John, a 35-year-old resident of Canada, has accumulated a significant amount of debt over the years.
He has credit card debt of $50,000, and personal loans of $30,000. He is unable to keep up with his monthly payments and is facing collection calls and legal action from his creditors.
John decides to consult a licensed insolvency trustee about a consumer proposal. The trustee helps him prepare a proposal to present to his creditors. The proposal includes:
- A payment plan that will last for five years
- A monthly payment of $400, which is an amount that John can afford
- A freeze on interest and penalties
The proposal is presented to John’s creditors and, after negotiation, they agree to the terms. The proposal is approved and becomes legally binding on both John and his creditors. John is now required to make the agreed upon payments and his creditors are unable to take any further legal action against him.
With this example, John’s total debt was $80,000, and with the proposal, he will pay around $24,000, reducing his debt by 70%.
Please note that this is just an example, and the specifics of a consumer proposal will vary depending on the individual’s circumstances and the agreement reached with the creditors.