Have you hit a rough patch financially?  Are you feeling overwhelmed by the debt and expenses?  If you are going through a period of financial hardship, there are options available to make things easier on you.  One of these options is filing a consumer proposal.  This article will discuss the benefits of a consumer proposal. 

What Is A Consumer Proposal?

A consumer proposal makes it easier for people to manage and pay off their debts.  It is a legally binding process that is implemented by a bankruptcy trustee.  During this process, the trustee will collaborate with you to create a "proposal," which is an offer to pay your creditors a certain percentage of what you owe them.  It can also be used to extend the amount of time you have to pay the debts in full. 

Allows You To Take Charge Of The Issue

Proposing a settlement helps you take more control of your money problems.  This is a solution that allows you to take a proactive approach to solving the issue. 

Filing for bankruptcy can help you deal with your debts, but it is a more reactive solution: one to be used when there are no other viable options.

Consumer Proposals Are More Affordable

Consumer proposals involve paying one reasonable monthly payment that you are able to afford.  You are able to deal with your debt in a way that still allows you to have money left over at the end of each month.

This is in sharp contrast to debt consolidation programs or debt management plans.  These systems of debt management would require you to have to repay all of your debts in full along with interest. 

Creditor Protection

Consumer proposals provide you with protection from your creditors.  If you enlist the services of a debt consultant, they can negotiate with your creditors, but they have no way to make sure that your creditors won't change their mind afterward.  They will still be able to take you to court. 

On the other hand, consumer proposals are legally binding documents.  Once they accept the proposal, they are unable to change their mind and try to sue you.  The agreement is set in stone. 

Can Be Better Than Bankruptcy

In some cases, consumer proposals can be a better solution than bankruptcy.  You are typically required to submit a monthly budget if you file for bankruptcy.  You will also be required to submit proof of your income to your trustee every month. 

When you file for bankruptcy, you are required to pay more if you make more.  This means that if you receive a bonus, raise, or overtime pay, you will pay more money monthly. 

When you have a consumer proposal in effect, the amount of money you pay each month remains fixed.  This means that you will pay the same amount regardless of how much money you end up making. 

Retaining Your Assets

Consumer proposals allow you to keep all of your assets.  When you file for bankruptcy, you can lose your tax refund.  Also, in certain areas of Canada, you can actually lose the equity in your home.  When you file a consumer proposal, you get to keep all of your assets along with your tax refund. 

Of course, if you do have the means to pay your debts in full, this is the best course of action to take.  It will allow you to keep a positive credit rating.  In other cases, if you have lower income with no assets, personal bankruptcy may be the best solution for you.  Consult with a bankruptcy attorney, such as Abakhan & Associates Inc., to find out what the best options are for your situation.