Consumer Proposal vs Bankruptcy – Know the Difference
A Consumer Proposal
is a way to consolidate your debts and only repay part of what you owe. It is a legal arrangement under the Bankruptcy and Insolvency Act
with its own set of rules, conditions and fees. A bankruptcy trustee arranges your proposal and the creditors who hold the majority of your debt must agree to the conditions. Here is more information about Consumer Proposals vs Bankruptcy
, including the major differences between the two, the costs of each option, how they effect your assets, how long each process takes, how they impact your credit, and the long-term consequences. Find out about this alternative to bankruptcy and see if it may be right for you.
Debt Consolidation – Choose the Best Way to Consolidate Your Debts Consolidation Loan, Home Equity Loan, Line of Credit, Debt Management Program, Debt Settlement, Consumer Proposal, Borrow Money
There are two main types of debt consolidation
. Type one requires borrowing more money to consolidate your loans
, credit cards and other unsecured debts into one new loan. You need to be able to qualify for a new loan
, or the increase of an existing loan or mortgage, for this option to work. Borrowing more money can end up increasing what you owe, even with a mortgage home equity loan
, rather than helping you pay off your existing debts.
Debt Repayment Program or Debt Management Program (DMP)
The second main kind of debt consolidation involves consolidating just your payments into a repayment program
you can afford. This type of program, when done through a non-profit credit counselling agency like ours, is also called a Debt Management Program
. It does not involve borrowing more money, which helps someone avoid the risk of getting deeper into debt. You can learn more about this option
or talk to a Credit Counsellor to find out if it might be a good option for your situation.
Debt Settlement – Is it Your Best Option? Explore Our Services and Helpful Tips Settling your debts
for less than what you owe is only an alternative, or a way to avoid bankruptcy.
It’s also a way of getting relief from your debts if you have a lump sum of money available to offer your creditors. As with other debt relief options
, creditors need to agree to your offer ahead of time. They also need to agree to write off any remaining balance. Here is more information about debt settlements,
how they work and what to watch out for. Just like with any tool, if a debt settlement is used the right way, it may be the right option to help you. If it’s used the wrong way, it can snowball into a financial and legal disaster.
Comparing Popular Debt Relief Options in Canada
If for more information on the bankruptcy alternatives mentioned here plus some more details on each one, check out the comparison chart below. It shows you more of the pros and cons of each option. However, it’s only a high level summary. For more complete information or to see how any of these options would apply to your situation, either contact a professional who offers that option or speak with a professionally accredited, non-profit Credit Counsellor.
Common Questions About Bankruptcy