Financial dents or constraints can be traumatizing, especially when you don’t know what to do next in order to get back on your feet. Most of the simplest options that come to mind is filing for bankruptcy or a consumer proposal. A consumer proposal is a negotiated agreement between you and your creditors to help you avoid filing for bankruptcy. In fact, this is an alternative to bankruptcy. You can use the services of a licensed bankruptcy trustee to negotiate and file your proposal. Here are some of the benefits of considering the proposal option to get you out of your financial difficulties.
Managing the debt
You ought to set up a payment plan that is flexible for settling your creditors. It’s easier to stagger your payments to your creditors for a period of up to five years so as to block collection agents from calling you or knocking on your door all the time. In other words, you get a chance to extend the repayments to your creditors for a period of time as you reorganize your accounts or investments.
Wage garnishment and interest payments
Wage garnishments and interest accumulation ceases once your proposal application goes through. A wage garnishment comes into play when a creditor gets a court order to get part of your monthly salary directly from your employer to settle debt repayments. Besides being embarrassing for your employer to know that you have debt difficulties, it might tarnish your credibility at the workplace. You can also have the monthly interest accumulation stopped through the proposal.
Reduction of debt
Besides renegotiating the terms of repayments to your creditors, you also get a chance to reduce the amount of money owed to your creditors. The beauty about using a consumer proposal is that, your creditors don’t want you to apply for bankruptcy because that will mean they won’t get paid. That will motivate them to accept a debt reduction. Remember, when you apply for bankruptcy, your assets will be utilized in repaying your debts, but in case the assets don’t pay the entire cumulative amount owed, then the creditors stand a chance of losing money. So, they’d rather accept a debt reduction. A creditor can accept a debt reduction of up to 50% and end up getting some of his or her money which is far much better than getting nothing at all.
The credit rating can be badly affected when you apply for bankruptcy. On a scale of R1 to R9, a bankruptcy application can give you the worst which is R9, and affect your possibility to get loans unlike a consumer proposal that will give you an R7.