Carrying debt is stressful and can feel really scary. Looking at all the different options out there to help with your debt can be really overwhelming. If you're reading this and considering bankruptcy, I want to help you to better understand how to look into it and the impacts it can have.
Bankruptcy + Consumer Proposal
Bankruptcy: is a legal process that can reduce the amount you owe on your debts but it's not easy and it will have a long-term impact on your credit score.
How much you pay and whether you qualify will depend on your income and your assets.
The bankruptcy payments will last either 9 or 21 months, during which time you must report your monthly income.
After 9 or 21 months, you will get discharged/released from the debts you had.
Bankruptcy has a significant impact on your credit and also puts a mark on your public record.
It can be a good option for you if you have been struggling to make your debt payment and can't seem to find a way out.
You don't always forgo all your assets or lose your house, it will depend on several factors, including how much equity is in those assets and what province you are in.
This option can get rid of government debts and judgements-but there are some exceptions.
Consumer Proposal: is a legally binding agreement between you and your creditors that gives you protection from debt collectors and stops wage garnishments.
It involves you either making either a lump sum payment or monthly payments
Interest on your debt stops accumulating the day you file.
Only require you to pay back a fraction of the debt owed.
The amount you repay will depend on your income and assets.
A consumer proposal will also show up on your public record but does not have the same impact as a bankruptcy.
You may also include government debts and judgements in a consumer proposal.
The average payback time is 5 years.
The main difference between these two options is that a consumer proposal allows you to keep more of your assets, has a lower impact on your credit score and will stay on your record for 3 years instead of 6 years for a first-time bankruptcy.
Only a licensed insolvency trustee can file a bankruptcy or consumer proposal on your behalf, and they would provide you with the specific amounts you would be required to pay back. With both of these options, part of the process will be two sessions with a financial counsellor to help support you.