If you are unable to pay your debts, you can consider the option of a consumer proposal. This is a legal debt settlement agreement you enter with your creditors that allows you to restructure all your unsecured debts into a single debt. It is a better alternative to bankruptcy because it offers numerous benefits. In this guide, we explain the 6 key advantages of a consumer proposal and why it’s the appropriate choice for you.

1. You Keep Your Assets 

One major advantage of a consumer proposal is that your assets are protected, and you can keep everything including home equity, tax refunds, and investments. When you file for bankruptcy, you will surrender non-exempt assets. If you’re struggling with repaying unsecured debts and credit card balances, a consumer proposal is a viable option to consider. 

A proposal gives you peace of mind because you don’t lose your valuable assets. Once you lose your assets, it may be an uphill task to buy them again considering your financial situation. It can take you a long time to buy assets when you lose as a result of bankruptcy.    

2. Lower Monthly Payments

In a consumer proposal, you renegotiate the payment terms with your trustee, and you can end up paying just a portion of your debt. Debts can be reduced by close to 70% of the total amount owed. It is vital to do some research to find out more about consumer proposals and how they can help you lower monthly payments. With this option, you get a chance to negotiate with the trustee to repay part of your debt. 

A consumer proposal is one of the safest methods of repaying your debt since it is government-approved. Your monthly payments will be lowered, and this helps you manage your finances.    

3. No Surplus Income

When you choose the option of bankruptcy, you are expected to pay more toward your debt repayment when your income increases. However, this is not the case with consumer proposals since they come with fixed monthly payments that don’t increase. Bankruptcy has a system called surplus income which can make the payments expensive. 

The good thing about a consumer proposal is that your monthly payments remain stable regardless of the money you earn. It is a strategic solution to your debt repayment problem because you will only focus on a fixed payment that does not increase. Instead, you can extend your repayment term if your income increases to avoid a penalty for surplus income. 

4. Creditor Protection

When you consider the option of a credit proposal, and it is approved, you will get credit protection. This means you will no longer receive garnishments and collection calls. A consumer proposal protects you through a provision known as the legal stay of proceedings. Instead, the creditors will deal with your trustee, and this can give you peace of mind. 

As soon as you file your proposal, the stay becomes effective and stops wage garnishments and calls. The good thing about the approval of your proposal is that it becomes binding to all creditors. 

5. Frozen Interest Rates 

A consumer proposal is designed to make your life easier because all interest rates are frozen. This means you can make significant savings because you will no longer be paying high interest to the creditor. New terms are negotiated when you apply for a consumer proposal, and they become binding to all parties involved. 

You will have no worries about fluctuating interest rates during the new repayment terms you agree with the trustee. A fixed interest rate also helps you calculate the total amount you should pay to clear your debt. 

6. Combine Debts into a Single Loan

With a consumer proposal, your debts are consolidated into a single loan. This makes your debts easy to manage, especially when you are required to make one monthly payment only. A proposal is one of the safest methods of handling your debts. If you offer more than the creditor will get in bankruptcy, there are likely chances that the creditor will accept your proposal. 

If you are struggling with repaying your loans, consider the consumer proposal option since it is cheaper compared to other debt relief methods. The cost is determined by your creditors, the amount you owe, your assets, and your income. Filing a proposal comes with several benefits and allows you to keep your assets, offers a fixed interest rate, creditor protection, and others. A consumer proposal is the best debt-relief option to opt for if you don’t want to file for bankruptcy.