Accumulated debt with unpaid bills is a real problem. Many negative long-term impacts and endless stress are caused by mounting bills and payment reminders regarding your finances. Not to mention the constant feeling of hopelessness and the embarrassment that comes with not being able to pay on time.

Bankruptcy, consumer proposal, or debt consolidation? How do you decide what’s best for your situation? While every situation is different, a consumer proposal or bankruptcy maybe some of the best options. Powell Associates Ltd helps you cope with your problem and relieves the stress that comes with creditors. Consumer Proposals and Bankruptcy are options you should learn about.

What Does  Consumer Proposal Entail?

A consumer proposal is a formal agreement between you and your creditors, which allows you to pay off your debts at an affordable rate. It also gives you time to make regular payments to repay all of your debt. It means that you do not have to file for bankruptcy. 

The main benefit of filing for a consumer proposal is that it allows you to keep your assets and avoid losing them if you file for bankruptcy. Once the creditors agree to your consumer proposal, they must cease forms of debt collection. Remember that your credit score will go down during the paying period and be negatively affected for three years after you finish paying. After that, you can restore your credit score.

What is Bankruptcy?

Bankruptcy is a legal process that allows you to get rid of debts that have become overwhelming or out of control. It’s the last resort for people who have no other way to pay their bills and risk losing their homes, cars, and other assets. Your trustee’s assets determine the amount of money you have to repay. You need to pay a minimum contribution and income surplus towards your bankruptcy. Your credit score will be at its lowest for  7-10 years.

But before you decide whether or not to file for bankruptcy, there are a few things you should know:

  • Bankruptcy won’t make your debt disappear overnight—it’s a long process that will take years (and often even decades) to complete.
  • You’ll have to pay an attorney to help with the process and file paperwork for you. It can be costly depending on how much debt you have and how much money is available for payment after all other expenses.

What Are the Similarities Between Consumer Proposal and  Bankruptcy?

There are many similarities and differences between consumer proposals and bankruptcy. Both are legal proceedings that allow consumers to deal with their debt problems. They can help you avoid foreclosure, repossession, and other negative consequences of not being able to pay your bills.

Features  Consumer ProposalBankruptcy
Does it allows you to retain assets?YesNo
Does it forgives part or all debts?YesYes
Does it charges interest?NoNo
Does it makes creditors not collect a debt?YesYes
Can it be canceled if you delay payment?YesNo
Does it requires monthly payments?YesNo
Does it brings the credit score down?YesYes
Will it stays on the credit report?Yes(3 years)Yes(10 years)

Between Consumer Proposal and Bankruptcy, Which One is Cheaper?

The answer to this question depends on several factors, including the type of debt you have and where you live.

If your debt is primarily unsecured (such as credit card debt), then a consumer proposal may be better than bankruptcy. However, bankruptcy may be better if your debt is primarily secured (such as a car loan). If you possess assets and want to protect them, filing for a consumer proposal and paying the agreed-upon amount is wise.

Are There Several Times You Can File For Consumer Proposal?

You can file a consumer proposal as many times as you like, but there are some restrictions. The first time you complete a consumer proposal, it will take 3-6 years to reflect in your credit score; then, you can apply for another. Also, it’s wrong to file for two consumer proposals simultaneously.  

Bankruptcy and debt consolidation consumer proposals are not the same things. Bankruptcy requires you as a consumer or business owner to deal with your creditors from whom you owe money and a bankruptcy trustee who will eventually sell off your nonexempt property to pay off your debts at pennies on the dollar. In contrast, consumer proposals and debt consolidation consumer proposals gather together all of your creditors under one roof and allow you to negotiate with them the repayment of debts over a set period.