit ratio to under 75% of your credit limit will help. You could also ask your credit card companies or financial institution lenders to raise your credit limit and perhaps even amend your terms of repayment (though the latter will be very difficult) – that’ll help increase your credit score. Ideally, try to use less than a third of your available credit and keep it low, ideally below 30%.
Remember, there’s no shortcut when it comes to improving your credit score. Anyone promising you the fast and easy way is not looking out for your best interests. It takes determination and effort to get your credit back on track. Do your research and make sure you understand any associated fees or consequences before you commit.
Consumer debt proposals: Paying off a consumer proposal early
Sure, you can settle your consumer proposal early, but that might not be the best choice for everyone.
If you’ve got the funds, paying off your consumer proposal earlier could help kickstart your credit repair – but don’t expect it to save you money or guarantee a good credit rating. So think carefully before you commit to paying it off early. In the following section, I describe a very troublesome issue which has now attracted the attention of the Office of the Superintendent of Bankruptcy Canada (OSB).
Paying off your consumer proposal early will do wonders for your mental health – and it’s perfectly acceptable! It’s no secret that financial hardship is incredibly stressful, and five years seems like a lifetime. So treating yourself to an early payoff will help you feel a huge weight being lifted off your shoulders.
If you want to shorten how long your consumer proposal lasts, you can change how often you make your proposal payments. Usually, they’re monthly, but if you switch to making extra payments by paying bi-weekly, you can pay off your proposal faster. Once you’re done paying off your consumer proposal, the unsecured debts you’ve been worrying about will be marked as taken care of on your credit report.
consumer debt proposals
Consumer debt proposals: LITs cannot talk you into getting a loan with a high-interest rate to pay off your consumer proposal early
On January 11, 2023, the OSB issued its position paper titled “LITs Promoting and Facilitating Loans to Debtors“. The problem is that some lenders are offering high-interest loans to people who are about to or are going through a consumer proposal. It looks like they’re giving loans to help people pay off their consumer proposals early, but it’s really just taking advantage of people’s tough financial situations.
The OSB has noticed that some LITs are promoting and encouraging people to take out loans without mentioning the potential drawbacks. They do this by talking up the positives and downplaying the negatives, and they may even pressure people into taking out a loan.
The OSB has come to the conclusion that it’s not in line with the Code of Ethics for Trustees or a LIT’s duties under the Bankruptcy and Insolvency Act and General Rules for LITs to promote or facilitate such loans. Furthermore, such actions are not allowed.
There is also evidence that LITs who receive engagements directly from “for-profit” debt consultants, may be entering into inappropriate arrangements with them. No trustees should ever accept a commission, payment, or any other type of reward from a third party for recommending work concerning a professional engagement, nor should they give out any commission, compensation, or another type of benefit to a third party for obtaining a professional engagement.
For the record, my Firm does not have any arrangements with any party regarding the referral of files and we neither accept nor pay a referral fee
Paying off your consumer proposal early isn’t really an issue. In fact, it can be great if you can afford it thanks to a financial windfall or change in circumstances. Everybody benefits in that scenario. But if you don’t have the means to pay off your consumer proposal quickly, don’t worry. Don’t take out an interest-bearing loan to pay off a consumer proposal. The consumer proposal itself should be considered an interest-free loan.
Look, if a debtor is trying to rebuild their credit with a loan after insolvency, there’s nothing wrong with that. They’re making the choice themselves, so it’s all good. In this case, LITs should explain the pros and cons of these loan products to the debtor. And, it’s important that they don’t push any company or product in particular.
The OSB believes that LITs should not be promoting or facilitating loans since it contravenes the Bankruptcy and Insolvency Act and its Rules. This practice has a negative impact on the LIT profession and the insolvency system. The OSB will be keeping an eye on this issue and taking appropriate action.
You Have Outstanding Financial Obligations — Consumer Debt Proposals
I hope you enjoyed our consumer debt proposals Brandon’s Blog.
There are many financial blogs. Ours focuses mainly on issues of importance to those individuals and businesses with financial challenges or worse, financial hardship, caused by debt problems. Income and cash flow shortages are critical issues facing Canadians, be they employees, entrepreneurs or companies and businesses with debt problems. Are you now worried about just how you or your business are going to survive? Those concerns are obviously on your mind. Coming out of the pandemic, we are now worried about its economic effects of inflation and a potential recession.
The Ira Smith Team understands these concerns. More significantly, we know the requirements of the business owner or the individual that has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.
It is not your fault you can’t fix this problem on your own. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team makes use of new contemporary ways to get you out of your debt problems while avoiding bankruptcy. We can get you debt relief now.
We have helped many entrepreneurs and their insolvent companies who thought that consulting with a trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.
We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.
We understand that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.
Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, Starting Over, Starting Now.
