Consumer proposals can be offered in many ways. The conventional way is to offer payments over a period of time, up to five years. However, there’s little to restrict a bit of creativity in a consumer proposal.
In fact, proposals to creditors can be offered in as little as one payment.
Filing a consumer proposal as a lump sum can be a good option for someone who has access to some cash but not enough to be able to pay off the debt in full.
A lump sum can be sourced in many ways, such as from the sale of an asset like a house, car, RRSPs, recreational vehicles or business sale. Perhaps a family member who’s willing to help you, or maybe you’ve just received a bit of a windfall from a lottery win, inheritance or bonus from work.
The advantage of offering a proposal as a lump sum or over a shorter period of time, is the affect on your credit rating. A consumer proposal stays on your credit file for 3 years after you’ve paid off the proposal, so the faster the proposal is completed, the faster it comes off your credit report.
A further advantage to a lump sum proposal is that it may increase the chances of your creditors agreeing to the proposal. It would make sense that creditors would like the money owed to them as fast as possible; so by offering what you can, as soon as you can, your proposal may be looked upon more favorably by your creditors. Furthermore, you may have to offer more in total if you want to spread your proposal payments over a longer period of time to give the creditors incentive to accept a proposal that will run over a longer time frame.
It’s worth considering too, that if you offer a proposal over a longer time frame like four or five years, there’s a lot of time where circumstances could potentially change, which may put the proposal at risk if you’re not prepared. A job loss, marital breakdown and medical problems during a proposal all have the potential to jeopardize your good faith efforts to repay your debt.
A lump sum proposal allows you to move on faster. It’s a flexible way of putting the past behind you and gives you financial freedom sooner, allowing you to get a fresh start.
If you think a lump sum consumer proposal is the right option for you, or you just want more information, contact a local consumer proposal administrator to discuss all of your options and come up with a plan that’s right for you.