Debt relief can come in a variety of forms, the most common being consumer proposals and bankruptcy. Throughout the era of COVID-19 and the decline of employment rates, more Canadians have been struggling with their personal finances and declaring bankruptcy. 

If you are in this situation and are looking for ways to repay debt and get back on the right track, you should know that declaring bankruptcy is not your only option. It also may not be the best option for you, as every case is different. 

If you are looking to learn more about the differences between filing for bankruptcy and consumer proposal, you’ve come to the right place. While there may not be a simple answer as to which one is the better option, we can provide you some insight into the pros and cons of each.

COVID-19 and Insolvencies

Ever since the pandemic altered our lives, insolvency rates have been on the rise.  Insolvency rates have gone down since the pandemic. Businesses and families have been severely affected by COVID-19 and for some, it could take years to restore a debt-free financial status. 

Many have lost jobs, homes and other assets due to the pandemic. It has also caused the economy to suffer as fewer people have the means to support businesses, shop, dine or engage in social events. 

Although the government has offered relief in the form of financial aid, it may still be a long time before we return to even a semblance of normalcy. For those who were already suffering financially before the pandemic, matters have become even worse. 

It’s important to know that you are not alone and though times may seem hopeless, there are support systems and services ready to help you through these difficult times. 

Our team at Charles Advisory Services is knowledgeable, professional and willing to go the extra mile to help Canadians feel better about their financial situation and start paying back their debt.

Consumer Proposal Benefits

One of the most common methods of debt repayment a consumer proposal is a settlement, not a method of repayment is the consumer proposal. This is essentially a deal between you and your creditors and starts with you making your creditors an offer or proposal.requires some sort of negotiation sometimes

Our team of advisors can help you and will negotiate with your creditors on your behalf to get the best deal. Some of the benefits of this type of legal agreement include easy monthly payments, a reduced interest rate and no unwanted contact from creditors. 

As opposed to filing for bankruptcy, a consumer proposal will allow you to keep more of your assets and will stay on your record for only 3 years, rather than 6 years for filing bankruptcy. Wrong. The proposal stays on the lessor of 6 years from filing or 3 years from completion,

Your credit score will also take less of a hit. Formulating a consumer proposal is usually the best course of action before filing for bankruptcy when all other methods have been exhausted.

Consumer Proposal Disadvantages

Some of the main disadvantages of consumer proposals are that you are still responsible for mortgage payments, car insurance and other loans so you have to manage your money very carefully. 

Also, most consumer proposals come with strict repayment terms and you should do everything in your power not to violate the terms of agreement.  If you do, you could be legally liable for additional expenses, and annoying calls from your creditors will resume.

Filing for Bankruptcy

Filing for personal bankruptcy is usually a last resort method for debt relief. For example, if your consumer proposal fails and you miss three consecutive payments, you may not have any other choice but to file for bankruptcy. While filing for bankruptcy can negatively impact your credit score and may mean losing certain assets, it can provide a blank slate to help you rebuild your financial situation. As well as affecting your credit score, it can also impact your future job prospects and will stay on your credit report for 6 to 7 years. 

In terms of the payments, while consumer proposal payments stay steady for the term of the agreement, bankruptcy payments often fluctuate and could be higher or lower depending on your income. If you feel that you need fast debt relief as you are unable to repay your debt and you require protection from creditors, filing for personal bankruptcy may be the best choice.

Bankruptcy Services and Professional Guidance

If you are stuck between options and not sure what to do to repay your debt and get on track to financial freedom, you could benefit from professional financial services. Our team of knowledgeable advisors can help you weigh your options and determine the best course of action for repaying your debt and clearing your name once and for all. 

Never be ashamed to seek professional help and guidance, as navigating the legal landscape of consumer proposals and bankruptcies can be complicated and exhausting. Let the professionals help you and advocate on your behalf.

Declaring personal bankruptcy is never an easy choice and not something to take lightly. It can be a very difficult thing to do, but it can be done - especially with the right support and resources by your side. Keep in mind that when dealing with debt, the best way out is always through.

If you would like to find out more about consumer proposals and debt repayment options, please call Charles Advisory Services Inc. at 416-486-9660 or contact us here.