When your debt has finally become too much, chances are that you’ll know it. Thinking of the constant stream of collectors harassing you, you have the realization that a second job or tightening the belt won’t be enough to handle your issues. At this point, you need to consider pursuing major measures to release yourself from debt, and it’s likely going to come down to declaring bankruptcy or pursuing a consumer proposal.
What Is Bankruptcy?
Bankruptcy is generally a last-ditch effort to try and end the cycle of debt, but it comes at a major cost: just about any of your assets. Generally, if you require bankruptcy, it’s probably because you need quick financial relief or some sort of protection from creditors. Any Canadian resident with over $1,000 in debt and who is currently insolvent can file for bankruptcy. Bankruptcy payments vary with income, with higher earners having to pay more. Exempt assets for bankruptcy include most household belongings and a car below a certain value.
Depending on your future plans, the biggest impact of bankruptcy may come on your credit rating. Those who declare will have an R9 credit rating. This is the worst possible rating and can remain on your credit report for seven to as long as 14 years. However, if you are in dire straits, bankruptcy may be worth taking this on.
Note that there are other debts that you may still be responsible for post-bankruptcy. These include legal fines and judgments (like alimony or child support) or student loans if you have been a student within the last seven years. As a result, if issues like these are the chief cause of your debt, you may want to look elsewhere.
What Is A Consumer Proposal?
A consumer proposal, for many people, is preferable to bankruptcy, though there are certain limits that one needs to abide by. This is a legally binding agreement between you and your creditor that negotiates a debt repayment plan over a five-year period. In exchange for abiding by this plan, you won’t have to worry about losing your assets – something which isn’t guaranteed in bankruptcy.
In order to qualify for a consumer proposal, you need to have unsecured debt that does not exceed $250,000. Note that a mortgage does not count in this regard. In addition, your debts need to exceed what you own, and you need to be able to prove that you can take on the monthly payments. This is a bit different than a debt consolidation loan in that you can end up paying back less than what you owe.
If you choose to go the route of a consumer proposal, it’s important to note that you need to do everything in your favor to try and stack the deck in hopes of getting it approved by your creditor. There are things you can do to help in this regard, but ultimately, it boils down to having an experienced and helpful licensed insolvency trustee. Learn more about the process and how to get started by visiting https://chande.ca and see what steps you can take to eliminate your debt and take control of your financial situation