We receive many questions regarding the difference between debt consolidation and a consumer proposal.
Debt Consolidation vs. a Consumer Proposal
A debt consolidation would require you to get a loan from a financial institution which would allow you to payoff your high interest debts and reduce your monthly payments. Consolidation loans are a popular way of dealing with debt, but there are a number of issues:
- If your credit rating isn’t great you may not qualify for the consolidation loan
- You might not be able to borrow enough to consolidate all of your debts
- You may not be able to afford the payments
When you get a consolidation loan you are paying back 100% of your debt including interest, but it does not damage your credit rating.
A consumer proposal is a formal debt settlement.
A consumer proposal is filed by a licensed trustee in bankruptcy. You don’t have to “apply” to file a consumer proposal the way you would for a consolidation loan.
Anyone who owes more than $1,000 and is insolvent (debts are greater than assets) is eligible to file a consumer proposal. Filing a consumer proposal:
- Stops interest
- Prevents creditors from taking any legal or collection action
- Allows you to compromise/settle your debt
When you make a consumer proposal you are settling with your creditors, which means you are paying back less than the total amount you owe.
In many cases this means you will payback 25-30% of what you owe (depending on your situation). The downside of filing a consumer proposal is that it does have a negative impact on your credit rating, but you can rebuild credit.
When you meet with us – you will always meet with a licensed trustee in bankruptcy at NO charge.
We have offices across South Western Ontario plus flexible hours to meet your needs so you don’t have to miss work.
Let us help you get a fresh financial start!