Unsecured debts are not tied to any asset that you own, like your home or automobile.
Student loans, which are also unsecured debts, can only be resolved by a consumer proposal if you have been out of school for seven years on the date you file the consumer proposal. This means that if you have been out of school for 7 years and decide to include your student loans when you file for a consumer proposal, your student loan creditor can receive a share of the proceeds and the student loan amount will be automatically discharged after the payment period.
Secured debts, like a car loan or home mortgage, cannot be included in a proposal. They are backed by an asset, like your car or your house.
How will a Consumer Proposal impact my credit?
A note will appear on your credit report that you are making payments on a Consumer Proposal. This will be seen as an R7 rating on all the debts included in the proposal. This will stay on your record for the full length of your payment period and for an additional 2 years after you have successfully completed the proposal.
Obviously, a Consumer Proposal will have a negative effect on your credit score in such a way that it tells creditors that you do not currently have the ability to pay your debts the way the contract originally required. However, the damage to your credit is generally not quite as onerous to you as would be due to a bankruptcy. Essentially, there is a difference between a bankruptcy and the settlement effected by a consumer proposal.
Licensed Insolvency Trustees and Consumer Proposals
In Canada a consumer proposal can only be administered by a Licensed Insolvency Trustee. A LIT is registered with and licensed by the Federal government to perform insolvency procedures under the Bankruptcy and Insolvency Act of Canada (BIA).
If you decide to file a consumer proposal, a Licensed Insolvency Trustee will:
- Draft the settlement offer to show your creditors how much you can pay each month and to make an offer for reducing the principal amount.
- Certify that you have considered all your options.
- Review and recommend the proposal to your creditors.
- File the necessary documents with the government to officially start the proceeding.
- Submit the proposal to your creditors and administer the entire process which includes accepting and reviewing all claims and recording the creditors’ response to your consumer proposal offer.
- Receive your monthly payments and disburse the money to your unsecured creditors.
- Provide at least two counselling sessions for your benefit.
- Certify the completion of the payments and
- File the completion certificate that will legally release you from all the unsecured debt covered in your consumer proposal.
Contact Us for More Information About Filing for a Consumer Proposal in Toronto
When you are looking for a solution to solve your financial troubles, filing a Consumer Proposal in Toronto may be a viable option for you. But that is something that only a Licensed Insolvency Trustee can properly determine after a thorough review of your financial situation.
Call Richard Killen & Associates to help you figure out how a proposal could work for you and your family. Talk to our team to discover all your options including consolidation loans, a consumer proposal, credit counseling and personal bankruptcy to help you choose which option is best suited for your individual circumstances.
Your initial consultation with us is free of charge and we can arrange an appointment in the evenings if that is more convenient for you. We want you to know that we make every effort to make you feel as comfortable as possible.
Richard Killen & Associates has debt counseling offices located across the Greater Toronto Area including Toronto, Scarborough, Mississauga, North York, Brampton, Georgetown and Pickering.
Contact us now and speak to a Licensed Insolvency Trustee through one of our offices and you will find out that making the call will be the most stress relieving call you will ever make!