Understanding Consumer Proposal in Nova Scotia: A Guide

For many individuals in Nova Scotia dealing with significant debt, finding a manageable path to financial stability can be challenging. A Consumer Proposal is a legal process under the Bankruptcy and Insolvency Act (BIA) in Canada designed to help individuals resolve their debt issues without declaring bankruptcy. This guide will cover key aspects of the Consumer Proposal process in Nova Scotia, aiming to provide clarity and assistance for those considering this option.

What is a Consumer Proposal?

A Consumer Proposal is a legally binding agreement between you and your creditors facilitated by a Licensed Insolvency Trustee (LIT). It allows you to pay back a portion of your debts over a specific period, up to a maximum of five years. The terms are meant to be favorable to both parties: creditors typically receive more than they would under bankruptcy, and you are able to keep your assets and avoid the more severe impacts of bankruptcy on your credit score.

Eligibility and Requirements

To be eligible for a Consumer Proposal in Nova Scotia, you must be insolvent (unable to pay your debts as they come due) and owe between $1,000 and $250,000 (excluding the mortgage on your principal residence). It’s essential to provide a detailed account of your income, assets, and debts to the LIT who will evaluate your financial situation and help determine if a Consumer Proposal is the best course of action.

Benefits of a Consumer Proposal

There are several benefits to filing a Consumer Proposal in Nova Scotia, including:

Stopping Collection Calls: Once filed, all legal actions and collection calls from creditors must cease.
Interest Freeze: Interest on your debts stops accumulating from the date the proposal is filed.
Asset Protection: You are generally able to keep your assets, including your home, car, and RRSPs (except for contributions made in the last 12 months).
No Additional Fees: The fees for a Consumer Proposal are included in the agreed-upon payments and are regulated by the government.

Steps to Filing a Consumer Proposal in Nova Scotia

The process of filing a Consumer Proposal involves several steps:

Consult a Licensed Insolvency Trustee: The first step is consulting with an LIT who will review your financial situation and discuss all available debt relief options.
Prepare and Submit the Proposal: If a Consumer Proposal is your best option, the LIT will help prepare and file the proposal, outlining the payment terms you are offering to your creditors.
Creditors’ Voting: Once filed, your creditors have 45 days to accept or reject the proposal. A majority by dollar value of the votes received determines the outcome.
Fulfillment of Proposal Terms: Upon approval, you must adhere to the terms of the proposal, make timely payments, and attend two financial counseling sessions.
Completion: After you have fulfilled all terms of your Consumer Proposal, you will be legally released from the debts included in the proposal.

Considerations Before Filing

While a Consumer Proposal offers a viable alternative to bankruptcy and can significantly alleviate financial stress, there are several factors to consider. It will impact your credit rating, assigning an R7 rating for the duration of the proposal plus an additional three years after completion. Therefore, it’s crucial to evaluate all debt relief options and consider the long-term implications on your financial health.

In summary, for many Nova Scotians struggling with debt, a Consumer Proposal presents an opportunity to regain financial stability while avoiding the harsher consequences of bankruptcy. By understanding the process, benefits, and considerations involved, you can make an informed decision about whether this is the right path for you. Consulting with a Licensed Insolvency Trustee is a critical first step in navigating your way out of debt and towards a brighter financial future.

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Understanding Consumer Proposal in Nova Scotia: A Guide