What is the Difference Between a Consumer Proposal and Debt Consolidation in Alberta?
Short AnswerIn Alberta, a consumer proposal actively works to pay back your creditors at zero interest. A debt consolidation loan or service merely shifts all of your debts into one loan payment, with interest. Remember, you can not borrow your way out of debt, you must eventually deal with it.
Longer AnswerA consumer proposal is a legally binding agreement that is put in place to provide Canadians and Albertans with immediate protection from debt collectors and it also secures a partial repayment of your total unsecured debt owing, which is agreed upon by the affected creditors. Your creditors would rather recover some payment than no payment at all, so under a consumer proposal, a Licensed Insolvency Trustee works out a payment plan between you and your creditors that is mutually agreed upon. All interest ceases, and at BNA Debt Solutions, our clients typically pay back just 37% of their debts on average. Meanwhile, debt consolidation services offer a loan to cover your outstanding debts. While this will eliminate creditor calls, it puts the debtor right back into another cycle of debt. Some debt consolidation services offer loans at high interest rates, rivalling those of credit cards. When a debtor takes a debt consolidation loan, they are merely putting all of their debts into one “basket” as opposed to actively taking steps to pay them down without interest.
Related Questions About Consumer Proposals
How Long Does It Take To Repay Debt in Alberta Through a Structured Repayment Plan?
When you are in debt, the first thing you want to do is get out of it – but knowing exactly how long that
Can a LIRA (Locked In Retirement Account) Be Seized in a Consumer Proposal?
Short Answer No, locked in retirement accounts are considered protected and cannot be seized in a consumer proposal. Longer Answer All retirement funds are protected
Can You Renew a Mortgage While in a Consumer Proposal?
Short Answer: Yes, you can easily renew a mortgage while in a consumer proposal!
Long Answer: There is a huge distinction between renewing an existing mortgage while in a consumer proposal and refinancing one.