Why a Consumer Proposal in Ontario is a Better Bet vs. Bankruptcy

In Ontario, Canada, declaring bankruptcy is only encouraged until all settlement solutions have been exhausted. A consumer proposal in Ontario is shaping up to be one of the wiser pre-bankruptcy alternatives, primarily because of the following reasons.

Debtors can negotiate

Under Canada’s Bankruptcy and Insolvency Act, people who owe a substantial amount of money can sit down with creditors and arrange for a modified payment scheme. Such opportunity gives debtors the chance to strike an agreement beneficial to them. For example, they can negotiate for an extended debt settlement period or offer to pay the debt balance at a discount.

Five years is the maximum length of time that a consumer proposal can be made. The agreement has to be approved by concerned creditors on the basis of a simple majority, and later on by the court if requested by any of the creditors. It often starts with a recommendation for a scheme like debt consolidation in Ontario from financial counselors, after which borrowers can then convince lenders to work out a feasible deal.

Lower financial loss to debtor

In bankruptcy, many assets have to be dealt with to cover the beleaguered borrower’s financial obligations. Consumer proposals, on the other hand, let debtors keep assets (houses, cars, etc.) and let them go on with their lives. Borrowers can resume work without fear of wage garnishments, and save enough to honor the payment scheme stated in the proposal.

At the same time, this solution offers other forms of reprieve to the debtor. As soon as a consumer proposal takes effect, interest on the loans that are being settled cease to further accumulate. There is also only one combined monthly payment (usually an affordable one) for all debts that the debtor will have to make.

Fresh start for borrower

The financial and personal freedom that consumer proposals give to borrowers are priceless. If they deal with unsecured creditors, debtors will be protected from legal action unless the agreement is nullified. After the proposal payments are finally paid off, within a period of five years, a borrower can have some semblance of normalcy when it comes to finances.

While customers of debt assistance specialists like Paddon + Yorke, Inc. will have a low credit score after a consumer proposal or debt consolidation, it will not be as severe compared to filing for bankruptcy. Consumer proposals and debt consolidations, as alternatives to bankruptcy, give a person who has struggled with debt another chance to get his or her finances back in order.