The number of bankruptcies filed in Canada has been on the decline over the past several years as people have borrowed less and have turned to other debt relief options like debt settlement programs. One of the other chief drivers of the decline in bankruptcies has been the fact that people are turning more and more to the option of last resort before bankruptcy—the consumer proposal.
A Consumer proposal offers many of the advantages of bankruptcy without drawbacks such as having to surrender any of your assets to your trustee. Another significant advantage of the consumer proposal is its flexibility. You can file a proposal on your own, or you can file jointly with another person. There are reasons why you might want to file jointly and reasons why you might decide not to, so it is important to get a good idea of the joint consumer proposal process before you decide.
Who Can File a Joint Consumer Proposal?
Canadian law does not make it difficult to file a consumer proposal jointly, and joint filing is actually quite common in Canada. You can file a consumer proposal with a close family member or business partner if you meet the consumer proposal standards of indebtedness, and if the majority of the debt to be covered under the proposal is held in common. There is no set rule for how much debt needs to be held in common between the two people filing the proposal, but most creditors and trustees will not accept a joint consumer proposal if the two filers do not have at least 90 percent of the debt in both of their names.
Because there is no standard rule, most trustees and creditors will work with you on a joint consumer proposal if it makes sense for them and for you to file jointly. Common pairs who might file a joint consumer proposal include a husband and wife, two business partners, a parent and a child, and two siblings. Importantly, a joint consumer proposal filed by two business partners will not likely be accepted if each filer has a large amount of personal debt.
Is Filing a Joint Consumer Proposal the Right Choice for Me?
Finding the right debt solution for you always depends on your unique circumstances. This is true whether you are considering a consumer proposal, debt consolidation or any other debt relief option.
Many people like the joint consumer proposal because it allows them to include more debt in the proposal than if they were to file alone. For instance, a single filer can only include debts up to a total of $250,000 in a proposal that he or she files as an individual, but a joint consumer proposal can include debts totaling up to $500,000.
There are also some significant savings on administration costs when you file a consumer proposal jointly. As any credit counselling agency will tell you, the length of time you are in debt repayment decreases in proportion to the increase in the amount of money that goes toward the debt itself while you are making payments. A joint consumer proposal treats two people as a single entity, thereby reducing administration fees and allowing you to devote more of your payment to the principal of your debt.
On the other hand, filing a joint consumer proposal has one significant disadvantage: Both individuals are held liable for making the agreed-upon payments. So if one person fails to meet his or her terms of the proposal, the other is liable for the full payment amount. If your consumer proposal stipulates a payment of $1,000 a month to your debt and you have decided with your partner to each pay $500, you as an individual will have to pay the entire $1,000 if the person who is filing alongside you fails to contribute. If this payment cannot be met, your proposal will be annulled, which has additional financial implications of its own.
What Is Your Best Option?
Before you file a joint consumer proposal, you should know that a good debt settlement program can help you get out of debt without the same negative impact that a consumer proposal can have on your credit. Fill out the Canadian debt relief application on this page to learn about how a proposal can help you.