A Fresh Start on Your Finances

  • By Jillian Taylor-Mancusi

If you’ve ever wished you could have a do-over when it comes to money matters, there is good news: a financial fresh start is possible. When debts become unmanageable, a Canada consumer proposal or bankruptcy can provide you with the clean slate  to get back on track and give  you a fresh start on your finances.

Get a Fresh Start with a Consumer Proposal

A consumer proposal is one of the options the Bankruptcy and Insolvency Act (BIA) makes available to Canadians struggling with a debt load they can no longer afford. With the help of a licensed insolvency trustee, you can make a proposal to your creditors that:

  • Reduces the balance you must pay back. Your creditors may agree to lower or eliminate your principal balance, and/or remove late fees or other charges.
  • Lengthens the amount of time you have to pay back your balance. However, a consumer proposal cannot run longer than five years.
  • Lowers your interest rate. By paying less interest, your monthly payments quickly reduce your principal balance.

Your proposal can be made up of any or all of these options. To qualify, you must have a stable income. Deciding whether or not a consumer proposal is right for you is one of the reasons the law requires you to work with a licensed insolvency trustee.  Licensed insolvency trustees are financial experts that manage consumer proposals and bankruptcies.

Be aware that a consumer proposal has an effect on your credit rating. All of the major credit reporting agencies will include your proposal on your credit history for three years after you pay off your agreement. Although that may seem like a long time, it’s actually three years less than a bankruptcy. A consumer proposal helps you pay off your creditors sooner, putting you on the fast track to a fresh start.

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Bankruptcy Offers a Clean Slate

Debts that you can’t afford to repay may require bankruptcy. Bankruptcy, another legal option for resolving debt problems, wipes away your debts and allows you a chance to start over. Creditors cannot attempt to collect on your debt or pursue any legal action against you when you are bankrupt. A meeting with a licensed insolvency trustee will help you understand your options and the effect a bankruptcy will have on you and your family.

Bankrupt individuals sign over their non-exempt assets to the licensed insolvency trustee, who then sells them. The proceeds are used to pay down debts owed to your creditors. Your trustee will help you understand which of your possessions you can keep and which will be sold. Exemptions are determined by each province or territory.

If you’re filing a first-time bankruptcy and you are not required to make surplus income payments, you will be automatically discharged after nine months. If you are required to make surplus income payments or if this is your second bankruptcy, you will be discharged in 21 to 36 months.

Late payments, collection calls, and legal action are all symptoms of a serious debt problem. But there are plenty of options to help you. A consumer proposal or bankruptcy can help you regain your financial footing and provide you with a fresh start.

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