The rate of bankruptcy claims in Canada has declined, but not because Canadian families are no longer struggling with debt. Instead it is directly connected to the range of options now available to Canadians, options other than bankruptcy.
The recent recession has subsided, however there are many individuals who lost jobs and accumulated debt during the recession and this debt has now become unmanageable. Tough financial circumstances lead to tough financial choices.
Having financial problems can be embarrassing, even if no one else knows. You may be ashamed to reach out for help; you may fear your employer, family or friends will find out. If you are struggling to pay your bills you will inevitably reach a breaking point.
Don’t wait until a collection agency calls you at work. Don’t wait for the worst-case scenario where the debt problem becomes so large in size that bankruptcy is the only option left. You have choices.
A consumer proposal is similar to a debt consolidation in that it enables you to make a low, single monthly payment. The differences are that they involve freezing the interest on your debts, settling your debts for much less then you owe and often include stopping collection action being taken by your creditors.
Consumer proposals have become an attractive option to Canadians that struggle with their debt for the following reasons:
- A consumer proposal offers a single monthly payment that is much lower than what you currently pay to your loans and credit cards.
- A consumer proposal can be paid off in full
- In a consumer proposal you do not have to report your monthly income to a bankruptcy trustee
- A consumer proposal is removed from your credit report three years from the date it is paid in full
Another reason that there has been an increase in consumer proposal filings is directly due to the fact that recent changes to the bankruptcy laws in Canada have made it much more difficult to file for bankruptcy.
From 2010 to 2011 the bankruptcy filings decreased by approx. 20% and consumer proposal filings increased by approx. 20%.
The 20% of folks who may have previously filed for bankruptcy but instead chose proposals were likely mid to higher income earners with stable employment. The changes in bankruptcy laws affected these people the most. The new bankruptcy laws have made it very expensive for someone who has a decent job and steady income to deal with compounded debt.
What the new laws fail to consider is that inflation is steadily on the rise and the cost of living has gone through the roof. Hard working Canadians with decent jobs are struggling just to pay their minimum living expenses – decent income or not. For more information about the declining rate of bankruptcy in Canada and the steady rise of consumer proposal filings, please visit www.debtcare.ca