Consumers in Manitoba carry an average of $18,312 in consumer debt. While that might be the lowest amount among all provinces across the country, it’s still a hefty load to carry, especially since this doesn’t even include mortgage debt.
With a higher amount of debt comes a higher chance of defaulting on loan payments. A higher debt load places added stresses on a consumer’s bank account, which can make it more difficult to keep up with payments. Even just one late or missed payment can have a significant impact on a credit score. And with missed payments comes the risk of falling into financial disarray.
Click here to find out what happens when you miss a mortgage payment.
Unfortunately, many Manitobans are finding it difficult to make their monthly payments on a regular basis. While they might have enough of an income to cover their payments, they’re just scraping by. Even the slightest dip in income or unexpected cost can lead to a slew of missed payments.
While this sounds like a dire situation, there are options available to Manitobans who are searching for an answer to solve their debt problems and one of them is to file a consumer proposal.
What is a Consumer Proposal?
Simply put, a consumer proposal in Manitoba involves asking creditors to reduce an outstanding debt amount in order to make it easier for consumers to repay their debts. You would put a proposal together and submit it to your current creditors, requesting to have your debt load lightened.
A Manitoba consumer proposal is a legally binding process that must be carried out by a Licensed Insolvency Trustee (LIT) who will work with you to come up with a sound offer for your creditors in hopes of paying back only a certain amount of what you still owe them. You may also request to have the amount of time needed to pay off the debt amount extended to make things easier for you to repay your outstanding balance.
Your creditors may accept or reject your proposal. If they have a problem with your proposal, they will need to participate in a meeting of creditors in order to express their reasons for objecting to your request to alleviate your debt. If, on the other hand, they agree to your proposal and accept, no meeting is required to take place.
Why Choose a Consumer Proposal Over Bankruptcy?
Bankruptcy is usually the last resort when it comes to dealing with overwhelming debt. This process typically involves alleviating your debt so that you are no longer required to make any payments to the creditors involved. The problem with bankruptcy is that you will likely lose many of your valuable assets, including your vehicle and home, or at least much of the equity in such assets.
Whether you decide to file for bankruptcy or a Manitoba consumer proposal, you can still benefit from being protected from the courts. Your creditors will not be able to take you to court and sue you for monies owed to them when you file any one of these two processes. You’ll also be free of any further calls from collection agencies demanding you to repay your debts. These are the two debt relief solutions that consumers can take advantage of in order to obtain such protections.
There are a few reasons why a consumer proposal might be a better choice than bankruptcy:
No need to submit all your pay stubs – With bankruptcy, you would be required to hand in all your monthly income statements to your trustee, including your paystubs, which is not the case with a consumer proposal.
You can keep your assets – With a consumer proposal, you won’t have to worry about losing all of your valuable assets. When you file for bankruptcy, on the other hand, you stand to lose many of your valuable possessions, with certain exceptions. This is one of the biggest reasons why Manitobans choose consumer proposals over bankruptcy.
Bankruptcy is a drastic solution and often the last resort, so avoiding bankruptcy is often preferred if possible. Consumer proposals can help consumers avoid bankruptcy while resolving their debt issues.
If you absolutely need to consider bankruptcy in Manitoba, read this.
Is a Manitoba Consumer Proposal Right For You?
If you’re considering a consumer proposal in Manitoba, you need to make sure you fit the bill first. There are certain requirements that Manitobans need to meet before filing a consumer proposal:
- Your total debt must not exceed $250,000 ($500,000 for couples);
- You must have proof that you are unable to make your monthly bill payments.
If you meet these requirements, you may continue with a consumer proposal. But in order for it to go through, your creditors must accept it. If not, you may need to seek other resolutions.
Just keep in mind that consumer proposals take a while to go through. With bankruptcy, you can typically expect to be discharged after nine months. With a consumer proposal, on the other hand, it can take three to five years to have your debt repaid and settled. That means it takes longer to start rebuilding your credit after a consumer proposal compared to bankruptcy.
How exactly will a consumer proposal affect your credit? Click here to learn the answer.
Final Thoughts
Like bankruptcy, consumer proposals require careful consideration before you file. Your credit will suffer and it will take a few years before you can start getting back onto a sound financial path.
Having said that, a consumer proposal can be a great way to alleviate you of your debt so you no longer have to be subject to collection calls and threats of litigation. A consumer proposal can also help you deal with your financial troubles so you don’t have to continue stressing over your mounting debt.
