There are many factors that are taken into account when filing a consumer proposal. One of the most important factors is your budget.
When you are in financial difficulty, it's hard to imagine you can create a budget and stick to it. Today your cash flow may not cover all of your household and monthly expenses, including rent or mortgage payments, car payments, food, clothing, utility costs, insurance and all of the other expenses that you can't avoid. Making the minimum payments on credit card bills never seems to make a dent in your overall debt load and those numbers seem to go up instead of down. You need a plan to deal with these debts so that you can reduce your stress and get your fresh start. But that plan has to balance your budget and a consumer proposal can help make this happen.
Making a Plan Starts With Assessing Your Expenses
When considering a consumer proposal, the most important question is, can I afford the monthly payments? To know for sure, your trustee will look at your monthly expenses to determine whether you can afford to complete the process. A consumer proposal will offer protection from your creditors, stops interest charges and must offer your creditors more than they would receive in a bankruptcy; but you have to be able to afford the payments. That's where your budget comes in. Your trustee will review your budget to see what expenses will disappear (like credit card payments) and where you might cut back to help you better makes ends meet.
Why Your Budget is Important
If you don't know whether you can afford your monthly proposal payments, it could mean added, unnecessary stress. Skipping proposal payments is dangerous because legally, you are only permitted to miss two monthly payments over the course of the proposal. If a third payment is missed, the proposal is automatically annulled. Once annulled, you lose the creditor protection that your proposal offered and your debts could go back into collections. This is why it's so important to plan ahead, be prepared and be honest with yourself about where your money is going. Creating a budget isn't fun and life happens, but a budget helps you make sure your proposal is affordable at the start and makes sure that you will be successful and receive your Certificate of Completion so your debts are eliminated for good.
Why A Consumer Proposal Is Better For Your Budget Than Bankruptcy
We talked earlier about how your creditors will expect to receive more under a debt proposal than they would if you were to file for personal bankruptcy. Since your creditors will be paid more you might wonder how this is good for your budget. A consumer proposal can help you lower your monthly payments by spreading your costs over a longer period of time. This can mean the difference between a balanced budget and continuing to struggle to pay your every day living expenses.