At times, debt can be truly overwhelming for your customers, and decisive action must be taken in order to get that debt off their own books. While bankruptcy is an option that some must take, there is another route that has become an alternative to it: consumer proposals.
Perfectly legal for Canadian residents, the consumer proposal can be formulated between a business and someone who needs to eliminate debt. Although they vary in terms, they are meant to reduce debt within a five-year span.
According to NerdWallet Canada, there are several elements that are key toward starting a consumer proposal:
- Businesses don’t have to wait interminably for debt payments, but instead, receive them on a regular schedule.
- Less money is owed per month for the customer.
- The payments don’t increase month-to-month, even if there are positive changes to a person’s income.
A look at the pros and cons
The cost to the customer is $1,500, considerably less than a bankruptcy proceeding. It’s also common to pay up to 20 percent as part of the payment cycle, meant as a service fee for the trustee who must legally set up the consumer proposal.
There is a disadvantage to a consumer proposal that does give some customers pause, and that’s the credit rating. According to the Equifax company in Canada, a consumer proposal is on your credit report for three years after you’ve completed all of its payments. Depending on when it was filed, it may be on the report for a total of six years from the initial date filed.
In comparison, a bankruptcy will be on your credit report for six years after the discharge date, or seven years if a discharge date wasn’t filed. If it’s not your first bankruptcy, each one appears for a full seven years on a credit report, so someone with two bankruptcy filings will have those for a total of 14 years on the report.
The right type of debt clearance for a customer
Bankruptcy may still be an option that some consumers pick. But, the risk of having to give up additional assets or make a high amount of additional payments beyond your debt owed are just two of the reasons some want to avoid bankruptcy and see consumer proposals as a better option.
At Debt Control Agency, we can help you with a customized approach to debt collection based on your company’s and consumers’ needs. We are a professional leading provider of full-spectrum, solutions-first, 3rd-party debt collections company. We have worked through many different scenarios to maintain the balance between superior customer service and collecting debts that are owed to you. Visit our website to learn more.