In Alberta you have many choices when it comes to how you want to address your debt, but one program unique to this province is the Orderly Payment of Debt program. Many people confuse this program with consumer proposals. This makes sense, as both programs are quite similar. However, there are a few notable differences.
In this article, we’ll go over what each program entails, how you can qualify and apply, as well as the differences between the two. Read on to learn more.
What is a Consumer Proposal?
A consumer proposal is a legally binding process in which a Licensed Insolvency Trustee (LIT) works with you to develop an offer that is brought to your creditors. You can offer to pay a percentage of your owing debts or extend the time you have to pay them off, or both.
Keep in mind that your creditors can reject an offer, but your LIT is knowledgeable in creating and negotiating proposals.
Once accepted, you will have no more than five years to pay off your owing debts.
Who Qualifies for a Consumer Proposal?
In order to qualify for a consumer proposal, you must be am individual and not a business. You must also be insolvent, meaning you are unable to pay your debts when they are due.
Your debts must total less than $250,000 (excluding your mortgage) and you require a stable source of income to make your consumer proposal payments.
Lastly, you cannot file for a consumer proposal if you are currently paying on a consumer proposal.
How to File a Consumer Proposal
Filing a consumer proposal begins with visiting a Licensed Insolvency Trustee who is licensed by the government to file the proposal on your behalf.
They will prepare and file the proposal, detailing what you will repay, how much you will pay each month, and how many months you will make payments.
Your creditors have 45 days to respond to your LIT. If they accept the proposal, you will start making your monthly payments until you are debt-free.
What is an Orderly Payment of Debt?
In the province of Alberta, an Orderly Payment of Debts (OPD) is an alternative solution to filing a consumer proposal.
An OPD is a debt repayment arrangement that begins with an application to the Court for an Order to consolidate your unsecured debts into one monthly payment. This involves an interest rate of 5% and a payment period of up to 3 years.
This is a legally binding agreement but only applies to unsecured creditors who have consented to be included in this arrangement and cannot be used to pay debts such as income taxes or business debts.
Who Qualifies for an Orderly Payment of Debt?
To qualify for an Orderly Payment of Debt, you must live in Alberta, Nova Scotia, Saskatchewan, or Prince Edward Island.
This program is available to those who cannot afford to pay their debts in full (insolvent), cannot afford their current interest rates, and cannot qualify for a consolidation loan.
How to file an Orderly Payment of Debt
To file an Orderly Payment of Debt in Alberta, you can contact Money Mentors, a non-profit organization that administers the OPD program.
Their team of professional financial experts can make the necessary application to the Court and address your creditors on your behalf.
And, just like the consumer proposal process, your individual situation and circumstances will be taken into consideration.
Orderly Payments of Debts Versus Consumer Proposal
Overall, consumer proposals and OPDs operate in a similar fashion but an Orderly Payment of Debts is usually more expensive since it requires you to pay your debt in full plus a fixed 5% interest rate.
When you file for a consumer proposal, you can often settle your debts by paying a portion of the principal owing and reducing the interest rate.
Both an OPD and a consumer proposal will have the same impact on your credit rating.
So how do you choose between the two?
A meeting with a Licensed Insolvency Trustee can help you determine which debt relief program will benefit your unique situation.
Choosing the Right Debt Solution for You
It’s fortunate that there are a variety of debt relief programs to choose from in Alberta. Living a debt-free life means choosing the right solution for your individual circumstances.
That’s why our professional team at Frederick & Company is dedicated to finding the perfect solutions when it comes to tackling your debts.
Get in touch with us today and we can explore your options and determine whether a consumer proposal is best for you, or if an OPD is the perfect solution.