Consumer Proposal is the answer to serious debt problems in Canada. It is a legal agreement between the lender and the creditor that offers the creditor a chance to payback an amount that is lesser than their debt. Insolvent individuals, who cannot pay off all their debt on time, and do not own any such assets, can qualify for consumer proposal.
There are a lot of advantages of considering consumer proposals over bankruptcy. Some of them are discussed below.
1. Reduced Payback Debts
When an individual, who is under a huge debt, files for consumer proposal, their debt is reduced. This means that after filing for consumer proposal, they only have to pay up to 30% of their debt amount. This encompasses collection debt, credit card debt, income tax debt, overdrafts, and line of credits.
2. Protecting the Assets
Unlike bankruptcy where your assets can be taken away from you, consumer proposal protects them once it gets accepted. These comprise of your vehicle, cottage, house, RESPs, and RRSPs. While you are managing your debt, you need to protect your assets too, because these are the only things you are left with after your retirement. Nevertheless, you just need to keep making payments till the duration that has been accepted by your creditor.
Not only is the process of filing for consumer proposal less expensive, but also the amount you are supposed to pay to the creditor is decided on the basis of your financial capability. Additionally, it takes around 60 months to pay off the proposal therefore; you can save the debt repayment amount by saving from your monthly expenses and become debt free once the period of 60 months are over. By paying at least a particular amount of your debt, you will feel an ownership and responsibility of doing something about the problem yourself. Moreover, this option is best for people who cannot pay the entire amount, but can pay back some of their debts.
4. No Legal Actions against You
Once the application for the consumer proposal is submitted, you will be protected against any legal actions taken by the creditors, such as garnishment of the wages and harassing phone calls. You will not find these benefits in other debt reduction alternatives. Other debt managements take place through the negotiation between the lender and creditor.
5. Simpler Process
The process to carry out consumer proposal is quite easy and uncomplicated. You can take the help of a counselor to create a proposal that the creditors will agree on, and is also in accordance with your interest and budget. Filing of the proposal is the next step, and lastly, after you have gotten a green light from the creditor, you will make payments on a monthly basis.
If bankruptcy is your least favorite option, then apply for consumer proposal. You can also take help of counselors that are experienced in the field to help you decide on which options you should settle for.