Consumer Proposal vs. Bankruptcy

The first step to paying off your debt is to explore and decide on which debt solution is best suited for you. If you are having problems paying your monthly bills, dealing with monthly debt payments, dealing with wage garnishments and phone calls from your creditors, you might want to think about consumer proposal or bankruptcy in Nanaimo.

Consumer proposal are structured payments over certain duration of time and can considerably reduce the total amount you have to pay that can even go up to 80% reduction. Consumer proposal provides great flexibility in which there will be an agreed debt settlement terms that creditors may accept, so you can avoid filing for personal bankruptcy.

Personal bankruptcy can be the best alternative for individuals that have extremely large debt and a low income, but it is always a good idea to talk to a professional regarding this specific problem before jumping to a decision.

Who can claim bankruptcy or a consumer proposal?

Claiming Bankruptcy in Canada: Any individual who is a Canadian resident, has a debt of over $1,000 and is broke can be eligible to file for bankruptcy. Eligible candidates may require fast financial assistance and protection from creditors.

Filing a Consumer Proposal: To be eligible for a consumer proposal, your debt must not exceed $250,000 (excluding a mortgage) and you must have the capability to pay a portion of your debts. But, there is a guarantee yet that you will be granted a proposal simply just by filing. First, the proposal must be accepted by most of your creditors.

The Cost Difference between Bankruptcy and Consumer Proposal

Bankruptcy Payments: This will vary since payments will be based on your income. The higher your income, the higher the amount you are required to pay. The high payment amount due to high income is known as surplus income payment.

Consumer Proposal Payments: The amount that you will pay through consumer proposal will be based on the negotiated settlement between the debtor and the creditor. After an agreement has been reached, a monthly payment will be fixed and cannot be changed and will remain the same until the proposal is completed.

The most notable difference between a bankruptcy and consumer proposal when it comes to payment is that in a consumer proposal, your payment will be spread out over a longer period of time, thus lowering the monthly payment. This makes consumer proposal a viable option for many people who are in debt.

How long does each bankruptcy option last?

Length of Bankruptcy: For a first-time bankruptcy payment, it will take a minimum of 9 months. But if you are obliged to make additional income payments, it will be extended to as long as 21 months. Longer periods mean an increase to the potential cost of bankruptcy.

Maximum Term of a Credit Proposal: Consumer proposal payments can take a period of 3 to 5 years to pay.