Managing a debt, specifically the repayment of principal and interest is not obvious thing for most individuals. Indeed, the fact that debt repayments represent important and regular amounts payable to the creditor puts a lot of pressure on the liquidity of the individual.
This can lead, in some cases, the declaration of personal bankruptcy. But there are alternatives to bankruptcy process for individuals in financial difficulty. Consumer Proposal is one of those alternatives and that’s what we deal here.
The consumer proposal in bankruptcy context:
In the case of a company, repayment of the total balance of a loan following the breach of covenants may, more often than not cause the bankruptcy of the company and question the assumption of continuity operating. Yet in the case of an individual who is in financial difficulty, several options are available.
A consumer proposal is one of these options and allows an individual in financial trouble to eliminate a significant portion of its debt while avoiding bankruptcy process. The proposal consists of presenting a budget to creditors to convince them to accept a partial refund offer debt instead of bankruptcy.
In a situation of payment difficulties or probable bankruptcy, it is important to understand the position of the creditor to be able to grasp the whole of the consumer proposal. The objective of the creditor, we are particularly environment, small business or large company, is to recover money lent to profit through the application of an interest rate.
Especially bankruptcy context, the creditor is not able to obtain the balance of the loan to pay which is very negative for him since non repayment constitutes a direct loss of invested capital. This is where the consumer proposal is interesting, since it acts as a compromise between the individual in financial distress and the lender creditor. The individual must therefore convince the creditor that it is more advantageous for him to accept his proposal of repayment and financial restructuring plan than getting nothing at all. The special offer so the creditor to repay a percentage of the loan amount.
But we must keep in mind that consumer proposal is not a miracle solution. Indeed, the application of it will have a negative effect on your credit rating and is accompanied by terms such as consultation sessions and strict payment deadlines that can not be negotiated.
Several professional services, in the consumer proposal process, helping you prepare a convincing budget and a solid action plan to present to your creditors to restructure your finances and manage your cash flow. Management of debt and money management is not an easy subject to talk about or manage, both personally and professionally. It is therefore important to seek help and take a moment to select professionals in the field who have at heart your rebuilding.
