Freedom From Debt Is Just Around The Corner

You don’t have to keep living with debt. There are ways to reduce your debt and get out of it sooner. You’ve probably already heard of bankruptcy, but bankruptcy isn’t the only means of getting out of debt. Since the 1990s, consumers in Canada have also been able to file a consumer proposal, a bankruptcy alternative that makes it easier to get out of debt if you have a job or an income, without losing your assets.

Bankruptcy trustees, today known as Licensed Insolvency Trustees, are the only professionals who can file for consumer proposals or bankruptcy. Your bankruptcy trustee is responsible for disbursing your payments to your creditors, whether they’re monthly payments or proceeds from the sale of an asset. Find out the difference between bankruptcy vs consumer proposal with a bankruptcy trustee today.

Advantages of a Consumer Proposal

The biggest reason to pick a consumer proposal is that your assets are safe. You won’t have to sell your home, surrender vacation properties, or the last 12 months of your RRSP contributions, which can all be subject to sale in a bankruptcy.

In a consumer proposal, your creditors agree to a debt reduction that you will pay off month by month. You send a fixed monthly sum to your bankruptcy trustee who then disburses it among your creditors. Toronto bankruptcy trustees David Sklar & Associates say they’ve reduced some of their clients’ debt by as much as 80 percent.

You can also lose an inheritance or any sudden windfall if it comes in during the bankruptcy process. Your monthly payments in a consumer proposal are fixed, even if your income increases. In a bankruptcy, a higher income may mean higher payments.

Consumer proposals help in other ways, as well. They put a stop to interest payments, even if it takes you five years to pay back your debts. It also stops any legal actions like a garnish on your wages and puts an end to collection calls.

Disadvantages of a Consumer Proposal

There are downsides to a consumer proposal compared to filing for bankruptcy. If you don’t have any assets that could be seized in a bankruptcy, bankruptcy could be the smarter financial decision. Keep in mind that in bankruptcy, you will also have to pay your creditors part of your surplus income.

A consumer proposal in Ontario also means you need to have at least some income in order to make monthly payments. If you’re unemployed or have no support from a spouse or family, clearing your debts right away with a bankruptcy might be necessary.

A consumer proposal in Ontario will also stay on your credit report longer. An R7 note (a code entry that indicates to creditors you were unable to manage your account and have entered a payment plan) remains on your credit report for three years after you complete your consumer proposal, which can last up to five years. If taking out a loan for a mortgage, car, or a business is a near-term goal, bankruptcy may be the better option, but it is best to discuss this with a Licensed Insolvency Trustee.

A bankruptcy trustee in Toronto will explain the difference between bankruptcy vs consumer proposals. Get real debt relief today.