The economic impact of COVID-19 has us answering a lot of questions about consumer proposals. The pandemic has impacted every person, every family in one way or another. The consumer proposal process can appear confusing and scary when someone first starts researching however it really isn't. It’s not something that’s widely discussed in casual conversation, and even though we have been doing consumer proposals in Calgary for over two decades, we are constantly educating people about how easy the process is and how it can improve their financial situation.
There are so many myths floating around that are propagated by the fear and shame of insolvency, and to make the situation even trickier, there are scores of less-than-truthful organizations out there who prey on this lack of knowledge and say they’ll get you out of debt but don’t have the backing of a Licensed Insolvency Trustee, or the Office of the Superintendent of Bankruptcy.
So we sat down and looked at some of the most common questions about consumer proposals that we get asked from people in Alberta. At BNA Debt Solutions, it’s our mission to not only help you conquer your debt but to also educate everyone who comes into our office about what tools are at your disposal, even if you’re not quite ready to start the process. Our compassionate and knowledgeable staff are with you every step of the way to make this process as seamless as possible for you.
1. What debt can I include in a consumer proposal?
Essentially all your unsecured debts must be included but some, court fines, etc, will survive and not be written off in the process. You can not pick and choose which debts to include. Taxes, cell phones, utilities, lines of credit, credit cards, mortgage shortfalls, car deficiencies, anything unsecured must be included. Secured debts must be recorded but if you want to keep the item that is secured, you must continue to make the payment on that item. Car, house, boat, motorbike, trailer, etc. If you are upside down on the loan (you owe much more than it is worth) this is the only time you can forfeit the item and walk away from the outstanding balance. Fines will survive and need to be paid before driving privileges are reinstated. As well, maintenance and child support can be included but will survive and will need to be paid in full. Student Finance debt will survive if you have been out of school less than 7 years but during the proposal, you are protected from collection proceedings. Interest continues to accrue and should be paid during the proposal.
2. Can you buy a house while in a consumer proposal?
Legally there is nothing that would not allow you to buy a house while in a consumer proposal, however, you may have difficulty as you won’t have the credit rating to be approved for the mortgage. Most creditors will not approve you for a mortgage while you are in a proposal. You can renew a mortgage though, while in a proposal, but your interest rate may be affected. We often advise clients to renew their mortgages first before filing one. During the proposal, you can save towards the down payment and then apply for mortgage approval afterward. If you have included a mortgage shortfall in a proposal or bankruptcy you may not qualify for further CMHC insurance in which case you will need a bigger deposit. Often, consumers are told by banks and other financial institutions that they can’t borrow money while in an undischarged bankruptcy or in a consumer proposal. But that’s not entirely true. Ultimately it depends on the lender — some lenders will be unwilling to take the risk.
3. Can I apply for credit while in a consumer proposal?
You can apply for credit while in a consumer proposal but probably won’t be approved unless it is secured by a prepaid balance. The whole program was designed to help a debtor get out of overwhelming debt, not acquire more. We understand that often you need access to a credit card to rent a car, make online purchases, etc. Most debit cards have this option now. If you apply for more than $1,000.00 in credit while in a proposal you are legally obligated to tell them you are in a proposal.
4. What is the Qualification for a Consumer Proposal?
Legally you must owe at least $1,000.00 meets the qualification for a consumer proposal but practically, we would never let anyone file a process under the legislation for $1,000.00 and take the hit on their credit rating. A minimum of $10,000 is more likely. You must also have the ability to pay something every month towards your proposal. If you don’t, but need protection from your creditors we have the option of filing bankruptcy and converting it to a Consumer Proposal once you have the ability to pay. Any individual who is bankrupt or insolvent and whose aggregate debts, excluding any debts secured by the individual’s principal residence, are not more than $250,000 meets the qualification for a consumer proposal. If you owe more than that, we have other processes to help you.Realistically unless you have a wage garnishment that you need to have stopped, filing a consumer proposal for a small amount (less than $10,000) may not be in your best interest.
Help Us to Help You
At BNA Debt Solutions, we are one of Alberta’s top experts on consumer proposals and personal bankruptcy. Our goal is to help Albertans eliminate debt, end creditor calls, and provide sound education to those seeking financial freedom.
Do you have any other questions about consumer proposals that we didn’t answer today? Ask away! You can message us any time and we’ll give you our best answer. Better yet, book a consultation with a Licensed Insolvency Trustee, and get our team working for you, today.