Under Canada’s Bankruptcy and Insolvency Act, a consumer proposal is a legally binding agreement between a debtor and his creditors to settle the bankrupt’s unsecured debts.
What then occurs if two parties share responsibility for the same debt? Couples can submit combined consumer proposals to consolidate debt.
Do you both have debts? Do either of you need to cancel your debts? Would a consumer proposal be the best solution for both of you? Let’s deal with some basics first.
What Is a Joint Consumer Proposal Filing?
Joint consumer proposals are allowed where the debts of two or more people are identical or nearly identical.
To grasp this term, we must consider two elements—similarity and significance.
Similarly, both parties may be responsible for the same debt repayment. If a husband and woman share responsibility for a debt, such as a mortgage or credit card, then the couple must pay equally.
Substantially raises some complex questions. Despite the lack of a precise legal definition, the term “basically” has signified that 90% or more of the debts between the two parties are identical. This is not strictly enforced, but it serves as a guideline. When dealing with joint or combined debts, filing a consumer proposal jointly makes the most sense.
Each individual must meet the eligibility requirements for a consumer proposal to file a combined bid. So, it’s up to every single one of us to:
- Owe more than $1,000 to creditors (even as a co-borrower);
- Be unable or unwilling to pay bills as they become due; and
- Own assets (what they own) that, if sold, wouldn’t generate enough cash to cover their debts
Joint Proposal Examples
You can only decide whether or not to file jointly by thinking about what is best for the family and their creditors. Every situation is different, and whoever you work with to deal with your debts should show you all of your options.
Here are several scenarios in which it would make sense to file taxes as the following:
- Husband and Wife: The family is responsible for all the debts, and the money for the proposal payments comes from the family’s budget. We suggest filing one procedure and saving money on administration. By doing this, you will pay more of the money to the creditors.
- Parent and Child: Submit a consolidated plan to resolve the issue if the parties are cosigners on the debt.
- Business Partner: In this case, the parties will have a more challenging time, but it is still possible, given that they do not have a high personal debt load on top of their joint commercial debt.
Joint Filing Advantages & Disadvantages
Joint Filing Advantages
- Consumer proposals require a couple to have at least $500,000 in debt, up from $250,000 for an individual (excluding a mortgage on their principal residence).
- Reducing some expenses allows you to negotiate with your creditors while keeping your payments manageable.
Joint Filing Disadvantages
- You will restrict your capacity to borrow for some time since a consumer proposal will be listed on both of your credit reports;
- Like any other joint responsibility, both parties must contribute equally to the payment. So if one partner doesn’t pay, the other must. Otherwise, the trustee will cancel the proposal after three missed payments.
So do you think you should submit a combined proposal? A consumer proposition cannot be made mandatory. Even if one spouse chooses to file, the other is not obligated to do so if they do not like to do so.
Can I Joint File a Consumer Proposal?
Yes! However, a consumer proposal cannot be filed by an individual consumer. Find out if a consumer proposal is a right choice by scheduling a free, no-obligation consultation with a LIT from Risman Zysman Inc.
Who Can File a Joint File a Consumer Proposal?
If you and your partner’s debts are roughly equal, you may qualify to file a joint consumer proposal. You cannot include debts accrued during the bankruptcy process in the consumer proposal since the proposal filing date will be the same as the bankruptcy filing date.
If you co-sign a debt or guarantee its repayment, you are equally accountable for its compensation. It’s common for a married couple to do this, though it doesn’t always happen that way.
Are Joint Consumer Proposals Right for Me?
Before you can figure out how to get out of debt, you need to know where you stand. Whether you want to consider a debt settlement, credit counseling, debt consolidation, or a consumer proposal, you must examine your finances and determine your options carefully.
Most people would instead file a joint consumer proposal than a single one because it lets them include more debt in the proposal. If you file as a single person, you must have debts of at least $250,000. You can have up to $500,000 in debts if you file as a couple.
You can also save money on administrative costs if you file a joint consumer proposal. Most importantly, a joint consumer proposal helps you save money that you can use to pay off your debts. The time between payments gets shorter when you pay more toward your debt.
On the other hand, both people who filed a joint consumer proposal are responsible for paying the agreed-upon amount.
For example, if your proposal calls for a payment of $1,500 and you and the other filer agree to pay $750. You will have to make the difference if the other person can’t make the payment.
Also, they will probably reject your proposal if you don’t pay the missing amount.
What Is Your Best Option?
Consumer proposals are better than bankruptcy if you can pay your creditors monthly and don’t want to lose your assets. But your Licensed Insolvency Trustee can help you determine which option is best for you and your debt.
Once your eligibility has been checked, a Consumer Proposal can only be legally handled on your behalf by a Licensed Insolvency Trustee, such as Risman Zysman Inc. Ask a company if they are Licensed Insolvency Trustees before submitting a Consumer Proposal, whether online or in person. The law says they have to hire a third-party Trustee, which could add to costs if they aren’t.
Together, let’s restore your financial freedom.