Your phone rings five times a day with creditors demanding to know when you will settle unpaid bills and loans. The interest on past payday loans taken out when you were financially stretched is going up faster than you can pay it down. There’s legal action against you to place a garnish on your wages, and you’re not sure how you will be able to pay your rent or mortgage when that happens. Being in debt feels overwhelming and it can seem impossible to get yourself out of it when the creditors come knocking.
The first thing you need to do to protect yourself from creditors is speak with an Insolvency Trustee and ask about your options. There are two ways you can stop the collection calls and get your life back from debt:
- a) File a Consumer Proposal in Ontario
- b) File for bankruptcy in Ontario
They are two very different processes, and while a Consumer Proposal does more to protect your assets, a Licensed Insolvency Trustee will assess your case to make sure you qualify.
Consumer Proposals in Ontario
A Consumer Proposal is preferred by most Licensed Insolvency Trustees in Ontario. According to Licensed Insolvency Trustees David Sklar & Associates, a Consumer Proposal is an agreement with your unsecured creditors to pay a portion of your debt in a set period of five years or less. The Licensed Insolvency Trustee helps you create and file your Consumer Proposal, negotiate with your unsecured creditors, disburse your payments to creditors, make sure all parties honour your Proposal, and provide credit counselling.
Consumer Proposals protect you from creditors by putting a stop by law to creditors’ efforts to recoup that money, whether through collection calls, wage garnishments, letters, or legal action. If you can’t sleep because you’re stressed out about debt and harassed by creditors, call Licensed Insolvency Trustees in Toronto like David Sklar & Associates.
Bankruptcy in Ontario
One of the main reasons people think of declaring bankruptcy in Ontario first is that it clears from your credit report six years from the date of discharge (on a first bankruptcy – the number is 14 years on your second). By contrast, a Consumer Proposal in Ontario is on your credit record for three years after you complete paying your debt – so if it takes you five years to pay, the damage is on your record for longer. However, a consumer proposal rating from a creditor is not as bad as a bankruptcy – rated from 1 to 9 (or R1-R9), with R1 meaning you pay your creditors on time, a bankruptcy is an R9, while being in a Consumer Proposal is only an R7.
The biggest risk in a bankruptcy is to your property, especially your home. Your home is only exempt from seizure if you have less than $10,000 in equity – otherwise, you could be forced to sell to satisfy your creditors.
Talk to a Licensed Insolvency Trustee and ask them about Consumer Proposals in Ontario versus bankruptcy. There may be a better way to protect yourself from creditors and get out of debt.
