Write-off Debt Without Bankruptcy: Learn about Consumer Proposals
Most people who struggle to pay off debt believe that personal bankruptcy is the only possible debt relief program for their situations.
Unfortunately, only 10% of our clients are eligible for bankruptcy, which can leave a lot of people wondering how they can write-off debt without bankruptcy.
A licensed insolvency trustee can help you understand your options to become debt-free when bankruptcy isn’t a suitable solution.
Here you can learn about consumer proposals and understand how they can provide the answer you need to tackle your debt.
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What is the difference between personal bankruptcy and consumer proposal?
Personal bankruptcy costs $1,800 if you don’t need to make additional payments.
If you file bankruptcy for the first time, you could become debt-free in as little as 9 months.
The debt is forgiven even though you don’t pay it off.
On the other hand, a consumer proposal can help you tackle the same unsecured debts, including government debts, but it does so with a repayment plan.
When you proceed with a consumer proposal, you need to repay partially your debt over the course of up to 5 years, after which the debt is forgiven.
How do I repay my debt with a consumer proposal?
A consumer proposal is similar to a debt consolidation loan, in the sense that it combines all your debts into one settlement.
This makes it more manageable as you don’t need to track multiple accounts, payment dates, and creditors’ details.
The trustee arranges the settlement with the creditors, who accept payment from you via the trustee.
However, the consumer proposal is not a loan.
It doesn’t repay your debt immediately.
You repay the debt partially throughout the plan.
Additionally, your credit rating plays no role in defining whether you are eligible for a consumer proposal.
The structure of a consumer proposal
The proposal is individually discussed and tailored by your trustee to suit your individual circumstances.
The proposal will therefore never offer more than you can afford to pay to your creditors.
However, it can be subject to further negotiations and counteroffers with your creditors until an agreement is met.
Typically, with a consumer proposal, you will pay off 20% to 40% of the money you owe.
However, the proposal settles your debt in full once you have repaid the agreed amount.
Similarly to personal bankruptcy, your debt is written-off in full.
Both consumer proposal and bankruptcy will appear for several years after their completion on your credit report.
Why do creditors accept a consumer proposal?
The consumer proposal is a legally binding process that can be more beneficial than bankruptcy for your creditors.
When you file for bankruptcy, your creditors may have to write off the debt without receiving any payment.
On the contrary, with a proposal, they can expect partial repayment.
Additionally, due to the agreement process, the consumer proposal only requires half of the creditors to agree to the suggested settlement to become legally binding for all creditors.
A fresh financial start
The consumer proposal is a debt relief plan that is administered by a trustee.
Due to its legal nature, all creditors’ actions and contacts stop as soon as you start the procedure.
Additionally, you are debt-free after completion of the proposal, which puts you in an excellent position to rebuild your credit score.
If you’re looking to clear out your financial slate, call (877) 879-4770 to set up your first consultation with a trustee and achieve debt freedom.
Information on Consumer Proposals
Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?
Consumer Proposal Eligibility
How to Amend a Consumer Proposal