Federal government statistics show that consumer proposals now represent approximately 40% of new personal insolvnecy files across Canada. This is a trend that has been developing for several years because of a variety of factors.
1. No interest on unsecured debt – many times people have come to our office having tried desparately to repay their debts only to have seen their payments eroded by interest or penalties. The filing of a consumer proposal puts a stay of proceedings into effect such that there is no further interest on unsecured debt. This allows a person that has a desire to repay all, or a portion, of their debts the mechanism to do so with a fixed schedule in place, once the consumer proposal is approved by unsecured creditors.
2. Bankruptcy now lasts longer – changes to the federal law have provided that some bankruptcies will last longer if a person has surplus income. What used to be a nine month bankruptcy process can now go as long as twenty one or thirty six months depending on circumstances. Please contact a local trustee for details on this point. As a result, filing a consumer proposal, and not a bankruptcy assignment, can become attractive.
3. It just sounds better – a consumer proposal will give a person the same protection from unsecured creditors that would be received in a bankruptcy filing. This includes income taxes.
To see if a consumer proposal is right for your situation, contact a local trustee to discuss.