Consumer Proposals – where you repay less than owed at 0% interest.

Are you making minimum payments on debt but cannot seem to substantially reduce the balance owed?  With the rising cost of living, many need to use a greater share of their income just to cover basic living expenses leaving very little for extra payments to reduce higher interest debt on credit cards, loans or lines of credit.  If you have not been able to consolidate higher interest debt into a new loan with favourable terms and payments you can actually afford, you might want to consider a Consumer Proposal.

A Consumer Proposal is a formal offer to your creditors filed with a licensed insolvency trustee to essentially settle your debt for amount you can actually afford to pay which reflects your current financial situation.  To illustrate, lets assume an individual has $40,000 owing on various credit card accounts with average interest rates of 19% requiring minimum monthly payments equal to 2% of the balance owed.  At this rate, the individual would pay at least $800 per month to simply service the debt but it would take in excess of 30 years to become credit card debt free.  If this individual earned $50,000 gross per year, their net pay after mandatory deductions and benefits might equate to approximately $3100 per month and after minimum credit card payments of $800, only $2300 would remain to cover all other expenses.  Besides basic living expenses, would there be anything left over to save for emergencies or retirement?  Likely not, which is why status quo is not a realistic option especially if it comes at the expense of not being able to meet other financial goals.

Rather than status quo whereby this individual might never be able to repay their credit card debt in full or start saving for emergencies or retirement, they could file a Consumer Proposal.  For example, this individual might file a Consumer Proposal offering a total of $15,000 payable at the minimum rate of $250 per month for 60 months, with the option to pay off sooner at any time funds become available without penalty.  In a Consumer Proposal, creditors receive one vote per $1 owed and as long as 50.1% or more creditors vote to accept, the proposal will become legally binding on all creditors.  Whether the individual pays the $15,000 over 60 months or 20 months, there is no interest paid on the proposal offer and if their income increased substantially or they received a windfall, they would not be required to repay any more than what was initially agreed upon.  Filing a Consumer Proposal rather than status quo would free up substantial cash-flow on a monthly basis that could be re-allocated to build a realistic budget, save for emergencies and other financial goals that might have once seemed to be out of reach.
Every financial situation is different and there are many variables to consider but if you are looking for debt relief, a Consumer Proposal might be a viable option worth consideration.

If you are looking for advice, or a second opinion about your debt, it does not cost anything to talk about your options.  Every financial situation is unique and viable options can differ from person to person.  A conversation free of judgment and cost, is the first step to determine options for debt that make sense for you.  For a free consultation, please call or text (506) 645-1814 or email jaime@tackledebt.ca; or visit www.tackledebt.ca.