How often have you thought that if you consolidate your debts that it would be the solution to your financial problems? There are two methods of consolidation that most people know, getting a bank loan or getting additional mortgage financing. But if these are not possible, is there another solution? A consumer proposal is a good alternative for consolidating debts.
Why Consolidate with a Consumer Proposal
There are a number of reasons to consolidate through a consumer proposal. First, you will be able to arrange a monthly payment that you can afford. This payment will go to the principle amount owed not just interest. Second, it is an agreement with your creditors. Therefore at least half of your creditors agreed to the proposal. Third, because it is a court approved agreement, it is binding on all of your creditors, even if they were not in favor. Finally, you will be debt free at the end of the proposal. With bank consolidations, normally you retain the credit cards. They get paid off and while you are paying the consolidation loan, the credit cards get used and you may end up with more debt then you originally had. The purpose of consolidating is to be free from debt. A consumer proposal will do that.
How to Consolidate with a Consumer Proposal
Your first step towards filing a consumer proposal is to meet with a trustee for a consultation. Why a bankruptcy trustee? Because a consumer proposal is a court approved agreement, it must be administered by an officer of the court. The officer of the court chosen in the legislation is a bankruptcy trustee. That does not make the consumer proposal a bankruptcy. It is not, it is an agreement acceptable to the creditors and the debtor. All unsecured debts must be included in the consumer proposal. You are able to retain all of your assets when you file the proposal. At the consultation, it is free at Hoyes Michalos, the trustee or his assistant will review your situation and recommend how much you should pay in a consumer proposal. If you are in agreement, there is information and documents that you will have to provide. Once provided, the documents will be drawn up and you will come in for the signing and the filing of the proposal.
When to Consolidate with a Consumer Proposal
The best time to consolidate your debts is when you realize that the principle is not going down and that you cannot adjust your lifestyle to change that. Most people will wait until their pay has been garnisheed or until their debts are at least in collections before they pursue a consumer proposal. Often I have been told by a client that I should have done this a year ago, often longer. What people do not realize until they are into their consumer proposal is how much stress financial difficulties cause. So when you realize that you are in the credit cycle and can’t get out, see a bankruptcy trustee about a consumer proposal.