What types of debts can be included in a proposal?

What Types of Debts Can Be Included In A Proposal?

When filing a Consumer Proposal, you need to be aware that there are several different types of debt. The first type of debt is known as unsecured debt (normally comprised of credit cards, unsecured lines of credit, bank account overdrafts, unsecured bank loans, payday loans and income taxes). The second type of debt is secured debt (including any mortgages you hold on your principal residence, a vehicle loan or lease), or any other debt that is “backed” by an asset.

The good news is that your unsecured debts can all be included in your Consumer Proposal.  You will pay back a portion of what they’re worth and the balance will go away (also referred to as “discharged”) when the Proposal is completed.   Your secured debts must be itemized in the proposal but have to be dealt with outside the Proposal process.  In other words, any secured debt would continue to be paid even if you file a consumer proposal.  Your mortgage company will expect you to continue to make timely mortgage payments as you have in the past.  And your vehicle financing creditor will expect you to continue making those car payments on time each month so that you can keep your vehicle.  If you fail to keep up with your secured debt payments, your creditors have the legal right to come and repossess (repo) your car, snowmobile, motorcycle or other property that you’ve underwritten by securing it against the loan for the item.

How will your secured creditors know that you’ve filed a consumer proposal?

Along with your unsecured creditors, they will all be contacted by the Trustee once your Proposal is processed and an estate/court number assigned to the file. Don’t be concerned about these creditors – as long as you are up to date on your payments it’s not likely they will move to repossess the secured property or vehicle.  In fact, due to changes to the Bankruptcy Insolvency Act in late 2009, a creditor is not allowed to seize secured property that you are up to date on the payments for.

Many people who are self-employed (either sub-contractors or independent operators) are surprised to discover that the Bankruptcy Insolvency Act will also allow them to discharge their income tax and GST debt.  There are very specific rules surrounding such debts so please notify us if you have any of them, as well as the details of your business operation, when you come in to meet with us.  We can give you very specific instructions on how best to deal with these types of debts so they are properly dealt with in your Consumer Proposal.  

Ready to find out more about how to file a Consumer Proposal?  Please call us toll-free from your area code by dialing 310-1100.  Our professional staff will be available to speak with you and provide you with a convenient appointment date and time at an office near where you live or work.  If you prefer the convenience of requesting an appointment using our website, please click here now).  We look forward to assisting you.