Compound maxed-out credit cards with other debt like student loans, personal loans, lines of credit, or payday loans, and you can quickly find yourself drowning in high-interest charges, late penalties, collection calls, and worse.
If you can’t make headway on your debt or meet minimum payments, you will want to speak to a financial professional like a Licensed Insolvency Trustee.
The Licensed Insolvency Trustees at David Sklar & Associates will walk you through all of your debt relief options and help you identify the right one for you. After all, there are more debt relief options than just bankruptcy — and bankruptcy should be your last choice.
For one, consumer proposals are a useful debt relief tool that allows you to get out of debt in Ontario without having any of your assets seized. However, they can take time to get out of and require you to make consistent monthly payments. The Licensed Trustees at David Sklar & Associates specialize in consumer proposal services in Ontario and guide you through the process.
There is no one-size-fits-all debt relief solution, but consumer proposals make the most sense in many cases. There are various reasons to choose a consumer proposal as your debt relief solution:
#1 You Are Insolvent
A person is insolvent when their liabilities exceed their assets. In practice, if your income allows you to make your debt payments on time, this is not an issue. When you can no longer afford to make debt payments, insolvency could force you into bankruptcy or a consumer proposal.
A bankruptcy trustee, now known as a Licensed Insolvency Trustee, will help you confirm whether you’re insolvent or not. Book a first-time free consultation with David Sklar & Associates to find out about your eligibility.
#2 You Have Significant Investments Outside Of An RSSP
Your RRSP investments are all protected from bankruptcy, except for contributions made within the 12 months before you filed for bankruptcy. That said, not all investments are made through an RRSP. If you have any investments outside your RRSP, such as property, stocks, bonds, gold, cryptocurrencies, art, or other assets, a consumer proposal will protect them.
#3 You Have Equity In Your Home
Whether or not your home is at risk when in bankruptcy depends on the equity you have in your home. The majority of Ontarians who declare bankruptcy own a house with a mortgage.
In Ontario, your principal residence is exempt from bankruptcy proceedings if your equity does not exceed $10,000. If your equity exceeds $10,000, you may lose your home or have to pay the equity to keep your home.
A consumer proposal is a much better idea than bankruptcy in this scenario, as your home will not be affected. You can calculate your home equity by subtracting your mortgage and any property taxes due to your home’s value. David Sklar & Associates can help you evaluate your principal residence’s risks and how bankruptcy could affect your home.
#4 It Stays On Your Credit Report For A Shorter Time
You may have heard that one of the benefits of bankruptcy vs a consumer proposal is that a bankruptcy will disappear from your credit rating faster. The thing is, this only rings true if it’s your first time filing. A consumer proposal can last up to 5 years and is only removed from your credit report 3 years after completion. A bankruptcy, if it’s your first time filing, will be removed 6 years after you complete the process. That said, the more you file for bankruptcy, the longer it will be on your credit report.
#5 To Protect Your Assets From Creditors
The most significant difference between a consumer proposal and filing for bankruptcy is how your assets get handled. Bankruptcy will require you to sell a wide range of assets to meet your debt obligations. These assets must be assigned to your bankruptcy trustee, who will then sell them and disburse the proceeds to your creditors.
If you don’t want the assets to be sold, you may be able to pay to cover the equity, allowing you to keep assets such as your home. Assets you might need to part with include investments, property, RRSP contributions made in the last 12 months, and inheritances.
A consumer proposal takes longer because you will have to repay your debts in monthly payments for a period of up to 5 years, but you will get to keep your assets. It’s a long process, and you will have to budget accordingly to meet your debt payments, but it keeps your assets intact.
If you’ve already spent years building financial wealth through assets like investments and property, a consumer proposal is a safer way to get out of debt. Don’t let credit card companies take what you’ve worked so hard to build. Find a compromise with a consumer proposal.
File A Consumer Proposal With David Sklar & Associates
As bankruptcy trustees, we offer consumer proposal services and bankruptcy services to those who need debt relief. After all, a consumer proposal is more than just a new agreement with your creditors. It also provides real relief like debt reduction and ending interest accumulation on your existing debt.
Other debt reduction schemes may sound appealing, but the Financial Consumer Agency of Canada warns that some consumers may wind up in even worse financial shape. Remember that other debt reduction pitches are financial products meant to make the company money. When a company offers you a debt reduction plan, compare their interest rates to your current rates and do your research into late payment penalties.
There are various reasons to file a consumer proposal. In a consumer proposal, your debt is reduced, and interest stops altogether. Consequently, your consumer proposal will appear on your credit history for three years after you complete it. That means it can be on your credit history for up to eight years, but if you’re struggling to keep up with payments now, you’re in no position to borrow more money. Get out of debt and rebuild your credit score.
If you’re interested in finding real debt relief, book a consultation with David Sklar & Associates to discuss your options. Real debt relief is around the corner.