When you’re over your head with debt, it’s easy to feel like there’s no way out. Making minimum payments only to watch your balances rise from added interest can be a vicious cycle. As your finances spiral out of control, you could soon find yourself on a fast track to bankruptcy. There is a way you may be able to halt your slide toward insolvency, however. It’s called a consumer proposal. It offers a way to stop accumulating interest and settle your debt for less than you owe. Here are four of the benefits of using a consumer proposal to get your debt under control.
1. It Safeguards Your Assets
One of the scariest things about debt is that it can lead to the seizure of your assets. When you default on a debt, creditors may ask a court to garnish your wages and seize your home, car, furniture, and anything else you own of value. A consumer proposal immediately halts collections and prevents the seizure of your assets. The only exception is when you have debts secured by specific assets. Protecting your assets from seizure provides peace of mind while you work to resolve your debt issues.
2. It’s a Legally Binding Process
A consumer proposal is also a legally regulated and binding process. It means your creditors must abide by it, and you will gain legal protection if they don’t. A consumer proposal requires the participation of a licensed insolvency trustee. They’re the ones who help you draft your proposal and whom you pay according to your agreed-upon schedule. Then, the trustee distributes the money to your creditors, so you don’t need to manage the process yourself.
3. It’s Less Damaging to Your Credit
A consumer proposal will also do less damage to your credit than a bankruptcy. A first bankruptcy will remain on your credit for six to seven years. A second one will stay on your report for 14 years. A consumer proposal only stays on your credit for three years after you complete payments. Plus, it may only appear on your credit report for six years from when you sign it. Plus, a consumer proposal on your credit report equates to an R7. Bankruptcy is an R9. The higher the number, the more impact the negative mark has on your credit.
4. You May Reduce Your Debt by up to 80%
Finally, a consumer proposal can significantly curtail how much of your debt you must pay. You can cut your overall debt load by up to 80%. That can turn a $50,000 debt into a much more manageable $10,000 one. Plus, when you finish paying the reduced figure, you get a certificate declaring you’ve satisfied your obligation. Your creditors can never try to collect the rest of the original debt total from you.
End the Debt Cycle
A consumer proposal may be ideal for you to regain control of your finances. It comes with significant benefits if you abide by the terms you agree to. However, you should always consult a qualified counsellor before entering into any financial agreements. If you take advantage of the consumer proposal process, you can emerge debt-free from the other side, ready to resume your life unencumbered.