Effective Ways to Reduce Debt in Canada
Managing debts can be a daunting task. There are several effective ways to Reduce Debt. One of the options is going for debt consolidation loan. This option is expensive as you will be solving one problem while creating an even bigger one. Another option is filing for bankruptcy. Whereas filing for bankruptcy can help you reduce your debt, it might deprive you the right to your assets. The final and best option is filing for consumer proposal.
What is a consumer proposal?
A consumer proposal is a document drafted to your creditors detailing how you’re going to repay your debts. If your proposal is accepted by your creditors, you’ll be making a single monthly payment up to 5 years. The money you pay will be shared among your creditors. This will probably enable you save up to 70% of your income.
Consumer proposal is filled by a Licensed Insolvency Trustee. As such, a consumer proposal is a legal binding document. If you’ll like to file for a consumer proposal, you will need licensed insolvency trustees to help you.
The process of filling for a consumer proposal
- Meet the trustees — the first step of filing a consumer proposal is meeting with he trustees. This is where the trustees will help you review options available and update you on the proposal process.
- Preparing for a repayment plan — you need a clear, realistic and achievable debt repayment plan. Licensed insolvency trustees will help you design a repayment plan that is likely to work. You will, therefore, know what you’re getting into.
- File consumer proposal — the third step is filing for a consumer proposal. You need to propose to your creditors how you are going to repay their money. This step entails giving your creditors a clear repayment map that they can trust. If they accept your payment plan, you can end threatening and harassing calls from your creditors. Remember, you don’t need all creditors to accept your proposal to be legally binding to everyone. If 50% of the creditors accept your proposal, then the remaining ones are legally bound to accept. You can now begin repaying your debt as agreed in the proposal.
- If you are prompt in paying your scheduled repayments within a period stipulated in the proposal, the remaining balances will be forgiven although there are some few exceptions. After making all payments as agreed, you’ll get a certificate of completion. This is what will complete the consumer proposal process.
Benefits of a consumer proposal
- Keep your assets
According to Todd Sheriff from Sheriff Sole & Madej Inc, filing for a consumer invoice helps you keep all your assets. You don’t have to forfeit your rights to the assets you own. You can control and enjoy them even as you repay your debts. This is not possible with bankruptcy.
2. Low monthly payments
A consumer proposal allows you to negotiate the amount of money you’re able to pay on a monthly basis. You don’t have to be compelled to pay huge amounts that can be too heavy for you to bear. You can lead a peaceful life even as you service your debts.
3. Keep surplus income
Consumer proposal doesn’t compel you to pay more if your income increases. You have fixed amount of money to repay each month. This means that you can reinvest your money if your income increases. Basically, you have control of surplus income that comes your way.
Disadvantages of a consumer proposal
As a way of how to reduce your debt, filing for a consumer proposal has its downside as well. One of the downsides of a consumer proposal is the repayment period. Repaying your debt for five years can be long. Filing for a bankruptcy may lead to faster repayment. The good thing, though, is that you can service your debts faster if you get more money along the way.
Who qualifies for a consumer proposal?
There are some specific consumer proposal requirements you must meet before filing for one. Here are some of them.
· Be able to pay a portion of your debt in a monthly basis.
· Do not exceed unsecured debts of $250,000.
· Have debts that exceed what you own.
Although these are some of the requirements you must meet, there are other things that are important. The best way of knowing whether you qualify for a consumer proposal or not is by talking to licensed insolvency trustees.
As you can see, you don’t have to file for bankruptcy. Filing for a consumer proposal is a good alternative. Besides, you will enjoy benefits that bankruptcy can’t offer you. If you would like to file for a proposal, therefore, it’s good to talk to licensed insolvency trustees. Licensed insolvency trustees will help you know how to reduce debt peacefully.