In recent years many Canadians have been able to take advantage of a unique debt relief repayment strategy called a consumer proposal. In my time as a debt counselor, people usually preferred this. It’s an option that provides financial relief by eliminating a substantial portion of your debt. Almost 50% of insolvencies filed in 2015 favored consumer proposals over bankruptcies. Here is a list of why people might favor a consumer proposal over a bankruptcy.
The biggest negative for most people is the stigma around bankruptcy. A consumer proposal typically has a better record on your credit report over a bankruptcy; R7. In contrast, bankruptcy has a harder rating R9.
The trade off from the R9 is that it can minimize the amount owing and have a shorter term than a proposal. To decide which one is best for you, ask yourself what is manageable & what your plans are.
Once you file a consumer proposal with your creditors, they cannot pursue any legal action against you like wage garnishment & assignments.
In a consumer proposal, your assets are safe & you get to keep them. Bankruptcy, on the other hand, could result in a seizure of particular assets; it will depend on your situation, your debt solutions team, & trustee.
In both programs, the government is forgiving a portion of your debts. The amount of forgiveness can be more than half of what you owe. The repayment amount is a reflection of your ability to pay. To qualify you’ll need to have a reliable source of income & be able to pay the retainer fee.
The terms of a consumer proposal are typically from 48-60 months. Bankruptcy, on the other hand, is somewhere between 1-2 years depending on if you have never filed before.
This concludes Part 1. For Difference Between a Consumer Proposal & Bankruptcy? Pt 2
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