An excellent bankruptcy alternative, here in Canada, is called a consumer proposal. I had never heard of this and when I looked into it, it’s a very proactive way to handle the repayment to creditors. It’s also a way to drastically reduce the amount of repayment but it’s also a binding contract between you and your creditors.
How This Bankruptcy Alternative Works
For starters, this is the only debt relief program that is administered through the government. The mark on your credit score isn’t as detrimental as filing bankruptcy and it also shows that you have elected to repay your creditors what you agree to in your terms. Your payments remain a fixed amount throughout the whole contract, whereas with bankruptcy, it fluctuates according to your surplus income. You can keep all your assets, but with bankruptcy, you can lose certain assets, even including your home in some provinces. There is a no-fee initial consultation for this to see if you qualify, where with most bankruptcies, you pay from the start.
If you want to be assured that it will work, once you start the process, you need to offer your creditors more than what they would be repaid if you had filed bankruptcy. The proposal has to be filed by a consumer proposal administrator, who is licensed by the government. And, you have to be able to make the monthly payments. If any of these aren’t the case with you, you should look at alternative measures.
If you are interested in seeing if you qualify, go to http://www.hoyes.com/bankruptcy-evaluation.htm
You pay a set fee to the administrator and that amount is included in your monthly payments, so no big amounts up front or forever payments. There are no hidden fees that you might experience in other plans. You are provided protection from creditors where with other programs, creditors can sometimes change their minds and take you to court. With bankruptcy, you lose your tax refund but with the consumer proposal, you don’t. The proposal includes all your unsecured debts, including income taxes, but not your mortgage or car loans. Many other advantages are noted in the section above and there are some online comparatives that point out any others.
Just like with anything, one has to weigh the pros and cons but this is definitely an option as opposed to filing bankruptcy. We all hope we’ll never be facing this situation but unseen circumstances can hit at any time.