When considering a Consumer Proposal as a debt solution you must be aware that there are different types of debts, and some debts may need to be paid back in full after you complete the payments on your Consumer Proposal.
In this article we will go over the types of debt that we get the most questions about from our clients.
In general all debts fall into two categories: secured and unsecured. Unsecured debt is normally comprised of credit cards, department store cards, phone bills, utility bills, medical bills, bank account overdrafts, unsecured lines of credit, unsecured bank loans and payday loans. Unsecured simply means that there is no collateral behind it and you did not guarantee it with an asset.
Creditors have no right to seize your assets to pay off the debt until they get a judgment order (which means they have to go through courts). 99% of unsecured debts can be included in a proposal.
As you may have already guessed, secured debt is everything that has some form of collateral behind it. Your vehicle financing, mortgage, maybe a line of credit backed by your stock portfolio.
In a case of non-payment of a secured debt, secured creditors have the right to seize the underlying property to make good on the debt. Secured debt cannot be included in a proposal unless you have decided to return the underlying asset.
If you have co-signed for someone, you’ll be relieved of that obligation when you file the proposal. However, if someone co-signed for your unsecured debt (for instance, your spouse co-signed for your line of credit) even if you file the proposal, your partner would be obligated to repay that debt.
That being said, if both of you file a proposal the debt can be included and resolved.
While student loans are considered unsecured debts they are funded by the government and can be included only if it’s been more than seven years since you’ve been a student.
Tickets & Fines
Speeding tickets, fines or other infraction fees cannot be included in a proposal.
All types of Canada Revenue Agency debts, such as income tax, can be included in a Consumer Proposal. In addition, bank account seizures or wage garnishments stemming from the debts will be immediately stopped when you file your Consumer Proposal. In fact, a Consumer Proposal is the only method that can be used to negotiate a reduced balance owing for CRA debts.
In many cases debts and financial obligations can be unclear. If you have been struggling to pay off your debts and looking for options that can provide you with a fresh start give us a call for your Free, No-Obligation Consultation. It’s 100% confidential and risk free. We’ll provide you with more information on the options available to you and what can work best in your particular situation.