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At this point you assign or transfers all of your non-exempt assets to a Trustee in Bankruptcy" and no longer have "any right to deal with these assets". (p. 7) Your income is monitored by the Trustee and any portion that exceeds "the normal maximum amounts required as living expenses for (your) household family unit" (p. 8) is paid to the Trustee as Surplus Income Payments for distribution to the creditors.

If the Consumer Proposal is accepted, you get to keep your assets and make "one manageable monthly payment to the Trustee ... who distributes the funds to the unsecured creditors on a periodic basis". (p.5)

Orderly Payment of Debts (O.P.D.):

Depending on your income and other qualifications, you may be accepted into an O.P.D. program, available in some Canadian provinces, which provides for full payment of all debts within three to five years.

Informal Proposal:

Sometimes it's possible to negotiate on one's own with creditors, but debt management agencies are adept at helping an apparently insolvent individual to devise ways in which expenses can be managed such that all or some of the debt can be settled or payment deferred. For instance, when credit card debt gets out-of-hand and the credit card company has pumped up the interest rate to the point where you can never pay it off, a financial adviser may be able to negotiate a release from continuing interest if a plan is made - and kept - to pay off the debt incurred thus far. The credit card is canceled, as are all other credit cards and lines of credit. A payment plan is initiated and, if you are able to stick with the payment plan, by the end of the agreed-upon period the debt is paid off.

Whatever route is taken to settle overwhelming debt, a good financial adviser will follow up on the initial assessment with additional counseling to prevent a recurrence of the situation. Deloitte and Touche provide two further counseling stages: "consumer and credit education" followed by "identification of the roadblocks to solvency and rehabilitation". By the time this counseling is concluded, you should have identified the cause of your financial problems and learned to manage money better.

Learn more about this author, Roberta Velyn.
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