What to Know about a Consumer Proposal with a Car Loan

Sometimes debt gets out of control, and it becomes clear that you’re not going to be able to pay them back. When you get to this stage you have two options, you can file for bankruptcy, where your assets will be taken and sold to pay off your debt, or you could take a consumer proposal. Never heard of a consumer proposal? Can a consumer proposal help with a car loan in Woodstock? This article will explain.

What is a Consumer Proposal?

A consumer proposal in Woodstock is similar to bankruptcy in many ways but for one key difference: You get to keep your stuff. A consumer proposal is an agreement with a licensed insolvency Trustee where you agree to pay all or a sum of your accrued debts over a 5 year period.

The trustee will work to figure out how much you can afford to pay and how much the creditors will be willing to accept to put together the proposal. It’s then up to the creditors to vote yes or no to the proposal at their discretion.

The reason a creditor might accept a Consumer proposal that doesn’t pay back the entirety of what they’re owed is that they’ll still get more from the proposal than they would if you filed for bankruptcy.

Advantages and Disadvantages

Consumer reports do have some major advantages over bankruptcy but they have a few downsides too. Consumer reports are less damaging to your credit score than filing for bankruptcy and obviously the big one is that you don’t lose any of your stuff in the deal.

The downsides are that the consumer proposal process is much longer, years longer usually that you’ll still have to be paying monthly. The fact that you’re keeping your assets also means you’re going to have to pay more than you would if you filed for bankruptcy.

Another important factor is that consumer proposals have a maximum debt limit ($250,000) while filing for bankruptcy has no limits. So if your debt exceeds that amount it won’t be an option at all.

What Option Should You Choose?

Like all things financial, the answer is a nebulous “It depends”. Either may be better depending on your current situation. If you can afford to pay the monthly instalments for the next few years then a consumer proposal may be the better option for your long term financial situation.

If however the debt is too much then a consumer proposal with a car loan in Woodstock may do you more harm than good and filing for bankruptcy will be the safer option. The choice is highly dependent on your personal situation and a blog post can’t tell you which to use, finding a financial advisor may be a good first step.

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