A Consumer Proposal May Be Your Best Bet

  • By Jillian Taylor-Mancusi

 

Most Winnipeg residents in deep financial trouble do all they can to stay out of bankruptcy.  Often, they just don’t know that bankruptcy is a cost-effective way to deal with debt.  They hear ads for solutions that reduce debt and monthly payments without bankruptcy but these ads don’t tell you that debt settlement plans offer no legal protection from your creditors.  You can enroll and still find one of your creditors garnishing your wages.  Another solution offers the same benefits without the risk.  It is called a Winnipeg consumer proposal.

Bankruptcy works well for people with few assets and moderate-income because the major disadvantage to bankruptcy is asset loss.  The fact is, if you have expensive possessions, you could lose some of them in bankruptcy.  The government added consumer proposals to bankruptcy laws to help.  With a proposal, you keep all you own.

Proposals basically work the same way as debt settlement plans.  You meet with a professional debt consultant.  In Canada, the same people that manage bankruptcies, licensed insolvency trustees, also manage proposals. Trustees review your financial circumstances in detail and determine a monthly payment you can afford to make.  The trustee then presents the proposal, with a reduced overall amount, to your unsecured creditors. Upon approval by a majority, the proposal becomes binding on all of your creditors. The single payment you make to the trustee each month replaces the payments you were making to each unsecured creditor.  A proposal can last up to, but no more than, five years.

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Once a majority of creditors agrees, all must honor the proposal by law.  That means none can change their minds and garnish your wages later.  They cannot sue you.  They cannot even contact you directly.  All you have to do is continue to make the new monthly payment to the trustee to maintain the agreement.

Legal protection is not the only advantage of a Winnipeg or Kenora consumer proposal.  With a proposal, you know the trustee is a qualified professional. It will also cost you less than one of those debt settlement plans you see advertised on television. The government regulates fees for a Consumer Proposal.  Many debt settlement plans have monthly maintenance fees, charge enrollment fees, and/or charge commissions from 20% to 30% on the amount of debt reduction they get from each creditor.  A good rule of thumb for trustee fees in a proposal is 20% of your total payments.  A trustee can tell you what the total cost would be.  An initial consultation with a Winnipeg bankruptcy trustee is free of charge.  You have nothing to lose by scheduling an appointment.

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