Alternatives to Bankruptcy in Edmonton: Consumer Proposals

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There is a number of alternatives to bankruptcy available to Edmonton and the area residents with financial difficulties; and, while the residents not rarely opt for Orderly Payment of Debts or some other bankruptcy alternative, the most popular option still seems to be consumer proposal. Of course, it is imperative that you find the solution that best fits your situation.

Why are consumer proposals #1 bankruptcy alternative?

Over the past few years we have seen a significant increase in the number of people who have chosen a proposal over a personal bankruptcy, and this is a trend we believe will continue. Whether this is because people feel more comfortable making an effort to repay a portion of their debts or knowing exactly what their monthly cost is going to be, or simply that they prefer to avoid the stigma of a bankruptcy - yet, a consumer proposal has become a very common mechanism to deal with financial problems.

Who can file a consumer proposal?

A proposal is typically best suited to those who have a good job, can afford to repay a portion of their debts or simply need a break from the interest and an extended amount of time to make the necessary payments. Normally we find that a consumer proposal works best for people who have debts in excess of $10,000, but we have often offered smaller proposals for those who simply want to avoid a bankruptcy at all costs.

Advantages of proposals over bankruptcy and/or other alternatives to bankruptcy

The following are some of advantages of a consumer proposal:

  • Lasts for a maximum period of 5 years
  • Generally is accepted by creditors
  • Interest is frozen from the date of filing
  • Negotiations can be made to only pay back a portion of the debt
  • Wage garnishments are immediately stopped
  • Creditors are "stayed" and cannot pursue further legal action

Filing a consumer proposal: the process

At the beginning of the process of filing a consumer proposal, we will help you to summarize your financial situation and determine the amount that you can afford to pay back each month. If the numbers seem acceptable to both you and your creditors, we will prepare the proposal. Within the proposal you must list all of your unsecured creditors. You will find very few creditors whose debts cannot be cleared through the proposal process.

Once the consumer proposal is filed, your creditors then have 45 days to vote for or against it. If a majority votes in favour of it, then it is considered acceptable by all creditors. In most cases the proposal will be accepted, as your creditors realize they would receive even less in a bankruptcy. Once accepted by creditors, your proposal has to be approved by court, but this is typically a very simple process. After it is approved by the court you and your creditors are bound to the terms of the proposal.

In situations where 25% or more of your creditors do not vote in favour of your proposal, we will call a meeting of creditors. You must attend this meeting and together we will help to negotiate an arrangement that will be acceptable to both you and your creditors.

Once the proposal is in place, you are permitted to miss up to two payments during the proposal, and we will simply add two payments onto the end. However, if you miss any more than two, the proposal collapses and is automatically annulled by the court. Your creditors may then apply to the court to garnish your wages, and interest charges are added to debts all the way back to the day you filed.

Effects of a proposal on credit rating

From the date you file the proposal, your credit rating will be adjusted to reflect your current situation, and will stay that way for the duration of the process. Once the proposal is finished, these comments will be listed with the credit bureau for a maximum of 3 years, but with a little effort you will find most people are able to reestablish this rating, repair the credit, on a substantially quicker basis.

Cost of filing consumer proposal

The costs to administer a proposal are based on a tariff that is set by the Bankruptcy and Insolvency Act and are calculated out of the monies that are offered to your creditors.

We at Goth & Company Inc. believe that getting best possible advice is imperative for our clients while trying to deal with their financial problems.

If you are experiencing financial difficulties, and are considering a consumer proposal or other alternatives to bankruptcy, please contact our licensed trustees in Edmonton - knowing that they will work with you to determine the best possible solution to get you back on track, and to ensure that difficulties do not happen again. Call for a free of charge consultation today.