A consumer proposal is actually a legally binding contract between you and your lenders where you agree to pay a lower amount of your debts over five years in return for a lower interest rate. Creditors are often willing to accept these proposals because they like to get less money in a year on a monthly basis, and not wait endlessly for complete payment which might never come. Here's how you can get started with negotiating your debts.
First of all, try to get your creditors to agree to a consumer proposal where your monthly payments are lowered by at least 40% or more. Lenders will almost never agree to anything that lowers your monthly payments by more than this much. This is one of the few exceptions to the no credit check for bankruptcy rule that does apply with this type of negotiation. They're also likely to agree to some degree on the interest rate, as long as it is significantly lower than the interest rate on your current accounts. So be sure to keep this in mind when discussing your financial problems with your bankruptcy attorney.
Once you have settled the issues regarding your debts with your lender, it's time to turn your attention to your other assets. Your other assets are likely your most valuable asset, so you want to include them in your consumer proposal. These are the things that you most definitely want to get paid off in the deal - things like your home, cars, furniture and personal effects. If you include them in your bankruptcy plan, they will be included in your debt management plan and will be expected to be paid off along with your unsecured debt.
So what do you do with all this information? You file for bankruptcy protection and wait for the official paperwork to come through from the bankruptcy court. If you meet the requirements for protection and file in a timely fashion, you will automatically be granted protection and you will immediately begin the process of repayment. The consumer proposal that you make to your creditors during this time period will help to speed up the repayment and prevent additional action.
This brings us to the last step in the consumer proposal process - when you have made all of your payments and done everything you can to repay your debts, your trustee will send you a final offer. At this point, you have one final opportunity to either accept or reject the offer. If you accept the offer, your case will be closed. (In most cases, the agreement will be filed in the appropriate bankruptcy court and a lawsuit will be started against you.) If you reject the offer, you can go back to the trustee and ask for more time to make payments.
When it comes to paying off your consumer proposal, it is important to remember that most unsecured debts are not dischargeable. Debts involving your student loans, taxes, divorce settlements, and fines, are typically discharged after bankruptcy, but student loans, tax debts, and the majority of personal debts (including consumer proposals) cannot be discharged. Secured creditors, such as credit cards, store cards, and car loans, are often discharged after filing bankruptcy, but there are strict laws that prevent them from coming back after that. It is important, if you have been thinking about filing bankruptcy, that you research your options very carefully and discuss with your lawyer all of your options. Remember that making extra payments on your student loans or repaying your secured creditors will seriously impact your credit score, so it is very important to act responsibly in order to avoid the risk of losing your home and the funds you will receive once your debts have been repaid.
For more references, check out: https://www.encyclopedia.com/history/encyclopedias-almanacs-transcripts-and-maps/bankruptcy-law