The Disadvantages of Consumer Proposals
byon 06-27-2012 at 07:49 PM (198 Views)
"If you are 1 of the millions of Canadians drowning in debt, you’re probably looking for the best debt help choices offered. A common option to bankruptcy in Canada is the consumer proposal. If you’re unfamiliar with the consumer proposal, it’s a negotiated settlement in between you and your creditors to lower your unsecured debts.
To file a consumer proposal you need to first employ a licensed trustee, who will critique your debts and your monthly budget, and determine a monthly payment program that best fits your financial wants. You will submit your lower lump sum payment to the trustee, who will then distribute the cash to your creditors.
One big advantage of consumer proposals is that most of your debts will be discharged. Certain legal debts like youngster assistance payments and court fines will not be included in your proposal. Plus, you no longer pay interest on your credit cards and will most likely know precisely how much you will be paying every month.
One disadvantage of customer proposals is that you must stick to your payment plan 100%, even if an unexpected monetary hardship comes about. You can not defer on any far more than two payments. Once you defer on 3, your proposal will be annulled. Therefore, do not sign up for a consumer proposal unless you know for sure you will be able to make the monthly payments.
An additional significant disadvantage is that a consumer proposal will remain on your credit for three years following you’ve completed producing your payments. In other words, if your payment program lasts four years, your credit will be negatively affected for a total of seven years. That is virtually as bad as bankruptcy! For the duration of this whole time period, you probably won’t be able to get a good deal on a mortgage or car loan, and you won’t be able to get a credit card that isn’t secured.
Finally, your trustee is entitled to a monthly percentage of about 20%, based on your proposal. If your debts are lowered by 50%, you’ll still be paying 70% of what you owe per month.
Debt settlement is a much much more useful option to eradicate your debt. Just like with consumer proposals, your monthly debts will be lowered, but your credit rating won’t take as a lot of a hit and the fees you spend to a debt settlement service are lower than those you’d pay to a trustee. get out of debt fast"