Overwhelming debt can have long-lasting repercussions for your financial well-being. If you reach a point where you start reaching your credit card maximums, can only make minimum payments, or start missing payments altogether, you can damage your credit score. Your credit score can recover, but it takes time, and the process doesn’t begin until you’ve got your debt under control.
Not only can debt hurt your credit score, but it also hurts your ability to save for future financial goals, such as putting a down payment on a house or retiring. If you’ve borrowed too much, it can make saving impossible. Some Canadians are even putting off retirement for years because they’re in too much debt to retire safely.
Making your debt a priority can put you on track to reset your finances and get back to saving. However, it’s not always possible to get out of debt alone.
If you’re in a situation where you have more debt than you’re able to pay and you’re struggling to keep up with payments or make any progress, it may be time to consider taking more drastic action. A consumer proposal may be the right solution to help you out of debt.
A consumer proposal is a binding legal procedure, and it’s not a debt solution that should be entered into lightly. It is a good alternative to bankruptcy, and it can protect you and your assets when you get out of debt. These are some of the benefits of a consumer proposal in Ontario.
You Get Debt Forgiveness
One of the primary benefits of a consumer proposal is getting debt relief. Working with a Licensed Insolvency Trustee, you will make an offer to your creditors to make a monthly payment that is within your means to be disbursed amongst all of your unsecured creditors. If the majority agree, it is legally binding for all of your creditors. The amount can represent a significant reduction in your total debts.
You Make One Monthly Payment
Under a consumer proposal, you only have to worry about making one monthly payment. That payment is disbursed appropriately to your creditors. It can make managing your debt more straightforward and reduce the chance that you might accidentally miss a payment.
Interest Rates Stop
Another benefit of a consumer proposal is that your debts stop generating interest. As long as you keep up with your consumer proposal payments, the amount you owe does not keep growing.
Every dollar you pay goes toward the principle, saving you from the high cost of interest rates.
You Get Protection from Collection Actions
A consumer proposal will also put a stop to collection actions against you. This includes things like wage garnishments and collection calls. Just putting a stop to collection calls can be a huge relief.
Your Assets Are Protected
Consumer proposals have become a popular alternative to bankruptcy because they provide debt relief without you having to sell any of your assets or pay your creditors to keep them. While the rules vary based on where you live, filing for bankruptcy in Ontario can entitle your creditors to equity in your home above a certain limit, equity in vacation homes or rental properties, and non-exempt investments or savings. With a consumer proposal, your assets are not at risk.
Consumer proposals are not for everyone, but if you’re insolvent and struggling to keep up with debt payments, they can be the right solution for you.
