| By :
Adrianna Noton
Sometimes, when debt and money problems get the better of you, drastic action must be taken to bring things back into balance and right the ship. When you sit down to discuss different forms of debt settlement, the terms bankruptcy and consumer proposal will inevitably come up. The bankruptcy option is typically a last resort, but a consumer proposal is something that may be a valid idea to help deal with your debt load. To do a consumer proposal means that you've agreed to a legally binding settlement with your creditors as a means of debt settlement. A consumer proposal has a few advantages over filing for bankruptcy that you should be aware of before you make a decision. With a consumer proposal settlement, you would typically make one payment per month that is spread around equally among your creditors. The payments would last no longer than five years, and you would be free of debt once the final payment was made. One advantage of a consumer proposal is that only a portion of the total debts must be paid off. This gives you some relief over the full amount of the original debt that you owe. The consumer proposal negotiation will determine exactly how much of the total debt is repaid. While getting into money problems is never anyone's goal, the option to only repay a portion of the whole amount is an attractive one. Any interest that you are paying on the various debts you have will stop accumulating on the date that you file for a consumer proposal. Generally, all your unsecured debts like credit cards and bank loans are included in the consumer proposal debt settlement. Once the consumer proposal settlement takes effect, all activity by collection agencies and other creditors will cease. With a consumer proposal, there is no danger of losing your home or any other assets as part of the debt settlement. When you enter a consumer proposal agreement, your credit rating will be impacted less severely than if you'd filed for bankruptcy. Keeping your credit rating stronger will enable you to rebuild faster and get things back to normal. It may seem unusual that creditors would be agreeable to a situation where you're only repaying a portion of the debt you owe, but at that point they just want to get something. If you opt for the bankruptcy option, they won't get anything at all. With bankruptcy, you are absolved from your debt and the creditors are left with nothing. By entering a consumer proposal agreement, they will at least get part of their money, which is an advantage over the alternative. No one wants to feel the sting of serious money problems, but if you do and you can't seem to find a way out, a consumer proposal is an option you may want to consider.
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