Consumer Proposals are a specialized type of debt consolidation that can be used to drastically cut debt with no added interest or fees. Used to settle virtually all debts, including government debts like income taxes and student loans, Consumer Proposal settlement terms are tailored to the unique circumstances of each person, which can make them a great option for many people.
Even though a Consumer Proposal is a legal debt management tool that has been around for a long time, many Canadians are surprised to learn about this unique consolidation solution which offers protection from creditors, but is in fact Canada’s number one alternative to personal bankruptcy.
What Advantages Do Consumer Proposals Have Over Bankruptcy?
Both Consumer Proposals and personal bankruptcy have immediate benefits to managing debts, including:
- Restructuring virtually all types of debts such as credit card debt, overdrafts, tax debt, ICBC debt, payday loans, student loans and more.
- Saving you money – by way of halting interest charges and cutting or eliminating your debts altogether.
- Giving you breathing room from your creditors, payments, and collection activity.
- Providing you professional support throughout either process, as well as qualified financial counselling.
Beyond your personal preference to avoid bankruptcy, each of these options will have advantages and disadvantages. Depending on your situation, you may find a Consumer Proposal a better choice than declaring personal bankruptcy when considering the following aspects:
Making a Consumer Proposal generally means you will only repay an affordable portion of your total debts to settle these debts in full. Payment terms under a Consumer Proposal are very flexible and can be tailored to accommodate many different situations, for example:
- A Consumer Proposal may offer repayment of as little as 25-50% of your total consolidated debts with no interest or additional charges.
- There is no ‘minimum term’ required in a Consumer Proposal. Payment terms can be up to 60 months, or a Consumer Proposal could even be completed with a single, lump-sum payment.
- A Consumer Proposal can be paid in full at any time, without penalty.
In comparison, bankruptcy payments and how long the bankruptcy lasts are calculated by law, primarily based on your overall income. Generally most people will pay only administrative filing fees of $200 per month for nine-months and bankruptcy will last either nine months or 21 months until you are discharged (released) from bankruptcy – and the length of the bankruptcy period is not negotiable.
Your Consumer Proposal settlement will be noted on your credit history for only three years following completion (or six years after your Consumer Proposal starts, whichever is sooner), whereas filing personal bankruptcy will be reflected on your credit report for six years after completion.
Tools and resources aimed at helping you take advantage of the “fresh start” benefits of making a Consumer Proposal or filing bankruptcy are provided as part of either process, and you can still apply for credit at any point.
BC law provides certain ‘exemptions’ that protect many of your assets from seizure to pay debts. Though most people keep all their assets in a personal bankruptcy, in certain circumstances a person may hold an asset worth more than the BC asset exemption allowances. A Consumer Proposal can be a simple solution to allow you more control over your assets and ensure that certain assets remain protected from interests your creditors may otherwise take in them.
While there is no limit on your earning potential during a bankruptcy or Consumer Proposal, and it is also possible to be self-employed during either process, bankruptcy does restrict the type of business structure that you can operate during the bankruptcy. By choosing to address your debts with a Consumer Proposal you can continue to be a director of a limited company, whereas a bankrupt individual may not be the director of an incorporated company until they have completed the bankruptcy process and received a discharge.
Similarly, there are a few professional accreditations that do not accommodate filing a personal bankruptcy – these restrictions may be avoided by making a Consumer Proposal.
As experts in debt consolidation, Consumer Proposals and personal bankruptcy, Sands & Associates’ qualified Licensed Insolvency Trustees can help you evaluate your situation and assess all your potential solutions so you can make the decision to move forward with your best option to get out of debt.
Book your free confidential debt consultation with a BC Licensed Insolvency Trustee today – it may take less than an hour to explore all your options and get a plan to become debt-free.