When you’re deep in debt, it’s easy to think there’s no way out. However, one option to consider is a consumer proposal. In Winnipeg, thousands of people have filed consumer proposals to help them get out of debt.
A consumer proposal is a legal agreement, prepared by a licensed insolvency trustee, between you and your creditors. It allows you to settle your unsecured debts for less than you owe. Many people prefer this over a bankruptcy because it allows them to keep their possessions.
There are other benefits to a consumer proposal. Here are four things a consumer proposal can help you do:
1. Pay off debts.
Unlike a bankruptcy, a consumer proposal helps you pay off your debts instead of discharging them. One of the biggest benefits of a consumer proposal is the ability to make repaying your debts affordable. A licensed insolvency trustee will work with you to determine a monthly amount you can afford to pay. If your proposal is accepted, instead of making payments to your creditors, you make one monthly payment to your trustee. The trustee then distributes the money to your creditors.
A consumer proposal can last up to five years. After this time, your debts are paid off.
2. Stop creditors from calling.
When you’re behind on payments, constant calls from creditors can be extremely stressful, especially if you don’t know how you’re going to pay them. There are only two ways to legally stop creditors from contacting you in Manitoba—a bankruptcy or a consumer proposal.
Once you file a consumer proposal, your trustee will contact your creditors. By law, they must cease all collection activities. This includes phone calls, wage garnishment, letters, and more. For many people, this is a welcome relief that alleviates a great deal of stress.
3. Avoid bankruptcy.
A consumer proposal is often used as a way to avoid bankruptcy. A bankruptcy means a loss for creditors, so most consumer proposals are accepted because they allow creditors to recover more money than they would from a bankruptcy. By avoiding bankruptcy, you can keep your possessions.
A consumer proposal also allows you more flexibility than a bankruptcy. You do not have to report your income or make surplus income payments. If your circumstances change and you can afford to pay off your proposal earlier, you can begin to repair your credit faster.
4. Learn better money management skills.
Credit counseling is one of the requirements of a consumer proposal. These two sessions take place with your trustee. Here, your trustee will help you understand how your debt became out of control, and then discuss what you can do to avoid credit problems in the future. You’ll discuss money management, credit usage, debt and interest, budgeting, and other valuable personal finance tips.
If your debt problems are becoming too much to bear, you may want to consider a consumer proposal. In Winnipeg, licensed insolvency trustees can help you decide if this is the right option for you.