Consumer Proposal vs. Personal Bankruptcy
Which is Better?
This is one of the most common questions that we get asked when we meet with someone. A bankruptcy and a consumer proposal are options under the Bankruptcy and Insolvency Act as solutions to provide debt relief in Canada.
Both, a consumer proposal and a bankruptcy, provide immediate debt relief and legal protection from creditors, however there are many differences between the two debt relief options.
A better way to evaluate the two options (consumer proposal and a bankruptcy) is to see which one is right for you. Just as there are many reasons why a person has run into difficulty in repaying their debts, there are as many reasons why one may be the right solution for you and the other may not. This is where we can help. As debt experts, we help individuals, day in day out, get out of debt and get a fresh start.
When is a Consumer Proposal Better Than A Brankruptcy?
It is not a simple decision. Which one should you file for immediate debt relief? A consumer proposal or a bankruptcy. Each has its own advantages and disadvantages. The following are the main differences for you to consider:
1) Proposal payments remain the same.
Proposal payments are often fixed and do not change month to month. However, in a bankruptcy, if your income is above the government guideline (the bankruptcy income test, click here), your monthly bankruptcy payments will change as your income changes.
2) Proposal process is simpler.
Once a proposal has been accepted by your creditors, you only need to make monthly proposal payments. A bankruptcy can be complicated. In a bankruptcy, you will need to:
– report your income each month
– pay more if your income increases (and extend the length of your bankruptcy)
– attend two credit counselling sessions
– provide your (and your family members) tax information to the trustee;
– repurchase or surrender non-exempt assets (for example: RESP, recent RRSP contributions, etc.); and
– creditors can oppose your discharge (for example, if they think you should have filed a proposal).
3) Proposal terms (monthly payments and length) are known up front.
In a proposal, you will know your monthly payments and the length at the beginning of the proposal. This can result in a piece of mind. There are no surprises.
4) Lose tax refunds and some assets in a bankruptcy.
In a bankruptcy, any tax refunds that you are entitled to get sent to the trustee (for payment to your creditors). Additionally, any assets that are not considered exempt (under Provincial and Federal laws) will either need to be surrendered to the trustee or repurchased. Common non-exempt assets include: recent RRSP contributions, RESP, certain life insurance policies, equity in your residence over a set limit, vehicles worth more than $6,600.
Conclusion: The Right Debt Solution for Me Is?
A personal bankruptcy and a consumer proposal are debt solutions under the Bankruptcy and Insolvency Act is that meant to help you get out of debt and give you a fresh start. However, as discussed above, each is different from one another and the right option is different person to person. To know the best debt relief option for you, we recommend that you speak with a debt relief expert such as ourselves. Everyday we help people get out of debt. This is all we do.
The process starts with contacting us by email, phone or completing the submission form just below. Chande Debt Solutions will guide you through the process from beginning to end and explain all the advantages and disadvantages so that there are no surprises. At the end of the process, your debts are wiped out! Want to get started? Contact us for a free no obligation consultation.
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