Despite being one of the smallest and slowest-growing provinces by population, New Brunswick has one of the highest debt-delinquencies in the country. Because of this, debt relief services in New Brunswick are in high demand. Most debt relief options are great, but one that is slowly becoming more popular in New Brunswick is the consumer proposal.
Does the Federal Government provide debt relief? Find out here.
In this article, we’re going to take a closer look at consumer proposals, including what they are, how they work, how to know whether you need to file one, and much more. Dealing with any serious debt and debt relief options can be a stressful time, and we hope we can help ease your mind.
What is a Consumer Proposal?
First of all, we need to know what a consumer proposal is.
A consumer proposal in New Brunswick is a formal and legally-binding process that requires the help of a Licensed Insolvency Trustee (also known as LIT). The LIT will help you come up with a proposal, which is an offer to pay your creditors a portion of what you owe (instead of the entire amount) or a request to extend the amount of time you have to pay off your debts. The proposal will also include other details, including the reasons you cannot pay the debt back in full, a new payment schedule, and more.
During a consumer proposal, you don’t actually pay your creditors directly, but instead pay the money to the LIT, who they will then send the money to the creditors. It is a good alternative to bankruptcy and filing one will protect you from debt collectors and the annoyances that they can bring. For example, they won’t be able to garnish wages, no more interest will accumulate, and you are not in jeopardy of losing your home or other assets. Of course, your credit will be diminished for a few years.
What is The Process of a Consumer Proposal in New Brunswick?
So, now that you know what a consumer proposal is, let’s move on to how they work. We feel that the easiest way to describe how a consumer proposal works is by walking you through the process step-by-step. Doing so can also help you or anyone else understand what to expect if they ever have to file one.
As we mentioned, the first thing to do is find yourself a LIT to work with. The LIT that you pick should ideally be someone. If you live in a larger city in New Brunswick, like Moncton or Saint John, there will likely be many different trustee firms to choose from. Next, you should ensure they are truly licensed and experienced, that they charge fair prices for their services, and that you are comfortable working with them.
First Meeting
Now that you have chosen a suitable LIT in New Brunswick, you can begin the consumer proposal process. The next thing to do is provide the LIT will all of your personal information, and the reasons why you need to file a consumer proposal in the first place. Once your LIT is armed with all of that information, they will be able to work with you and start crafting the proposal.
Look here for further information about the consumer proposal initial assessment.
Filing The Proposal in New Brunswick
Next up, the LIT will file the proposal, after which you will stop making payments immediately. Also, any lawsuits or wage garnishment imposed upon you by creditors or debt collectors will stop. Your LIT will then submit the proposal to your creditors, along with a financial report of your situation, which will include the roots of your financial issues and why you cannot pay off your debts in full.
Wait For Acceptance
From there, creditors will have 45 days to accept or reject your proposal. If you owe money to more than one creditor, and one or more of those creditors is owed at least 25% of your total debt, a meeting between the creditors will be held. This meeting will allow each creditor to make a vote on whether they should approve or deny the proposal that you have submitted.
Payment Process
If the proposal is approved, you will be responsible for either paying a lump sum or making monthly payments on a schedule, depending on what was outlined and agreed upon in the proposal. You will also need to attend a minimum of two financial counselling classes.
If your proposal was not accepted, you can make changes to it and resubmit. You can also consider other available options in New Brunswick or simply file for bankruptcy. However, filing for bankruptcy should be your last resort, as it can not only cost you your assets, but your credit will also suffer greatly.
So, why would a creditor ever accept a consumer proposal when they will not be fully repaid? Well, that is because a creditor would rather have you pay back some of the debt that you owe, instead of none of it at all. Of course, this doesn’t mean they are going to accept every proposal that comes their way, so you need to work closely with your LIT to come up with an offer that not only works for you, but also for your creditors.
If you ever do need to file for bankruptcy, here’s how you can rebuild your credit.
How To Know When to File a Consumer Proposal in New Brunswick?
When you are dealing with debt, it can be quite hard to know when you should continue to simply handle it on your own vs. when it is time to ask for help. There is no clear-cut and concrete answer to when you should choose a consumer proposal. It all depends on your unique life and financial situation in New Brunswick.
Read this to discover what debt forgiveness in Canada is.
Some of us struggle with even a relatively small amount of debt, while others are fine taking on thousands of dollars worth of it at a time. You need to take a long hard look at your situation and if you even have a slight feeling that you could use some help, you should reach out to a LIT and have a talk with them to see if they feel you could benefit from a debt relief option in New Brunswick.
Is a Consumer Proposal Right For You?
Before you decide to file a consumer proposal, you must first determine if you meet the necessary qualifications. These include:
- You have consumer debts of over $5000 but under $250,000. Things like mortgages are not counted here
- You have a good job and can afford to make monthly payments if need be
- You simply do not have the ability to pay off your debts in full
- You are unable to get a debt consolidation loan
- You don’t want to go bankrupt for one reason or another
When Should You Choose a Consumer Proposal Over Bankruptcy?
For many people in New Brunswick with insurmountable debt, their mind goes right to bankruptcy. While it is a good option if you don’t qualify for a consumer proposal, there are many situations where a consumer proposal should be chosen over bankruptcy.
If you have many assets that you do not want to lose, you should go with a consumer proposal, as it doesn’t put your assets at risk. If you plan on using credit within the next few years to make large purchases, you should also go with a consumer proposal, as it is much less harmful on your credit than a bankruptcy would be.
Final Thoughts
Consumer proposals in New Brunswick are one of the most helpful debt relief options available to consumers. If you’re looking for more information and want to speak with a professional, Loans Canada can help.
