case studies,  consumer proposal

Consulting a lawyer prior to considering a consumer proposal?

Been slowly slipping deeper into debt the last while, I’ve been beyond stressed about it while my spouse thinks it’s fine.

I’ve mentioned the consumer proposal ideal before but my spouse shut it down.

So we visited a bank for a consolidation loan, 100k @ 12% and we wouldn’t be able to make the payment without incurring more debt.

So we met with a Certified Financial Planner, he recommended looking into a consumer proposal. My spouse now wants to see another Certified Financial Planner, and even mentioned seeing a lawyer?

As spouse stated ‘a consumer proposal is for someone who is close to bankruptcy, and that isn’t us’ all the while we’ve been spending $2000 +/- a month that we don’t have to service the debt, for a while now.

Question is, what kind of lawyer would I seek out to appease this request?

Is it even common to touch base with a lawyer prior to considering a consumer proposal?

Victor Fong, Licensed Insolvency Trustee responds:

You would see a lawyer who specializes in bankruptcy law. Just do a Google search for one.

It wouldn’t hurt to see a lawyer but it isn’t necessary.

I’d advise you to see a Licensed Insolvency Trustee for a consultation. It’s free and you have no obligation to do anything.

The LIT will calculate what you’d be paying in a CP. You would have up to 5 years to pay it, interest free.

Compare that amount with what you’d be paying to your creditors over the next 5 years – not just the principal but the additional interest you’d be paying on top of it. You can calculate this using an amortization schedule as I demonstrate in this YouTube video.

Your credit score will be negatively affected when you file a CP but you could be saving a significant sum of money by doing the CP versus paying back the debt on your own.

So you have to ask yourself if the money you’d save from filing a CP would be worth the hit on your credit score.

Because the only drawback of a CP is the hit on your credit score.

Your assets aren’t affected in a CP nor is your ability to sponsor someone to Canada, act as a director of a corporation, etc. (unlike in a bankruptcy).

Good luck 🤞

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With many years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. so that he could dedicate his professional life to help people from all walks of life to deal with their debt.