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April 2007 - Consumer proposal is not for everyone

Consumer proposal is not for everyone

☳ by Adam Aspilla

When you are in financial difficulty, you have to explore a solution that is appropriate to your circumstance. Do not choose consumer proposal if your situation is for bankruptcy.


People motivated by pride are in self-denial of their financial trouble would choose consumer proposal instead of bankruptcy that often times would delay them from getting out from financial mess and at a greater cost.


A good illustration was a couple whose combined income was barely enough to meet their basic needs and indebted more than $40,000. They did not own a house, no saving or investment. They were advised to file bankruptcy as their situation was ideal for bankruptcy. However, they opted to file a consumer proposal because according to them, it was embarrassing to file for bankruptcy.


Their consumer proposal was for $350 monthly for a period of 60 months. During the first 15 months of their proposal they were able to fulfill their monthly obligation. However, starting the 16th month they started to default their monthly payments until their consumer proposal was cancelled.


As a consequence of the cancellation of the consumer proposal, their creditors were after them for the entire amount of their original debts of more than $40,000.00 plus interest in arrears. Unfortunately, their payments of more than fifteen months of about $5,250 for the consumer proposal were not refundable and they basically lost it.


As their creditors were pushing them against the wall, they finally decided to file bankruptcy. As a result, they paid a trustee fee which was much lower than $5,250 (the amount they paid under the consumer proposal) and delayed them from getting out of debts. Had they filed bankruptcy at the first instance they should have paid only a trustee pay and saved the $5,250.00. Moreover, the bankruptcy process should have been over in nine months for they were first time bankrupts.


If you are in financial trouble, you have to set aside your pride and do not hesitate to file for bankruptcy when it is the best solution of your problem. Otherwise, you will be paying unnecessarily on a consumer proposal that would ultimately be cancelled and delay you from getting out of debts because consumer proposal is not for everyone.? 


Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.