Consumer Proposals vs. Bankruptcy (MNP 3 Minute Debt Break)

This is another edition of the MNP 3 Minute Debt Break. In this installment, we discuss the differences between Consumer Proposals and Bankruptcies. 

The bills are piling up. You’re constantly getting calls from creditors. You borrow money from friends and family but it doesn’t seem to be helping. You know that you need to do something, but… what?  Is bankruptcy the only option? No. There are several alternatives. One option is to file a Consumer Proposal. There are multiple benefits of filing for a consumer proposal rather than a bankruptcy. Here are just a few.

Fixed and Lower Payments! The payments on the Consumer Proposal can be set at the same amount each month for the entire period of the proposal. That allows for more stability and ease in budgeting each month. A lower payment is often achieved because the proposal laws allow a consumer proposal to be paid for a period of up to five years. By spreading out the total funds offered over a longer period of time, you are able to reduce each month’s payment and manage your debt obligations while also keeping up with the costs of day-to-day expenses.

Avoid Interest & Penalties – Once a Consumer Proposal has been filed with a Licensed Insolvency Trustee, the interest charged by the creditor ceases to apply. With the balance now established, it will allow both you and the creditor to have a better understanding of what the creditors will receive as dividends and what you may want to offer.

Retain Control of Assets – In the case of a bankruptcy, until the date that a person is discharged from their bankruptcy, certain assets they acquire become property of the bankrupt estate.  For example, if a bankrupt individual inherits money during a bankruptcy, that individual would need to pay all funds into the estate to the maximum of 100% of the debt plus 5% interest to the creditors and administration costs. A Consumer Proposal has different legislation. If the same individual had filed a proposal, those funds would be retained by the debtor. The debtor would then have the ability to pay their proposal early or continue to make the agreed upon payments.

Depending on your unique situation, there might be other debt solutions available to you as well. Contact a Licensed Insolvency Trustee for a free, no-obligation consultation. Together you will be able to assess your personal situation and choose which debt solution route most suits your financial needs. A fresh financial start is achievable, it’s just a matter of how you’re going to get there.

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