Understanding Consumer Proposals in New Brunswick

In New Brunswick, as in the rest of Canada, navigating the rough waters of financial distress can be daunting. One life raft offered by the Canadian government to avoid the shipwreck of bankruptcy is a legal process known as a consumer proposal. Understanding how consumer proposals work in New Brunswick is crucial for individuals seeking to find a path back to financial stability.

What is a Consumer Proposal?

A consumer proposal is a legally binding process facilitated by a federally licensed insolvency trustee. It allows individuals who owe less than $250,000 (excluding the mortgage on their primary residence) to negotiate a settlement with their creditors. This agreement involves the repayment of a portion of their debts over a period of up to five years, in exchange for full debt forgiveness from the creditors once the agreed terms are fulfilled.

The Process of Filing a Consumer Proposal in New Brunswick

The process begins with a consultation with a licensed insolvency trustee who assesses your financial situation to determine if a consumer proposal is the best option. The trustee then works with you to develop a proposal that offers a feasible repayment plan based on your income, living expenses, and debt load.

Once a proposal is drafted, it is submitted to your creditors, who have 45 days to either accept or reject it. A majority vote (based on dollar value of debt) in favor is required for the proposal to be accepted. If the proposal is accepted, you will start making payments to the trustee, who in turn distributes the funds amongst your creditors. During this time, you are protected from debt collectors, and interest on your debts is frozen.

Advantages of Filing a Consumer Proposal

Filing for a consumer proposal comes with several advantages:

Debt Reduction: You only repay a portion of your debt, relieving you of a significant financial burden.
Interest Freeze: From the moment you file a proposal, interest on your debts stops accruing.
Legal Protection: Once your proposal is filed, creditors cannot initiate or continue legal actions against you, such as wage garnishments.
No Asset Loss: Unlike bankruptcy, you do not have to surrender your assets in a consumer proposal.
Credit Recovery: Recovering your credit score after a consumer proposal is often faster than after filing for bankruptcy.

Considerations and Downsides

While a consumer proposal can offer a lifeline, there are also downsides to consider:

Your credit rating will drop to an R7 and will remain on your credit report for three years after you complete the proposal.
Not all debts can be included in a consumer proposal, such as secured loans, child support and alimony payments, and student loans less than seven years old.

It’s also important to note that failing to comply with the terms of your proposal can result in its annulment, leaving you open to legal action by your creditors.

Conclusion

A consumer proposal in New Brunswick offers a viable path to debt relief for many individuals, but it’s not a decision to be taken lightly. It requires a thorough assessment of your financial situation, often with the guidance of a professional. Understanding the intricacies, benefits, and potential drawbacks of this process is essential before embarking on this journey towards financial stability.

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Understanding Consumer Proposals in New Brunswick