If you’re struggling with debt, it’s important to learn about the options available to you and your specific financial situation. Filing for Bankruptcy or offering a Consumer Proposal are just two of the solutions that the qualified debt advisors at Fuller Landau can help with, once we’re certain that all other options have been exhausted.
When you file for Bankruptcy, you essentially dispose of some personal assets to eliminate your outstanding debts. It is a serious legal process, lasting as little as 9 months. A Consumer Proposal is often a preferred alternative to Bankruptcy, in which you make an offer to your creditors to repay only a fraction of your debt, based on your financial ability.
The two processes share a couple things in common:
- Immediacy: The debt protection provided by a Bankruptcy or Consumer Proposal is immediate. Your unsecured creditors are notified within 5 business days of your filing, and you are protected from any further collections at that time.
- Counselling: Individuals filing a Consumer Proposal or Bankruptcy are required to attend two counselling sessions within 7 months, to receive guidance on budgeting and money management, and to develop a workable plan for a healthy financial future. Monthly income statements must also be submitted by people filing for Bankruptcy.
Differences Between Consumer Proposals and Bankruptcy
Understanding which debt relief option is best for you can be confusing and overwhelming. The following chart highlights the key differences between Consumer Proposals and Bankruptcy so you can gain clarity on these potential insolvency solutions and the implications of each. In general, you’ll notice that the eligibility requirements for a Consumer Proposal are more restrictive, while the penalties are less severe than for Bankruptcy.
||For debts less than $250,000 (excluding your home mortgage)
||No limit on the amount of debt
||Only available to individuals
||Available to Individuals and companies
||Creditors will have 45 days to vote for or against the proposal, or to submit a counter-offer. If approved by majority of creditors, the proposal receives court approval and becomes legally binding.
||Creditors cannot stop the process
||Settlements offered must be more favourable to creditors than a Bankruptcy
||Pays out based upon income and value of liquidated assets
||A fixed amount that does not vary with income
||A portion of your monthly income must sometimes be paid to the Trustee for the benefit of your creditors; amount varies as income changes
||You keep any tax refund you receive
||Tax refunds relating to a Bankruptcy year or prior years will go to the Trustee for the benefit of your creditors
||Can last from 1-5 years
||First-time Bankruptcies can last from 9-21 months.
||Can be paid down earlier than scheduled for early release, with no penalties and no interest
||Early payments can be made, but do not result in early discharge
Want to learn more about the difference between a Consumer Proposal vs Bankruptcy? Contact us today for a free consultation. We’ll help you identify which option is most viable, or if either are even necessary.