Let’s say you’ve realized that you’re in debt beyond your wildest dreams. The pile of bills and "past due" notices is like a mountain weighing you down. Yet you believe that if you can just get some breathing room, you can work through this.
Is there a way to make this happen, without declaring bankruptcy? The answer is yes.
Depending on the nature of your debts and the creditors that you owe, sometimes, you can talk to your creditors and describe your financial situation: your earnings, expenses and other debts. Then, make a promise to pay them a certain amount each week or each month.
If needed, you could ask for assistance from a non-profit credit counselling service such as the Community Financial Counselling Services in Winnipeg.
The acceptance of an informal proposal made to creditors is strictly voluntary on the part of an individual creditor. Some may accept your informal proposal, but others may not be willing to provide you with the desired relief.
Should this occur or if your debts are too significant or complicated for an informal solution, you may be best to make a formal consumer proposal, a legal process under the federal Bankruptcy and Insolvency Act. You can do this if your debts total less than $250,000, excluding your home mortgage.
First, contact a trustee in bankruptcy, who will act as the administrator of your consumer proposal and will set the process in motion. This will start by reviewing your financial situation and formulating a proposal that will work for you and has a reasonable chance of being acceptable to your creditors.
The next step is to inform all your creditors that a proposal process is underway. It stops any garnishees, executions, and collection letters and phone calls.
Your creditors will have 45 days to accept or reject your proposal. No news is good news in this process. If your creditors do not respond to the proposal, it is considered to have been accepted by them.
A court approval process follows 15 days later, at which time you are on the road to settling your debts and getting a fresh start on your financial future.
Unlike an informal proposal, once your proposal is approved by the court, it is legally binding on all creditors regardless of whether they approved it or not. But by no means are you out of the woods simply because your proposal has been approved.
In order for a consumer proposal to be effective in providing you with needed debt relief, you have to be diligent in making your payments under the proposal and attend mandatory credit counselling from your administrator so you can start getting your financial life back into shape.
Once you have attended the sessions and meet other conditions, including making all the payments you agreed to, the administrator declares your proposal complete and your debts are legally settled.
It is never easy to face your debts head on. But knowing that there are solutions available to stop the collection calls and letters that do not require bankruptcy can be a first step to bringing peace of mind in your life.
» Wayne K. Palmer is a senior manager in BDO’s Brandon office. He isresponsible for both the consumer and commercial practices in Brandon and surrounding areas, including Boissevain, Minnedosa, Neepawa and Dauphin. Wayne has more than 25 years experience in the financial recovery services field.