When you are seeking relief from unpaid debt, you may be wondering what options are available when you know you don't have enough money to fully pay all of your obligations. One way to clear your debt is by filing for Personal Bankruptcy. However, in most cases, it is advisable to go with a Consumer Proposal plan.
While a Personal Bankruptcy is a faster option that is usually finished within nine months, it does not guarantee that you will be free and clear of your debt. If you have enough surplus income, it is possible that you will need to repay debts to your creditors as long as you are financially able to do so.
A Consumer Proposal plan allows you to repay a portion of your debt over a four or five year period. Once you have reached an agreement on what you can pay, it is a legally binding contract and cannot change. Once you have completed the repayment period, you are clear of your past debt.
The Disadvantages of Bankruptcy
Impact on your credit rating
While a Consumer Proposal will leave an R7 credit rating on your report, it will only remain for three years after you have completed your repayment plan. A bankruptcy will leave an R9 rating (the worst rating possible) on your report, and the BK will remain on your report for 7 to 14 years after your discharge.
In the event that you have surplus income, it will need to be reported to your court trustee every month. The reason for this is because in a Personal Bankruptcy when you have additional income, payments will be made to creditors based on what you earn. Basically, any wage increase or change in economic status (such as you getting a raise or your spouse getting a job, respectively) would require you to pay more. In a Consumer Proposal, once you have agreed to a repayment amount, the terms cannot be changed.
Loss of assets
During a bankruptcy, you may be required to surrender certain assets (i.e. home or car) in order to settle your debt. A CP doesn't require you to surrender any assets.
Overall, a Consumer Proposal makes it easier to take on new debt after your agreement is finalized. Since there is no change in how much you owe each month, you may find it easier to fit a car payment into your budget. In addition to that, your credit rating will not take as much of a hit in the long run. All you need to do is find a dealer that has lenders who are qualified to work with your unique financial situation.
Preparing for the Future
When preparing for your next auto purchase during or after your Consumer Proposal repayment period, be sure to bring all the necessary documents with you, such as your driver’s license, proof of residence and proof of income. You may also be required to provide a list of references as well, so be prepared for this by getting permission from at least six family members, friends, or coworkers.
Also, you may find a down payment to be helpful. Showing a lender that you are willing to invest in the purchase will definitely give you a better chance of approval. It will also reduce the amount of negative equity on the loan.
Working with the Right Dealer
If you have had problems finding a dealer who can help you, Canada Auto Loan has a network of dealers that will do everything possible to get you approved. Complete our secure, fast, and easy online application today and we will connect you with a dealer in your local area that can get you back on the road.