One of the biggest concerns people have when facing financial difficulty is what happens to their assets. Often, when considering a consumer proposal, they will ask: “do I surrender or lose any assets?” This is a legitimate concern; the protection of our assets is essential for our future. People like to have a car, so they can get to work; a house they can call home; and retirement savings to use at a future date. No one wants to lost their assets.
Luckily, the answer to that question is: “no, you do not have to surrender any assets in a consumer proposal”. Not having to surrender assets is one of the main reasons why people choose consumer proposals over other debt relief options. It is an affordable offer made by debtors to settle their unsecured debts with their creditors. In exchange for making agreed upon payments, the debtor keeps all of their belongings. They are designed to protect all of your assets including RESPs, investments, windfalls, expensive cars, and equity in your home. (RRSP’s are already an exempt asset except for recent contributions so are your’s to keep whether you file a bankruptcy or consumer proposal).
Can I keep paying my car loan or mortgage?
Consumer proposals also allow debtors to make the payments on their secured debts (such as a car loan or mortgage) by helping them balance their budget again. People often ask if the car loan lender or mortgage company can take your vehicle or house after you file a consumer proposal? If you maintain your payments and keep them in good standing, then no, they are restricted by government law from taking your car or house. These secured debts are not part of the consumer proposal settlement; they are maintained separately, outside of the proposal.
What happens if I cannot make the payments on my secured debts?
There are cases, however, where someone’s situation has changed so much that they can no longer afford the loan on their car, or the mortgage on their house. In these cases, the creditor will take the asset back, sell it off, and then try to collect on any shortfall left on the loan. In a perfect case, this happens prior to the filing of a proposal and when it does, once the asset is returned, the shortfall debt becomes an unsecured debt, which can then be included and dealt with as a part of the consumer proposal. So it is important to know you can surrender a secured asset such as a vehicle or house before your proposal begins, if it’s something you need to do in order to improve your finances for the long term. However, it is your choice whether or not you wish to surrender the secured item. If you don’t, you must keep up with the payments. If you default after your proposal is filed you will still be responsible for any unsecured shortfall.
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If you are looking for a solution to deal with your debts while protecting your assets, then a consumer proposal might be right for you. Moreover, it is a government debt relief program designed to help Canadians obtain a fresh financial start. Meet with a licensed insolvency trustee to discuss your financial situation to find out if a consumer proposal is the right option for you. The initial consultation is always free.