A certain amount of consumer debt is actually a good thing for the economy. It helps stimulate consumer spending while helping the average person afford purchases that would otherwise be too expensive to cover.
But carrying an excessive debt load can be a financially dangerous situation. Along with too much debt comes an increased risk of being caught up in a dire financial position that can end up in the loss of assets, damaged credit, and the inability to make any further purchases on credit.
Consumer Debt in Prince Edward Island
In Prince Edward Island, the average consumer debt amount is $22,131, which is close to the national average. That’s quite a high amount considering it doesn’t include mortgage debt.
Over $20,000 in debt – along with interest – can take years and even decades to pay down, especially if the interest rate attached to it is high. Credit card debt, in particular, typically comes with exorbitant interest rates, making it extremely difficult to pay down when the numbers have managed to reach such heights.
Read this to learn how you can consolidate your credit card debt.
While many Prince Edward Island consumers with this much debt may be able to comfortably afford their payments every month, others struggle just to make the minimum payments. By making the bare minimum payments, this vicious cycle continues. Principal amounts remain the same while interest charges can make the debt load increase. In situations like these, consumers may need a way out.
For information about the minimum payment trap, look here.
That’s where consumer proposals come into the picture. These debt solutions allow consumers to alleviate their debt in order to finally put an end to threats of litigation and collection calls. Is a consumer proposal in Prince Edward Island right for you?
What Exactly is a Consumer Proposal in Prince Edward Island?
A Prince Edward Island consumer proposal essentially involves filing a proposal and presenting it to creditors in an effort to negotiate a reduced debt amount or an extension of time to pay off the debt. The proposal must be initiated and filed by a Licensed Insolvency Trustee, who will present the proposal to your creditors on your behalf and negotiate for better terms.
Like bankruptcy, consumer proposals are governed under federal law under the Bankruptcy and Insolvency Act, as well as provincial regulations. Once your proposal has been submitted, your creditors have the opportunity to review it and determine whether or not its terms are agreeable. They have 45 days to make their decision, during which time you are no longer required to make any further debt payments.
If your creditors agree to your proposal, you will be afforded immediate protection from any creditors who have threatened to sue you or have your wages garnished in order to have the debt fully repaid. An arrangement will then be made for you to make partial payments of your remaining unsecured debt owing.
Any creditors who wish to dispute your proposal may do so at an arranged meeting of creditors, though such creditors must stake a claim in at least 25% of your debt. At this meeting, such creditors will vote on whether or not to accept or reject the proposal.
Your proposal must be accepted by at least 51% of your creditors in order for it to go through and be accepted. At that point, the courts will approve your Prince Edward Island consumer proposal, after which you immediately start making your scheduled payments to pay off whatever remaining debt is left.
What Do I have to Do to Get a Prince Edward Island Consumer Proposal?
In order to qualify for a consumer proposal in Prince Edward Island, you must:
- Owe less than $250,000 ($500,000 for married couples filing jointly)
- File as an individual and not as a business
- Be insolvent (unable to pay your debts when they are due)
You will also have a set of duties that you are responsible for carrying out. For starters, you will have to attend credit counselling sessions as part of your consumer proposal process. These sessions will teach you how to budget appropriately and handle your finances properly in Prince Edward Island. You will also be obligated to make your payments in full and on time each month. If you miss three payments, you will be considered in default.
Benefits and Drawbacks of Consumer Proposals
There are plenty of advantages of filing for a Prince Edward Island consumer proposal:
- Lower your payments as much as 50%
- Reduce your interest rates
- Extend the amount of time needed to pay off your debt
- End collection calls
- Eliminate any threats of litigation or wage garnishment
- Make easier regular payments
- Be debt free in months
But as advantageous as Prince Edward Island consumer proposals may be, they also have their own set of drawbacks:
- Consumer proposals typically take longer to complete compared to bankruptcy
- You can’t qualify for a consumer proposal if you owe more than $250,000 in debt
- Your credit rating will be affected, though your report will show this note for a shorter time period compared to bankruptcy
Why Choose a Prince Edward Island Consumer Proposal?
There are many reasons why you may want to consider filing a consumer proposal in Prince Edward Island:
- You’re having trouble making your mortgage or loan payments
- Your credit cards are always maxed out
- You’re using your credit card to pay all of your bills
- You’re losing sleep over your debt
Final Thoughts
Being under constant pressure to pay your debt is no way to live. If that sounds like you, it’s important that you speak with a credit counsellor or Licensed Insolvency Trustee to see what your options are. There are plenty of options available to you, including Prince Edward Island consumer proposals. Take the first step towards being debt free today!
