Assessing your debt options
Relief from the stress of debt is closer than you think.
Overview
Your options at a glance
There are many important differences between these three debt relief options. Each option has benefits and downsides. Making this kind of decision is not easy. Speak to one of our insolvency advisors to help you understand how each applies to your unique situation.
Option 1
Debt counselling
Learn proven debt reduction tactics from our insolvency advisors to better manage your debt on your own.
Key highlights
- You will learn how to self-negotiate reducing interest and other costs with your creditors
- You will learn how to manage your debt and develop your own do-it-yourself debt management strategy
- Creditors and debt collection agencies may eventually stop calling you once you start making regular payments
Option 2
Consumer proposal
A consumer proposal is a legally binding debt relief option where your Licensed Insolvency Trustee helps you settle your debt with your creditors. If the creditors accept your offer, you make the agreed monthly payments, and any remaining debt is forgiven once your payments are complete.
Key highlights
- Keep the value of your assets, such as your car, house and investments
- Creditor protection, stops collections, garnishments and legal action
- Affordable, fixed monthly payment that does not increase once the creditors have accepted your offer
Option 3
Bankruptcy
Filing for bankruptcy allows you to eliminate nearly all your unsecured debts. It’s often a more affordable and faster alternative to a consumer proposal but should be a last resort option.
Key highlights
- Get out of debt in as few as nine months
- Your creditors cannot decline your bankruptcy
- Your payments are based on your income
Debt relief – option 1
Debt counselling
There are solutions to get you out of debt. Debt counselling starts with talking to an insolvency advisor who can explain your debt relief options; ensure you understand how each of them works and help you decide your next steps to take. Licensed Insolvency Trustees are the only licensed, federally regulated debt relief experts who are obligated to explain all your options and give you the independent, unbiased advice you need. Our insolvency advisors offer a free, confidential debt consultation to provide you with an overall assessment of your personal financial circumstances and help you on the path to financial recovery.
Top benefits
Debt can be tough to deal with on your own. Debt counselling gives you access to proven do-it-yourself techniques along with expert coaching to help you make smarter choices to manage your debt.
- Confront your debt without judgment, reduce your stress and anxiety and actively take the steps to take control of your financial situation
- Establish solid financial goals with the tools we provide and get out of debt
- Learn how to self-negotiate with your creditors to reduce interest rates
Top considerations
This can be a good option if you are self-motivated and committed to doing the work yourself to build your own debt management plan. Results can vary depending on your budget, financial obligations, credit rating and the type and amount of debt owed.
- It may take longer to pay off your debt through a self-management option
- There is limited impact on your total debt owed and not all creditors may participate
- This debt relief option is not a legal solution, and it may not stop collection calls, wage garnishments or further legal actions
Debt relief – option 2
Consumer proposal
A consumer proposal can be a good option to reduce your debt without bankruptcy. With a consumer proposal, our Licensed Insolvency Trustees at Bromwich+Smith negotiate a legally binding settlement with your unsecured creditors on your behalf. Your debt can often be reduced to a fraction of what you owe with the remaining amount forgiven. A consumer proposal offers relief from creditor harassment and affordable monthly payments, for a structured path to becoming debt-free.
Top benefits
A consumer proposal has several benefits that make it a good debt relief option for people who can’t afford to pay back their debts but want to avoid bankruptcy.
- Keep your assets, such as your car, house and investments
- Stops collection calls, wage garnishments and legal action
- Affordable, interest-free monthly payment that does not increase once the creditors have accepted your settlement offer
- Often repay less than you owe
- You can pay it off faster without penalty
Top considerations
It is important to weigh several considerations before deciding if a consumer proposal is the best debt relief option for you.
- Usually takes longer (up to five years) to complete versus bankruptcy
- To encourage creditor acceptance, a consumer proposal generally offers higher payments (and is therefore more expensive) than if you filed a bankruptcy
- If you fall behind on your payments your consumer proposal may be automatically annulled, reactivating your creditors rights to collect
- Negative impact to your credit rating
- There are limits on how much debt can be included in a proposal
Debt relief – option 3
Bankruptcy
Filing for bankruptcy can be the most effective debt relief option, especially if a consumer proposal is not right for you. If you have never filed a bankruptcy before, and your income is low, bankruptcy can be completed in as little as nine months. While bankruptcy will provide you with creditor protection, it should be considered a last resort after other debt relief options have been explored. Our experienced Licensed Insolvency Trustees can walk you through the bankruptcy process to help you decide if it is the right debt relief option for you.
Top benefits
There are several benefits to bankruptcy compared to other debt relief options.
- Get out of debt in as few as nine months
- Cost effective – often costs much less than a consumer proposal
- Stops collection calls, wage garnishments and legal action
- Your creditors cannot refuse your bankruptcy
Top considerations
Bankruptcy gives you protection from creditors and forgives most of your debts, but there are disadvantages to consider as well.
- Your monthly payment is based on your income, so if your income increases over time, your payments also increase
- You might need to make payments based on the value of your assets
- Your Licensed Insolvency Trustee is required by law to hold income tax refunds and some tax credits for payment to your creditors
- Your credit rating is negatively impacted
Unsure where to start? We’re here to help.
If you are experiencing financial difficulty and cannot manage your debt any longer, you can book a free, confidential consultation with one of our insolvency advisors to help explain all your debt relief options and help you decide your next steps.
Questions answered
FAQ
Your answers to commonly asked questions about debt relief options.
When is a consumer proposal better than a bankruptcy?
Our debt experts can help you decide if a consumer proposal is the best debt relief option for you. Here are some benefits of a consumer proposal versus bankruptcy:
- You do not lose your tax refund, GST credits or other tax rebates or credits. In a bankruptcy, your trustee is required to set aside these refunds/credits and rebates for distribution to your creditors
- You do not have to report your monthly income like you do in bankruptcy
- If you have a high income, a consumer proposal can be more affordable than a bankruptcy
- Your credit report is not as significantly impacted with a consumer proposal
When should I choose bankruptcy over a consumer proposal?
Filing for bankruptcy is a last resort option and other options such as consumer proposals should be considered first. Our insolvency advisors will discuss your options after assessing your financial situation. There are three key reasons why you might want to consider a bankruptcy:
- Depending on your situation, bankruptcy can be as short as nine months, whereas a consumer proposal can take up to five years
- In many cases, bankruptcy costs less than a consumer proposal
- Unlike consumer proposals, which creditors can reject, bankruptcy does not require creditors to vote and accept the terms of the bankruptcy
Can I keep my credit cards if I file a consumer proposal or a bankruptcy?
When you file for bankruptcy, you must stop using your credit cards, even those with no balance. Legally, you are permitted to borrow up to $1000 while in bankruptcy, but we strongly encourage avoiding all credit during this time, as an important step in your financial recovery. With a consumer proposal, you can keep your credit cards, though the issuer has a right to cancel the card, even if there was no balance owed. It’s important to remember that the main goal when you choose a consumer proposal is to become debt free, so we also encourage you to avoid credit with this solution too.
We’re here to help
Contact us
Managing debt can be difficult, but we’re here to help. Our insolvency advisors can show you your options and help you choose the best plan for you.
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