What Is the Variance Between a Consumer Proposal and Bankruptcy?

 

Filing for Bankruptcy or submitting a consumer proposal are viable options for debt relief. But how do they are different from one another? While both provide legal protection from creditors and function similarly in terms of outcomes, they have many important differences. Understanding your debt relief options will come in handy when dealing with debt-related stress and anxiety.

 Do you want to know how to use consumer proposal bankruptcy filings to get out of debt? Continue reading to learn about the key differences between the two.




What exactly is a consumer proposal?

 A consumer proposal is a formal agreement filed between you and your creditors. It is designed with the assistance of a licensed insolvency trustee, who will assist you with debt relief and repayment strategies. The contract will usually require you to pay a portion or all of your debt over a set period.

 Consumer proposals are useful because they assist you in reducing your debt in a controlled and manageable manner. When you file a consumer proposal, the interest charges on your credit cards will stop accruing. You will also be protected from debt collectors, legal ramifications, and wage garnishments.

 

What exactly is Bankruptcy?

 On the other hand, the consumer proposal process can potentially relieve you of all of your debts. Once again, a licensed insolvency trustee is required to investigate your claim, analyse your finances, and oversee the proceedings in your case. When you file for bankruptcy, you will usually have obligations to fulfil. Attending credit counselling sessions (usually two sessions per case) and filing monthly income and expenditure news stories are examples of this. After all, proceedings are completed, you can be relieved of your debt between nine and 21 months after your first filing. 

 

What are the main distinctions between the two?

 The primary distinction between the two debt relief options is the impact on assets. When filing for Bankruptcy, you usually surrender any non-exempt and relevant assets to eliminate your debts as much as possible. You repay a component of your debts through consumer proposals. As a result, you keep your assets, but they are factored into the amount you offer your creditors consumer proposal bankruptcy Consumer proposals are available for up to $250,000 in unsecured debt (there is a different type of proposal in the case of higher debt). Bankruptcy is applicable if you have at least $1,000 in unsecured debt. It does not include your mortgage on your primary residence.

 They also differ in terms of settlement or repayment. Consumer proposals have a negotiated repayment amount divided into monthly payments and must be agreed upon by the majority of creditors. The Bankruptcy necessitates monthly payments based on monthly gross income. Consumer proposals can last up to 5 years, whereas bankruptcies typically last nine to twenty-one months.

 

What are the two things they have in common?

 The main point of similarity is that both options shield you from legal ramifications and creditors. If you choose one of the two options, your interest charges will also freeze. You will no longer receive collection calls, which can be a huge relief. As both bankruptcy and consumer proposals are governed by the Bankruptcy and Insolvency Act of Canada, you will have the assistance of a licensed insolvency trustee in both cases.



Most relevantly, both options will aid in your financial recovery! With these options, you'll be well on your financial activity health, but you'll also receive financial education, which is a life skill worth learning. To learn more about consumer proposals, contact Consumer Proposal Alberta at (587) 418-3277 or send us an email.

 

 

Location: Alberta, Canada

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