Tuesday, December 11, 2012

Advantages of Consumer Proposal over Filing for Bankruptcy

What is a Consumer Proposal?
A consumer proposal is a formal and legally binding agreement or deal that You and the Administrator of your Consumer Proposal make with your creditors (companies that you owe debt/money).

Why do creditors accept Consumer Proposals?
Creditors would receive more money from you in a consumer proposal than when you file a bankruptcy, in which case your creditors would receive less money from you.

How does a Consumer Proposal work?
- Secured creditors (e.g. Real Property, House mortgage) will be paid in accordance with existing payment arrangements. These payments may also be paid according to payment schemes that are mutually agreed upon by the debtor (you) and the secured creditor(s).
- Fees and payments are to be made by You to the Administrator of the Consumer Proposal.
- The Administrator (trustee company) of the CP (consumer proposal) will distribute the money received from the debtor (you) to the unsecured creditors (credit card companies, banks, finance companies, financial institutions, loan companies, credit corporations, etc.).

Major Advantages of Consumer Proposal over Filing for Bankruptcy:
- Only one small monthly payment to cover all your debts of different kinds.
- Total payment of 1/3 or less of all your unsecured debts.
- Better credit score or rating compared to Bankruptcy.
- All your debts are fully paid at the end of the payment period (usually 5 years).
- Easier to build credit after payment of all debts.
- Peace of mind.

The main advantage of consumer proposals over filing for bankruptcy is that in a CP, your credit score will not be badly affected as much as a bankruptcy which is the worst credit rating. When you want to sponsor family members or relatives, and you filed for bankruptcy, your sponsorship application is likely to be denied by immigration officials. When you are bankrupt, it is long and very hard to build up your credit again and difficult to gain trust from creditors once again.

When your monthly liabilities (debts) are totalling more than your assets, it is time to think and reconsider your way of spending money and your way of living. When you are spending more than you are earning, when your expenses are greater than your income, you need to stop and ponder. There are several reasons why people end up having trouble in their financial situations and budgets.

Major Reasons for Financial Difficulties:
- Credit mismanagement
- Loss of job
- Loss of business
- Insolvency
- Death of family member
- Expensive style of living

Example of Unsecured Debts from Unsecured Creditors:
$24,000 --- Credit card debts
$10,000 --- Line of credit
$ 8,500 ---- Bank loans
$ 1,500 ---- Home improvement card debt
$ 1,000 ---- Finance company loans

Now, some people will immediately think of filing bankruptcy because they think this is the best resolve and the easiest way to go.
But Wait! Hold on!
Don't just take what your friends have to say and what other people or websites are saying because..................... there are better options. One of the best alternatives is a consumer proposal. Filing a consumer proposal is a great solution instead of filing for bankruptcy and insolvency.


A consumer proposal paying the administrator (trustee company) a total of $15,000 at a rate of $250 per month for a period of 60 months (5 years).



  1. Thanks for the information. I have been weighing the odds of filing for bankruptcy or a consumer proposal in Edmonton. This information helped a lot.

  2. I think this is a great idea. More people need to get involved with consumer proposal in Ontario.

  3. Thanks so much for the post. Do you happen to know of any companies that do consumer proposals in Ontario? Please let me know, thanks.

  4. Do you also have a link or something that will help me build consumer proposal in Ontario? I don't exactly know how to create them but would love to learn how!

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