Bankruptcy vs consumer proposal, they are two debt relief options available to Canadians facing financial hardship. Understanding the differences between the two can help individuals make an informed decision about which option is best for their financial situation.
Bankruptcy is a legal process that provides a fresh start for individuals who are unable to pay their debts. In Canada, bankruptcy is governed by the Bankruptcy and Insolvency Act. To file for bankruptcy, individuals must owe at least $1,000 and be unable to pay their debts as they become due. Upon filing for bankruptcy, all assets are turned over to a licensed trustee who will sell them to pay off creditors. Bankruptcy also affects an individual’s credit score and remains on their credit report for six years.
A consumer proposal, on the other hand, is a debt repayment plan that is negotiated between an individual and their creditors. This option is available to individuals who owe less than $250,000 (excluding mortgage debt on their primary residence). The consumer proposal offers a payment plan that is based on the individual’s ability to pay, and may include a reduction of the total debt owed. A consumer proposal does not require the sale of assets and does not have the same impact on an individual’s credit score as bankruptcy.
So which option is better for Canadians facing financial hardship? The answer depends on the individual’s specific financial situation. If an individual has a large amount of debt and is unable to pay it off, bankruptcy may be the best option. However, if an individual has a smaller amount of debt and is able to make payments, a consumer proposal may be a better choice.
In conclusion, Bankruptcy vs consumer proposal, they are both debt relief options available to Canadians facing financial hardship. It’s important to understand the differences between the two and to seek professional advice to determine which option is best for an individual’s financial situation. An informed decision can help individuals get back on their feet and regain control of their financial future.