Consumer Proposals: What are the Advantages?

5 Advantages To Filing A Proposal

Proactive Solution To Your Debt Problems

You are taking charge of your money problems, and proposing a settlement with your creditors. Filing bankruptcy in Canada will also deal with your debts, but that’s a more reactive approach, when you have no other options. Consumer proposals are an honorable resolution to your debt problems. You feel better making a deal with your creditors.

Consumer Proposals Are Affordable

Even if you qualify for a debt consolidation loan or a debt management plan, you will be repaying all of your debts, in full, plus interest. If you have more debt than you can handle, that’s very expensive. Consumer proposals feature one reasonable monthly payment, that you can afford, to deal with all of your unsecured debts. Imagine having some cash left over at the end of the month!

Immediate Creditor Protection

Consumer proposals give you protection from your creditors. You could work with a debt consultant to file negotiate with your creditors, but they can’t guarantee that your creditors won’t change their mind and take you to court. Consumer proposals give you protection from your creditors; they can’t sue you or garnishee your wages. Once it’s accepted, they can’t change their mind: it’s a legally binding settlement.

Often Better Than Bankruptcy

For many people, consumer proposals are better than bankruptcy. If you file bankruptcy you are required to submit a monthly budget, with proof of your income, to your trustee each month. In a bankruptcy, the more you make, the more you are required to pay (it’s called surplus income). If you get a bonus, or a raise, or work overtime while bankrupt, you pay more. With consumer proposals your payment is fixed, and never increases, even if your income goes up. So, if you expect your income to increase, consumer proposals are better than bankruptcy.

Keep Your Assets

Another advantage of consumer proposals over bankruptcy: you keep your assets. In a bankruptcy you lose your tax refund, and certain assets (like RESPs and any contributions you made to your RRSP in the year before bankruptcy). Depending on where you live in Canada, you may also lose the equity in your house. With consumer proposals you keep all of your assets, including your tax refund.

If you have the money to pay off your debts in full, you should, because that will preserve your credit rating. If you have equity in your house and can qualify for a second mortgage, that may be the best solution for you. If you have low income and no assets, and a lot of debt, personal bankruptcy may be the correction solution. However, for many Canadians consumer proposals are the correct solution. To find out more, and to arrange for a no charge initial consultation, contact a licensed consumer proposal administrator today.

Are There Any Disadvantages?

While a consumer proposal is a great alternative to declaring bankruptcy, it is not for everyone. Filing a consumer proposal may not be an option if:

  1. You do not have a steady or sufficient income to support your proposal payments. If you miss three proposal payments your proposal is annulled and your creditors can once again pursue you for your debts.
  2. A consumer proposal will remain on your credit report for 3 years after the completion of your proposal. If you will be discharged in 9 months in a bankruptcy, your bankruptcy may appear on your credit report for a shorter period than a consumer proposal if you take all 5 years to complete your payments. However, you can begin the process to rebuilding your credit while you are in a consumer proposal so this may not have as negative an impact in the long run as it sounds.

Solve Your Debt Problems

A consumer proposal can help you eliminate your debt and gain control over your financial future. Let us help you:

  • eliminate your unsecured debts;
  • reduce your monthly payments;
  • stop collection calls;
  • avoid bankruptcy;
  • allow you to start saving for your future.

Contact a local Consumer Proposal Administrator so we can help you on your road to debt recovery.

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