Bankruptcy or Consumer Proposal? How to Choose?

faillite-ou-propositionIf you are already at the stage where you have to choose between bankruptcy or a consumer proposal, you’ll want to read this article. Before you opt for personal or commercial bankruptcy, you should start by consulting a licensed insolvency trustee in order to determine if it really is the ideal solution to your situation.

In discussing with a licenced insolvency trustee, you may discover that you have the choice between bankruptcy or a consumer proposal.

If that is the case, here are some tips to help you determine which of financial bankruptcy or consumer proposal is best suited for your needs.

Bankruptcy or Proposition: The Basics

Before choosing which of these solutions is best for you, it’s important to understand the gist of each.

Personal or Commercial Bankruptcy

Personal bankruptcy is a good way to quickly restore your financial stability. However, it is a last resort solution to get rid of a maximum number of debts. Personal bankruptcy is not without any consequences. It can negatively impact your credit, which could prevent you from getting any loans for a good number of years. Moreover, bankruptcy does not stop you from acquiring new debts.

When it comes to commercial bankruptcy, it’s a legal solution that allows you to free yourself of debts by liquidating your assets and by closing down your business.

Consumer Proposal

The consumer proposal is a very interesting option because it can help you get rid of up to 80% of your debts without going bankrupt. The consumer proposal halts any increase to your debts by stopping the interests and reducing the amount you have to pay each month. You will no longer have to deal with harassing creditors, fear the seizure of your salary, or any other judicial action.

For businesses, the business proposal is a deal that your trustee makes with your creditors. This agreement will allow you to keep your business running while buying you the necessary time to reimburse your debts.

Bankruptcy or Consumer Proposal: How to Determine Which Solution Is Made for Me

Now that it’s time for you to choose between bankruptcy or consumer proposal, here are a few tricks to help you determine which is best for you.

Bankruptcy: Who Is It Meant For?

Any individual or business with more than $1,000 of debt, and unable to reimburse that debt is eligible to go bankrupt. Even if it is a last resort solution, it is an available one, no matter your situation. On the other hand, we recommend you consider a consumer proposal, provided you are eligible.

And the Proposal?

When it comes to the consumer proposal, it’s primarily for those who wish to face their obligations, especially if they might be able to cover a fraction of the debts and who, depending on their circumstances, could get out of their situation without going bankrupt. If all you need are lower monthly payments and more time, the proposal could be your solution.

Here are the two key eligibility criteria for the consumer proposal:

  • You are no longer able to cover the monthly payments on your credit cards, your banking fees or taxes;
  • You have a debt somewhere between $1,000 and $250,000 (in the case of a joint proposal, this amount can sometimes go up to $500,000)

The business proposal offers an interesting solution to those who want to avoid going bankrupt and still keep their businesses going. It will help free yourself of seizures and of any legal proceedings and payments to creditors. Your trustee will be the one to negotiate with your creditors the reimbursement method, based your situation.

Bankruptcy or Consumer Proposal: In Conclusion

Between bankruptcy or the consumer proposal, the consumer proposal is more often than not much more appealing because the negative impacts are fewer. Unlike bankruptcy, the proposal also protects your property and you against creditor harassment.

For more information on bankruptcy or consumer proposals, do not hesitate to contact us. One of our team’s experienced financial recovery advisors will be happy to answer all of your questions.

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