Understanding the Advantages of Consumer Proposals
In the current economic landscape, many individuals are grappling with financial challenges. One viable solution for those struggling with debt is a consumer proposal. This article offers an in-depth look at the advantages of consumer proposals and how they can be a beneficial alternative to bankruptcy.
What is a Consumer Proposal?
A consumer proposal is a formal, legally binding process coordinated by a Licensed Insolvency Trustee (LIT). This is an agreement between you and your creditors to settle your debt for less than the total amount owed.
Consumer Proposal Vs. Bankruptcy
A consumer proposal and bankruptcy are two distinct debt solutions. Both are regulated by the federal government and are legally binding. However, they differ in several ways. Bankruptcy is typically for individuals with no regular income, whereas a consumer proposal is ideal for those with a stable income source.
Top Six Advantages of Filing a Consumer Proposal
Understanding the advantages of consumer proposals can provide clarity on why this option may be preferable for many.
Advantage #1: A Consumer Proposal is Not a Bankruptcy
One of the main advantages of consumer proposals is that they are not a bankruptcy. Even though bankruptcy can be a valuable financial solution, many individuals feel a sense of shame connected to it. A consumer proposal, however, is a different debt solution that can provide the same relief without the stigma of bankruptcy.
Advantage #2: You Can Pay Off your Consumer Proposal Early
In contrast to bankruptcy, a consumer proposal allows you to make additional payments and complete your proposal earlier. This can be beneficial as it allows you to start rebuilding your credit score sooner.
Advantage #3: A Consumer Proposal Has a Shorter Effect on your Credit Rating (Credit Score)
A consumer proposal will impact your credit score, but it can recover quite speedily once the proposal is completed. The record of a consumer proposal stays on your credit report for six years from the date you file the proposal or three years from the date you complete it, whichever is shortest.
Advantage #4: A Consumer Proposal is Legally Binding
Another significant advantage of consumer proposals is that they are legally binding. This means that once you enter into a consumer proposal, your creditors must release you from your debts once you meet the terms of the proposal.
Advantage #5: A Consumer Proposal is a Negotiated Agreement
A consumer proposal is a negotiated agreement between you and your creditors. This can make it seem more respectable compared to bankruptcy.
Advantage #6: Your Consumer Proposal Payment Never Changes
One of the most appealing advantages of consumer proposals is that your required payment never changes. Unlike with bankruptcy, where the monthly payment can increase if your income increases, with a consumer proposal, your monthly payment stays the same throughout its term.
Getting Started with a Consumer Proposal
If you believe a consumer proposal may be the right solution for you, the first step is to get in touch with a Licensed Insolvency Trustee (LIT). These professionals can guide you through the process and help you understand the advantages of consumer proposals.
Conclusion
Understanding the advantages of consumer proposals can help you make an informed decision about your financial future. If you’re struggling with debt, a consumer proposal could be the right solution for you. Reach out to a Licensed Insolvency Trustee to discuss your options and start your journey towards financial recovery today.
