Consumer Proposal vs. Bankruptcy
Statistics show that the rate of bankruptcies significantly drops, which is possibly triggered by the willingness of most Canadians to file for a consumer proposal. Besides, if you have a huge amount of consumer debt in Canada, the Canadian government has designed an approach that can save you from losing your assets and eliminate your pile of debts through a consumer proposal.
Somehow a consumer proposal has a huge resemblance to bankruptcy that includes its impact on your credit rating. So, when the other debt relief solutions like credit counseling and debt consolidation fail, an individual is likely to settle filing for a consumer proposal than bankruptcy. This way, they can retain their assets and can avoid the negative impact of bankruptcy.
Moreover, when all the other option isn’t enough to relieve you from indebtedness, having a wide understanding on a consumer proposal can help you make a wise decision as to which one will serve you the best.
Things To Consider When Choosing
Your Total Debt
If you decide to file for a consumer proposal, you should be aware that it has a maximum limit on the amount that you can stipulate in your proposal. If you owe over $250,000, you will no longer qualify to file for a consumer proposal; unless, if you’re filing jointly.
If you’re seeking to file as a single individual, your debt levels should not go beyond $250,000. However, if you’re filing with a family member, business partner, either parent or siblings, through a joint consumer proposal, you can file to a maximum debt limit of $500,000.
Can I Make Some Payments on My Debt?
A consumer proposal would only be suitable for you if you are capable of making some payments on the money you owe each month. If in case, you are incapable of paying any amount on your debts each month, then filing for bankruptcy would be the best alternative for you.
When Do I Want to Be Debt Free?
In Canada, most of the residents assumed bankruptcy as the quickest way out to free themselves from their debts. This is initiated to the notion that filing for bankruptcy for the first time will grant you an automatic discharged after 9 months. Since a consumer proposal designs a length of payments for a huge amount of debts, nine months is not enough to complete the terms.
Moreover, when entertaining the thought of automatic discharge, keep in mind that several residents are filing for the first time but were not automatically discharged, reaching several years due to extension.
Am I Willing to Surrender My Assets?
The most unfortunate aspect of bankruptcy is the potential loss of your property. In bankruptcy, you are obliged to give up your assets to your licensed bankruptcy trustee. This is done to compensate your creditors through the proceeds of your assets that your trustee will deposit in a trust. Though there are a few exemptions that you can keep, thinking that you still have a chance of keeping your assets while eliminating your debts is way better.
Consumer Proposal or Bankruptcy?
Bankruptcy limits the sum of your earnings under bankruptcy protection in the form of surplus income. When you file for bankruptcy, you are obliged to pay for surplus income each month. A bankruptcy superintendent will cap your earnings resulting in an extension of your bankruptcy discharged. In this instance, the duration of time you spend in bankruptcy is much longer than that of a consumer proposal.
Although a consumer proposal can impact your credit rating longer than bankruptcy can, still you can keep your valuable assets. For as long as you comply with the agreed payment arrangements, there is no need for you to give up your assets. Besides, the payment plan in a consumer proposal will remain constant regardless if you increase your earning during the period.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.