Posted on: 19 May 2015
If you're considering personal bankruptcy, you may also want to take a look at a consumer proposal. A consumer proposal is a type of debt arrangement that can have some major benefits over a traditional bankruptcy, though it has many things in common with conventional bankruptcy proceedings as well. Through a consumer proposal, you will work with a consumer proposal administrator to find a way that you can pay back your creditors.
1. Debt Collection Actions Are Stalled
From phone calls to wage garnishments, all attempts to collect a debt will stop when you've filed a consumer proposal. This is true even if the consumer proposal has not yet been accepted or denied. If you're about to enter foreclosure or get a vehicle repossessed, a consumer proposal can help stall this issue -- though it will not necessarily resolve it. If you're currently experiencing stress or anxiety due to constant collection calls, the consumer proposal can give some respite.
2. Fines, Penalties and Interest Will Stop Accruing
While you are going through the process of filing a consumer proposal, no additional fines, penalties or interest will accrue. Essentially, the consumer proposal puts a "stop" on time related to your creditors. If you have very high interest rates and are already very late on your payments, you can save a lot of money by filing a consumer proposal quickly after you realize that you need it.
3. You Will Be Free and Clear in Five Years
A consumer proposal gives you a plan to pay off your debt within five years. Once you have paid off the debt, the debt is gone -- even if you have only paid off a portion of it; this all depends on how the consumer proposal is constructed. After the five years have passed (and it can occasionally be lower than five years), you can begin rebuilding your credit history and your financial situation.
4. Your Credit Score Won't Be Hit as Hard
Though there is some damage done to a credit score through a consumer proposal, it is not as significant as the credit hit that is involved in bankruptcy. Personal bankruptcy will almost always return an R9 rating -- the lowest possible rating -- while a consumer proposal will produce a rating of R7.
Of course, a consumer proposal isn't always ideal. If you have more debt than you can realistically pay off, a consumer proposal won't help -- and will probably be declined, regardless. In these situations, it's far better to declare personal bankruptcy and to wipe the slate clean. Contact a debt solutions professional, such as Vine & Williams Debt Management, to help you choose the best option.Share