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I never thought I would become insolvent - what individual does? It caught me completely by surprise. I live a modest lifestyle with a part-time job and a home-based business. There is no pleasure boat parked outside, and I live inexpensively.

So, how did I come to face insolvency? Did I earn below the poverty line? No. Did I buy things impulsively? No. Did I spend more than I could repay? Well, actually, yes - although I didn't realize it at the time.

Here's how it happened. Setting out with my home business, several years before, I used credit cards to help with the expenses. And, although I eventually made significant inroads on the card balances when business was good, they had always crept up again (after all, the interest was 20%!). I thought I was doing alright - I made my monthly payments, and sometimes paid more than the minimum. But, without realizing it, I was sometimes using the cards for basic expenses.

What Caused My Own Insolvency? The Unexpected

Specifics vary by individual - it can be job loss, medical expenses for a loved one, or even ill-advised purchases. In my case, the start of the recession in 2008 tipped my precarious finances. Business income nose-dived. Credit card balances rose. Soon I didn't have enough to pay my monthly bills. Worried, I went online to see how Bankruptcy works, and I stumbled on information about a Consumer Proposal.

What Is A Consumer Proposal?

A Consumer Proposal is an alternative to Bankruptcy, that provides debtors with many of the same protections. It is ideal for those with a regular income, who can afford to pay more than what the creditors would receive in a Bankruptcy. The debtor typically makes payments towards a Consumer Proposal over a period of years.

Who Is a Good Candidate for a Consumer Proposal?

If you are insolvent (can't meet your financial obligations) but make a regular income, a Consumer Proposal could be your best insolvency solution. A Consumer Proposal is just that: a proposal you make to your creditors, with the help of a Licensed Insolvency Trustee. A typical Proposal sets out a monthly payment over a five-year term - but are other variations to fit your particular situation.

How Does It Work?

Call for a free first appointment with a Trustee. Take along information on your household expenses and income. The Trustee will review these, discuss the causes of your situation, and give an opinion of your options for going forward. If a Consumer Proposal appears to be a good fit, you will find out more about the process.

You and the Trustee will determine what you can afford to pay per month. You may need to see the Trustee one or two more times to complete the needed information, review the Proposal paperwork, and finally sign it.

When this process is complete, the proposal is filed with Canada's Office of the Superintendent of Bankruptcy, and the Trustee sends copies to all your creditors. Over the next 45 days, the creditors will submit their claims and their votes to the Trustee. If the majority (in proportion to dollars owed) vote yes, or do not vote at all, your Proposal is accepted.

Why Do Creditors Accept Consumer Proposals?

If you have regular income, you can pay more during the 60 months of a typical Consumer Proposal than you can in the 21 months of a typical Bankruptcy. This is precisely why creditors prefer Proposals over Bankruptcies: they get more money. Your Trustee will look over your numbers to see if you can provide your creditors with a better return using a Proposal.

How Does A Consumer Proposal Protect the Debtor?

Just as when a Bankruptcy is filed, as soon as the Trustee files your Consumer Proposal, your creditors must cease their efforts to get in touch with you. No more harassing phone calls! Also, any legal action regarding your debts will be stayed. The calculation of interest stops.

Just as in a Bankruptcy, once you have fully performed the terms of your Proposal, your obligation to your creditors is complete. They may not approach you for additional money.

Unlike in a Bankruptcy, If your income goes up while you are paying your Proposal, your payments do not.

And finally, a Consumer Proposal is not Bankruptcy. Thus, you can honestly respond "no" to the question, "Have you ever declared Bankruptcy."

The laws regarding both Bankruptcy and Consumer Proposal are contained in Canada's Bankruptcy and Insolvency Act.

Stop Worrying - Start Now!

Before I filed my own Proposal, I spent a few months worrying. That was the worst part! Once I attended my appointment with a local Trustee, my anxiety almost disappeared. It's a great relief to be able to see ahead, with professional help.

If you are facing insolvency, don't delay and worry. Peruse the information on this website, and book a free appointment to see a Licensed Insolvency Trustee or a Consumer Proposal Administrator. For me, it was like turning a new page.

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