What You Should Know About Consumer Proposals Before Filing For Bankruptcy
Before you file for bankruptcy, take some time to talk with a bankruptcy trustee about consumer proposals. A consumer proposal may give you the opportunity to reduce the balances on your existing accounts, establish a solid repayment plan and put a stop to the collection phone calls without having to formally file for bankruptcy. If you're looking for a way to resolve your financial struggles without the lasting effects of bankruptcy, here's what you need to know.
Why Consider a Consumer Proposal?
When you have the means to repay some of your debt, it's in your best interest to pursue a consumer proposal. Since the consumer proposal process isn't technically bankruptcy, you aren't limited by the same income restrictions as you are with a bankruptcy filing.
You also won't have to surrender your assets like you'd have to with a bankruptcy case. And, once you've signed off on the final agreement, your payment plan is locked in. There are no concerns about payment amounts increasing if your employer gives you a raise, so you'll have more control over your finances.
Finally, consumer proposals aren't as damaging to your credit as a bankruptcy filing. You might be able to save a few points on your credit score by choosing a consumer proposal over bankruptcy.
Why Would Creditors Accept Consumer Proposals?
If you're wondering what's in it for the creditor, you'd be surprised. If you file for bankruptcy, your creditors face the potential of not receiving any funds toward your outstanding account. With a consumer proposal, although the creditor will forgive part of your debt, you're still responsible for paying part of it, too. That means your creditors are more likely to accept a consumer proposal over seeing you file for bankruptcy.
What Can't a Consumer Proposal Cover?
It's important that you not only understand the advantages of a consumer proposal, but also know what limitations this method has. Any past due child support or alimony payments are automatically excluded from a consumer proposal. You'll have to pay those no matter what. You also can't include any student loans or secured loans. If you're having a hard time making your car or mortgage payment, you'll have to seek another alternative.
As you can see, consumer proposals have their advantages. If you're in a situation where you're able to repay some debt, consider working with a trustee to file a consumer proposal instead of jumping into a bankruptcy case.
To learn more, contact a company like Vine & Williams Bankruptcy.