Choosing the Right Path: A Guide to Consumer Proposals and Debt Relief

Dealing with overwhelming debt can be stressful, particularly when your monthly payments are becoming difficult to manage and they don’t seem to make a dent in what you owe. The good news is that there are several debt relief options, and understanding the differences between them can help you make an informed decision about your financial future.

What Options Are Available for Debt Relief in Canada?

There is no single debt solution that works for everyone. Speaking to a Licensed Insolvency Trustee (LIT) can help as they will discuss options that are based on your situation and designed specially for you.  Depending on your circumstances, you may want to consider several possibilities, and below is some options an LIT will discuss with you:

• Bankruptcy is a formal legal process that can provide relief from many unsecured debts when other solutions are not suitable. It is not necessarily the first, best or only option, and a Licensed Insolvency Trustee can explain how bankruptcy would affect your particular financial situation
• A Consumer Proposal is another option. It is a federally regulated option that allows an individual to make an offer to creditors to repay all or part of their unsecured debt over time. A Consumer Proposal can provide debt relief while avoiding bankruptcy
• Debt consolidation combines multiple debts into a single payment, potentially making monthly finances easier to manage. Whether consolidation is practical depends on factors such as the amount of debt, interest rates, income and available credit. This option still requires you to pay back 100% of your debts plus interest
• Credit counselling can help if you need assistance with budgeting or money management. Sometimes a quick adjustment to your budget is all that is required to get back on track

Why Have Consumer Proposals Become So Popular?

Canadians consider Consumer Proposals for different reasons.  If you are struggling with multiple unsecured debts, such as credit cards, lines of credits or income tax debt, having a structured repayment arrangement may make managing your finances easier. Instead of dealing with several creditors and multiple payments, the proposal creates a formal framework for addressing eligible debts in one manageable monthly payment

In addition a Consumer Proposal is an agreement upon payment that doesn’t have to  change over time.   If your creditors agree to your proposal all you need to do is keep up with your one monthly payment,  no interest is charged and the payment doesn’t change.

Unlike a Bankruptcy, a Consumer Proposal also allows assets to remain in your possession, and you don’t have to report your income to the Trustee on a monthly basis.   Due to its straight line approach and minimal invasiveness the Consumer Proposal is a very popular alternative that Canadians consider when deciding between a proposal and a Bankruptcy.

Is a Consumer Proposal Always the Right Choice?

The quick answer is No.   Everyone’s situation is different and there are situations where another solution may make more sense.

For example, if you are able to repay your debts through improved budgeting you may not require a Consumer Proposal.  Or in other circumstances, your financial situation may be serious enough that bankruptcy needs to be considered as the more practical option.

Only a LIT can come up with a solution that is right for you.

When Should I Get Started ?

Many people wait until their financial situation is unmanageable before seeking advice but you don’t necessarily have to wait that long.  If you are always using credit to pay everyday expenses, making minimum payments, receiving collection calls, or finding that your debt continues to grow despite your making payments, it may be time to explore your options.

Getting advice early can give you a clearer understanding of your financial situation and what options are available to you.   At Chase & Associates we explain debt solutions that are tailored to you and your specific situation.  The right approach depends on your individual circumstances, including your income, debts, assets and ability to make payments. We offer a free consultation to discuss your options.   What are you waiting for?   Reach out to us today and take that first step towards financial freedom. You will be glad you did!  Call today – 1-866-317-8331