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It’s no secret that debt can be a major burden. It can feel like you’re constantly swimming upstream, just trying to keep your head above water. And when you’re already struggling to make ends meet, getting out of debt can seem overwhelming.
The good news is, you can do it. Solving debt doesn’t happen overnight, but it is an important task.
In today’s article, let’s explore two solutions—consumer proposal and bankruptcy. What are they, and which is better? Here’s what you need to know:
What is a Consumer Proposal?
A consumer proposal is a legal process that allows you to repay your debts to creditors over a period of time, usually five years or less.
A consumer proposal may be a good option if you struggle to repay your debts and cannot make payments to your creditors. It is important to note that a consumer proposal is a legal process, and you will need the help of a licensed insolvency trustee to file a proposal.
A consumer proposal can help you:
- Repay your debts over a period of time
- Make one monthly payment to your trustee
- Stop interest from accruing on your debts
- Protect your assets
If you are considering a consumer proposal, it is important to speak to a licensed insolvency trustee to see if it is the right option.
What is Bankruptcy?
Filing for a bankruptcy in Canada is a legal process that legislated under the Bankruptcy and Insolvency Act in Canada. To file for a bankruptcy, you would have to do so with a Licensed Insolvency Trustee (LIT). The LIT is an unbiased third party who ensures the laws and regulations of a bankruptcy are applied and held by both the debtor (the party borrowing money) and the creditors (the party lending money). All the information that you need to know about bankruptcy in Canada can be found here.
Consumer Proposal vs. Bankruptcy
For debt relief, more options are available to you than you think. There are two major options for dealing with it: consumer proposals and bankruptcy. Of course, there are pros and cons. What’s important is to understand the difference between them before deciding.
Bankruptcy can give you a fresh start by wiping out your debts. It’s a serious decision and will stay on your credit report for seven to ten years. That said, it’s not the end of the world, and you can still rebuild your credit and get back on track.
A consumer proposal is a bankruptcy alternative. It’s a legal process that allows you to make a repayment plan to pay off your debts over time. Unlike bankruptcy, a consumer proposal won’t damage your credit score. It will stay on your credit report for three years, but it won’t have the same negative effect as a bankruptcy.
Conclusion
So, which option should you go for? It depends on your situation. If you’re making minimum payments, have a lot of debt, or face foreclosure, bankruptcy might be the best option. If you can make your minimum payments but are looking for a way to get out of debt without damaging your credit, a consumer proposal might be the better choice.
No matter which option you choose, it’s important to get professional help to make sure you’re making the best decision for your situation.
Debt Helpers is a company in Canada dedicated to providing people with customized debt solutions, consulting services, and more. The company hopes to give people the chance to achieve financial independence and stability by managing their debts first. Browse our website to see our resources and advice on handling debt.