When it comes to overbearing debt, Canadians usually are in a dilemma of choosing between two key alternatives; making a Consumer Proposal or going Bankrupt. They are both a legal remedy to allow people to control their money but they are different in respect to their implications, activities and outcomes. These differences need to be known assuming one needs a choice.

What is Consumer Proposal?

A consumer proposal is simply a formal offer to enter into a contract with creditors and agree that you will repay a portion of what you owed at a given time over a specified period of time. A consumer proposal is a less drastic alternative to bankruptcy; many people who research the purpose of a consumer proposal will find that they do not need to liquidate all their assets, such as a home or a vehicle. This option is popular in Ontario consumer proposal cases. People choose it to avoid the severe impacts of bad credit.

Also Read: Does Loan Consolidation hurt your Credit Score?

Reasons why Canadians Prefer Consumer Proposals

Conversely, being a Canadian bankrupt is legally stating that you no longer have the ability to pay off debts. Although this provides a quicker way to cancel debts, it has more severe implications. Anyone who considers bankruptcy will find that it may require giving up some property. It can also cause long-term harm, such as damaged credit and limited access to future loans. Many people in such cities as Toronto use the services of a bankruptcy lawyer to receive an individual consultation regarding the impact that bankruptcy Toronto regulations can have on them.

Technology and Decision-making

Technology has also made the decision making process very easy. Technologies such as a consumer proposal calculator can help Canadians figure out the approximate way their payments would look under a proposal, simplifying comparing the amounts of their repayments in the consumer proposal versus bankruptcy case.

The other factor is the change in credit rating results. A consumer proposal Canada offer would stay on your credit report up to 3 years when completed and bankruptcy up to 6 or 7 years depending on provincial laws. Looking at official bankruptcy information Canada offers not only the timelines but also some information about the bankruptcy laws which slightly differ between provinces.

In the end, your income and debt determine whether to choose a consumer proposal or bankruptcy. Both are legal tools that help you rebuild, but you must weigh the pros and cons first. Consulting an expert will mean that you make the correct decision after gathering the necessary information.

Also Read: A Buyer’s and Seller’s Quick Guide What Is a Conditional Offer and How Does It Work

FAQs

1. People ask, how do I know which proposal to choose and that it is consumer proposal?

You can avoid bankruptcy and retain assets through a consumer proposal. This works if you have a steady income and can repay part of your debt.

2. Do you get your way out of all debt by going bankrupt?

Bankruptcy does not discharge certain debts.  Other obligations such as child support, alimony, and school loans in some circumstances tend to persist.

3. Is it possible to refuse legal assistance in filing a consumer proposal or a bankruptcy?

Both procedures have to be performed by a Licensed Insolvency Trustee. A professional will help you with the bankruptcy laws in Canada and make the appropriate choice.

Also Read: 10 Ways to Consolidate Credit Card Debt