Bankruptcy Proposal versus Debt Settlement

What Debt Management Plans in Canada are the best?


Legal Enforceability

  • A Hamilton Consumer Proposal is a legal agreement. With a consumer proposal, you make an offer to your creditors. If the majority of your creditors (50% plus one) accept your proposal, ALL creditors are bound by its terms, even those who did not vote for it.
  • With debt settlement, each creditor decides individually if they wish to accept your offer. In many cases, this can be a very time consuming process. In addition, if you miss one payment you could end up back where you started.

Legal Actions

  • Under a consumer proposal, all legal actions (writs of execution and wage garnishees) against you cease when the proposal is filed. No existing creditor may begin legal action against you in order to attempt to collect their debts
  • A Debt Settlement provides no protection from legal action. With a debt settlement situation, you will need to negotiate with each creditor to stop any legal action against you. Creditors that do not agree to your terms are still able to take legal action in the future.

Paying your creditors

  • Debt settlement either arrange for you to pay you creditors directly (which is preferable) or they collect the money and distribute it to the creditors on your behalf after taking their fees. For this reason, it is important that you research the reputation of the firm you are using to ensure that they are reliable and can be trusted.
  • A Proposal Administrator is licensed by the federal government. With a consumer proposal, your payments go into a Trust Account, so you can trust that your payments will be made to the creditors.

Fees for Services

  • Many Debt Settlement firms charge an up-front fee for the initial consultation. They then charge you another fee based on the amount you owed prior to the settlement.
  • Proposal administrators typically provide the initial consultation at no charge. If you decide not to proceed, there are no fees. With a consumer proposal, the Administrator’s fees are fixed by the federal government. These fees come directly from your proposal payments so that, in effect, your creditors are paying the charges. There are no additional fees associated with a consumer proposal.

What is Debt Settlement?

Debt Settlement differs from a Consumer Proposal as a debt settlement is an informal offer to your creditors. In this offer, you agree to pay your creditors a portion of the amount owing in exchange for having your debt considered paid in full. A debt settlement can apply to all of your debts or selected debts. With a debt settlement, you or a Consumer Proposal Hamilton company contacts each of your creditors in order to attempt to get them each to agree to your offer.

A debt settlement with one or some but not all of your creditors can still result in you having to deal with collection calls and potential garnishees from your other creditors.



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