Last updated on August 23rd, 2021 at 03:08 pm
For those struggling with debt, the end can feel like a long way off. If there are multiple kinds of debt in lines of credit, credit cards, mortgages, and other options, this feeling only becomes worse. Luckily, options like consumer proposals and debt consolidation can act as a beacon of hope.
The reality of struggling with debt means that even when there are steps forward, it can still feel like taking steps back. But, with the help of consumer proposals and the Licensed Insolvency Trustees (LIT) that administer them, the steps can actually start to take effect. How is this possible?
What Do Consumer Proposals Do?
Before we understand how consumer proposals work, it is important to understand the results that they bring. There are many advantages to successful consumer proposals, including:
- Reductions of up to 90% of all debt
- Organizing all debt products into one payment
- Stopping high-interest rates
- Preventing wage garnishments from the government or debtors
- Ending the collection calls
- Reducing income taxes
- Presenting an opportunity for financial freedom
These benefits provide a multifaceted approach to dealing with debt that can make a real difference in the lives of those who are struggling to maintain bills or remain financially solvent.
Now that we know how beneficial consumer proposals can be, let’s take a look at how the process usually works.
How Consumer Proposals Works?
Before we get into the usual process, it is important to note that every consumer proposal will differ slightly. Different banks and lenders, as well as the amount of personal debt, will play a role in the process and may have effects on an individual basis. Barring these unique circumstances, however, the process usually involves three key steps.
1. Consultation with a Licensed Insolvency Trustee (LIT)
The first step in your consumer proposal will be finding and consulting with a Licensed Insolvency Trustee(LIT). These professionals perform all consumer proposals, which is a great boon for those seeking to engage with this service.
During the initial consultation, your chosen LIT will inquire about your debts, the amount owing on them, and the interest rate. It is also important to provide them with information about any assets, liquid or otherwise, that are in your possession.
2. Drafting of a Consumer Proposal
After gathering all of the information you have provided, your LIT will begin drafting your consumer proposal. This includes working towards the benefits described above, informing the government and your debtors, and ensuring that there are no outstanding circumstances that may affect your chances of success.
3. Acceptance or Rejection by Debtors
The final step in the process is getting your debtors to agree with the consumer proposal. Luckily, this does not have to be a unanimous decision. Only 50% of the debtors involved need to agree to the terms for it to be legally binding for all of them. If your proposal is accepted, then you will begin a path to financial freedom. It is also only after your proposal has been accepted that your LIT will receive payment.