Consumer Proposal Vs Bankruptcy – What Is the Difference?

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What is the difference between a Consumer Proposal and Bankruptcy is a common question we hear all the time so today let’s do a comparison of consumer proposal vs bankruptcy?

I’ve been in the insolvency business discussing bankruptcy in Toronto for over 30 years and in all that time I don’t ever remember meeting anyone who actually wanted to go bankrupt. Let’s face it, who would? I have met an awful lot of people who did realize and accepted that bankruptcy was the solution they needed. But, going bankrupt really had not been on their to-do list.

It is a common topic when choosing a debt relief solution. I know the vast majority of people who come to our office would greatly prefer to solve their debt problems some way other than filing a bankruptcy. Many choose a consumer proposal or some other kind of debt consolidation versus personal bankruptcy. Ultimately, it boils down to finding out what options are available for you, what the consequences will be, and then deciding what is best for you and your family.

What is the difference between consumer proposal and bankruptcy?

A consumer proposal is a settlement made between you and the lender with the assistance of a Licensed Insolvency Trustee. The trustee will facilitate the negotiation between you and the creditor concerning the repayment terms. The agreement includes paying a reduced amount of your total debt owed within a certain period, usually five years. Once the agreement has been finalized, the creditors will not be able to take a portion of your income. Moreover, the interest on your debt will stop immediately.

On the other hand, bankruptcy involves taking over your assets to settle your debt with specific exemptions. Your Licensed Insolvency Trustee will work with you upon deciding to file bankruptcy, which is governed by the federal government. By declaring bankruptcy, your creditors can no longer go after you and you can have a fresh start in your financial goals upon relieving yourself from your debt. This is after completing your duties. However, no one wants to go bankrupt but depending on your financial struggles, this could also be the best solution to your debt problem.

Bankruptcy versus Consumer Proposal: How can you decide which the best is for you?

A lot of things have to be considered when choosing between the two options. Do you want to keep most if not all your assets? If yes, you should consider going for a consumer proposal. There are also differences in the payment terms. A consumer proposal differs from bankruptcy in the sense that it requires a regular and fixed amount of payment based on what you agreed upon with your creditors. As with bankruptcy, you will be obligated to pay an amount based on your salary and other factors. A proposal will also have a lesser impact on your credit score but will still have an impact. Filing bankruptcy will make you debt-free faster than a consumer proposal.

The first step in making this work is to talk to a Licensed Insolvency Trustee. A trustee is licensed by the federal government with the duty to assess your situation for you and explain all the options and consequences. Once you know what paths are available and where they will lead, you can decide which one to take. Though the decision must be yours, their job is to make things as clear to you as possible so you can make the best choice for your financial situation.

Now here’s the neat part. That consultation with Richard Killen & Associates is FREE- no charge, no strings attached. Not a bad price for the kind of empowerment a person with debt problems wonders if she or he will ever find.

So don’t stew about those bills anymore. Call us or contact us by email and make an appointment for that free consultation. Remember, it may be the most stress-relieving call you ever make.

One of our Licensed Insolvency Trustees will explain the difference between a consumer proposal and bankruptcy, the pros and cons of each, however, ultimately, it’s up to you to decide on a consumer proposal vs bankruptcy to solve your debt problems.

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