Many Canadians have never heard of an alternative to bankruptcy called a consumer proposal. If you have a steady income and can’t pay all of your bills, but don’t qualify for a consolidation loan, you may be able to enter into a consumer proposal rather than go into bankruptcy. However, consumer proposals are still a serious matter as one lady found out.
In a consumer proposal, you are essentially telling your creditors than you can’t pay all you owe them but can pay back a lesser amount. Your creditors may agree to this if they think that bankruptcy is the only other option because creditors usually get more money in the case of a consumer proposal.
However, once you’re in a consumer proposal, you can’t expect new creditors to be excited about lending you money. The second comment in this Ellen Roseman blog entry is from a “Frustrated” lady who was turned down for a lease on a new Ford vehicle because she and her husband had filed a consumer proposal that was accepted by her creditors.
This lady is very unhappy and thinks that because she is a loyal customer of Ford’s she should be able to lease another vehicle. It doesn’t take too long in thinking about this from Ford’s point of view to see why she was turned down. Her other creditors won’t get all of their money back; why should Ford expect to get all of its money back?
In the end she had to resort to private financing at nearly 30% interest, which she describes as “usurious.” However, the lender has to be compensated for the extra risk of lending to a couple who can’t always pay back their loans. I have no idea whether 30% is appropriate in this case, but a higher than normal rate is in order.