Many individuals are under the assumption that bankruptcy and consumer proposals are synonymous. However, is filing for a consumer proposal really the same thing as filing for bankruptcy? The quick answer here is no. Here are a few of the major differences between the two, to help clarify the confusion.
Non exempt assets will not be assigned to the trustee in a consumer proposal.
In comparison to bankruptcy, when it comes to consumer proposals, you are in fact not surrendering all your assets. Instead, you must pay your creditors a percentage of what is owed to them and/or extend the amount of time you have to pay off your debts, taking into account the value of these assets.
A consumer proposal is better for your credit rating generally speaking.
Filing for bankruptcy is worse for your credit rating and could potentially leave a mark on your credit report for up to 14 years., if you have been bankrupt previously. On the other hand, if you file for a consumer proposal, your credit rating will read that you are in the process of making a settlement with your creditors, and it will remain on the credit report for 3 years from the day it’s paid out.
To qualify for a consumer proposal, your total debt (not including your home’s mortgage) must not exceed $250,000.
In comparison to filing an assignment in bankruptcy, in order to qualify for a consumer proposal your debts cannot exceed $250,000. In addition to this, you must also be able to pay back a percentage of thes debts. If you are unable to do so and your debts do in fact exceed the $250,000 limit, bankruptcy is often your only option.
You are entitled to tax refunds with a consumer proposal.
Whereas when filing an assignment in bankruptcy, you are no longer entitled to receiving certain tax refunds.
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