Canadians in financial difficulty in some cases find themselves needing to choose between making a proposal to their creditors and filing for bankruptcy. And without initially looking into the previous, the ill-informed are usually too quick to settle upon the latter. The ill-informed, undoubtedly, are usually wrong in their judgment.
There is a common misconception that bankruptcy in Canada automatically ends after 9 months. Because of this, plenty of people assume that filing for bankruptcy is a really good debt exit strategy. This is far from the truth. Filing for bankruptcy in Ontario ought to be considered a last hope. A more desirable means to deal with debts is to make a consumer proposal to Ontario creditors.
Contrary to popular belief, filing for bankruptcy in Canada does not instantly end after nine months. It may drag on for much longer, especially for people who have been bankrupt before, or for those who start making substantial surplus income. For a first-time bankruptcy, surplus income normally implies prolonging the bankruptcy period from the usual nine months to 21 months or longer. Look into making a proposal as an alternative if you wish to get out of this rut.
A consumer proposal requires some work; but it ends up easier than bankruptcy, and you're better off in the long run for having opted for it. Selecting a consumer proposal helps you keep all your possessions—your car, your home and various other sizeable properties—and all the equity you have developed in them. Having a proposal, your payments are determined beforehand; whereas with a bankruptcy, your payment amounts increase with your earnings. A bankruptcy would likewise have a greater unfavorable impact on your credit history compared to a consumer proposal would.
A consumer proposal is also a faster means to work out debts in situations where assets are liquidated to pay creditors apart from not having the drawbacks of bankruptcy. Additionally, even when a set payment term is agreed upon, you can make payments ahead of schedule, and hence complete your proposal sooner. An additional freedom provided by a consumer proposal is business ownership—one thing that being bankrupt does not.
If you are saddled with debt, but things are not looking too depressing, making a consumer proposal in Ontario is the reasonable way to go. Bankruptcy is beset with many restrictions, and doesn't look great on your credit history either. Check out consumer-proposals.org/consumer-proposals.htm for a comprehensive discussion on exactly how a consumer proposal may be helpful in your situation.
Why Ditch Bankruptcy for a Consumer Proposal in Ontario