Consumer proposal and Bankruptcy - What you need to know!
Recently I have seen many posts on social media and sch asking for advice about consumer debts and some of the responses are shocking!! Ensure you are well versed in all the pros and cons to make the right decision for you. Many people do not think that a consumer proposal will have the same effects as a bankruptcy on their credit and that alone is very alarming! I have also found out that not all the companies that process these share this information with their clients. That leaves you very vulnerable for future mortgage needs you may have.
Consumer Proposal (CP):
Picture this: You’re drowning in debt, and CP comes in as your lifeguard. You work with an insolvency trustee to negotiate a repayment plan with your creditors.
The trustee bundles up your debts into one manageable monthly payment, with no more pesky interest charges or creditor calls.
But beware: CPs aren’t a walk in the park for your credit score. They hit it hard, like a punch from a heavyweight boxer. And they stick around on your credit report for what feels like an eternity – up to 8 years!
If you’re dreaming of a new mortgage, traditional lenders will make you wait 1-2 years post-CP. Lenders also want to see new credit of 2 trade lines of a minimum of $2500 for 1 year reporting with no lates after discharge. But fear not, alternative lenders might throw you a lifeline sooner, albeit with higher interest rates.
Bankruptcy:
Bankruptcy: the grand reset button for your finances. Assets may be sold to repay debts, but not all debts are wiped clean – think student loans, child support, and government debts.
It’s like a financial makeover, but with a waiting period of 1-2 years post-discharge before you can even think about a mortgage.
Lenders also want to see new credit of 2 trade lines of a minimum of $2500 for 1-2 years reporting with no lates after discharge.
Your credit score takes a nosedive, and bankruptcy sticks around on your credit report for 6-7 years. It’s like having a not-so-glamorous tattoo that you can’t remove.
What’s the Fun Alternative?
Before diving into CP or bankruptcy waters, consider some lighter options:
Think of debt consolidation loans as your financial superhero, swooping in to save the day with lower interest rates and a fixed monthly payment.
Balance transfer credit cards are like magic wands, turning high-interest debts into 0% interest for a limited time.
Refinancing your mortgage? It’s like hitting the financial refresh button, allowing you to consolidate debts and lower your interest rate. Many people have seen a large increase in their home value, take advantage of this and have your equity work for you by using it to pay off your consumer debt.
Downsizing isn’t defeat – it’s a smart strategy to free up cash and tackle debt head-on.
The Golden Rule:
Pay off your credit card in full every month – it’s like giving it a spa day, free from interest charges!
Remember, ignoring debt won’t make it disappear. So, grab the bull by the horns (or in this case, the debt by the tail) and take action!
In a Nutshell:
Debt can feel like a heavyweight champion, but with the right strategy, you can come out swinging. So, whether you choose CP, bankruptcy, or another route, remember: the key is to take control of your finances and punch debt in the face!