In my last blog I talked about someone who was probably going to file a bankruptcy but then who might do a proposal. What are the items that I check off if I feel someone is better suited for a proposal?
Here are features I look for:
- A bankruptcy would cost more than the person’s cash flow could support. In other words their expenses including the payment required in a bankruptcy would be more than they are earning.
- Their debt is too high to pay under a Debt Management Plan with a credit counselor, but is not high enough to make the required proposal payment out of reach for the household budget.
- There is equity in an asset that the debtor wishes to keep. This could be equity in a house, RESP contributions for their children’s education, contributions to a RSP in the last twelve months, or other investments that the debtor feels they have worked for and would like to keep.
- There are student loans involved and making a proposal to all the creditors will help pay down the student loan debt so that they are either paid off or there is not much owing by the end of the proposal. If student loans are less than 7 years old, a bankruptcy or proposal might take care of the other debts, but during that time interest will continue to accumulate on the student loan debt. If student loans participate in a proposal, they will hopefully be paid more than the interest costs during the same period of time.
- The debtor is just committed to paying down a portion of the debt. There is really not much difference to a credit rating between a personal bankruptcy and a consumer proposal, but it often just makes people feel better knowing they have paid down some of the monies they borrowed.
If you have questions about consumer proposals, you can find general information at this location on our website – http://consumer-proposals.org/consumer-proposal-questions.htm .
If you have questions about your situation and whether you would be a candidate for a consumer proposal, give us a call. I will review your situation and be happy to let you know if you “fit” my checklist for a proposal.
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