You could suffer a significant reduction in income by getting hurt or sick, or experience job loss and or a marital separation. Many still have an income, just not the capacity to pay back the debts they originally contracted.
A consumer proposal is an excellent option, says Nathan Sugeng, a Licensed Insolvency Trustee (LIT). A legally binding agreement, it allows you to repay your creditors a percentage of what is owed in exchange for full debt forgiveness.
With this program it is possible to write off as much as 70% of what you owe. It can eliminate almost all unsecured debts, including credit card debts, bank loans, payday loans, tax debts and certain student loan debts. It does not affect the mortgage on your principal residence or a secured car loan; you are allowed to keep your assets, including your tax refund.
The program operates under federal law and is regulated by Industry Canada. Because it is a legal process, it puts a stop to collection calls, wage garnishment, and any legal action that may have been undertaken by your creditors to collect.
The only way to file a consumer proposal is through a trustee; LITs themselves are highly regulated by the government. They make sure the amounts they settle are fair both for the person filing and the creditors.
A debtor may realize they don’t have the budget or capacity to pay back their debts in full, but they are willing to pay something. If, for example, they owe $100,000 to various creditors, they may only be able to pay back $50,000.
“A lot of people inherently do want to pay,” says Sugeng. “They want to pay back what they can while still being able to look after their family. They’re not coming to a trustee to get a free ride or get a get out of jail free card. Unfortunately some people encounter an adverse event in their life that has affected their ability to pay.”
Your trustee will help you determine the amount to be paid back, taking your assets and day-to-day living expenses into account. They will propose a monthly amount that is affordable for you. Payments can be spread out over a maximum of five years and the full repayment period is interest-free.
A trustee helps the consumer put together an offer to their creditors to settle their debts, which is then put to their creditors as a group. The group votes on whether to accept the proposal or not and your trustee handles the negotiation process.
With a consumer proposal, the creditor gets more than they would receive in a bankruptcy and the person filing gets some much-needed financial relief.
When you meet with a trustee, the consultation is free. They’ll spend about an hour asking questions and getting to know your financial situation, then they’ll formulate a plan to help. You will not make any payments up front; trustees don’t get paid until the work starts.
You may even discover your financial situation isn’t as dire as you thought. A trustee will share financial advice and help get you on the right track.
Be sure to choose a licensed operator. The license is not something to be feared, Sugeng assures, it simply means your trustee is being regulated by Industry Canada and overseen by the government, which is a good thing. They are held to a higher standard and are audited on a frequent basis.
Lastly, reaching out to an insolvency firm doesn’t mean you’ve done anything wrong. The phone call to book the appointment is often the hardest part. Most feel a huge sense of relief after speaking with a trustee and wish they’d done it sooner.
Call Fontaine & Associates to book your free consultation today.