Each debt solution available to Canadian debtors has its own minimum requirements that must be met in order to qualify for help. This is true whether that solution is debt settlement, debt consolidation, a consumer proposal, or bankruptcy. When you are evaluating the difference between a consumer proposal and bankruptcy, one key requirement is the amount of debt you can be carrying in order to qualify for either debt solution.
Debt Required to File a Consumer Proposal
To file a consumer proposal, which is a debt option more drastic than debt settlement but only slightly better than bankruptcy, you must owe at least $1,000 in unsecured debt. The maximum that you can owe as a single person and still qualify for a consumer proposal is $250,000. Married couples who file their income taxes jointly, however, can owe up to $500,000.
You can get specific guidelines for each province and territory with these consumer proposal guides linked below.
Below is a summary of these requirements to make it easier for you to determine the debt solutions for you.
Debt Required to File for Bankruptcy
Unlike the consumer proposal, which is designed for those who are simply unable to make their minimum monthly payments, bankruptcy in Canada is designed for individuals who cannot make their minimum payments, have no hope of making payments even when their total debt is reduced, and who are essentially insolvent because of low net worth.
Consequently, you do not have to owe nearly as much to file for bankruptcy as you do to file a consumer proposal. You will qualify for bankruptcy in Canada if you owe at least $1,000 in unsecured debt. There is no upper limit on what you can owe and still qualify for bankruptcy.
Debt Required for Debt Settlement
Usually, you will have at least $10,000 in unsecured debt to qualify for debt settlement. Because of this, a debt consolidation loan or consumer credit counselling, not debt settlement, is usually ideal for those who owe less than $10,000 and yet do not want to file for bankruptcy or put together a consumer proposal. Even those who meet the minimum debt requirements for bankruptcy or a consumer proposal may want to seriously consider debt settlement because debt settlement can often get you better terms for your debt with your creditors. Furthermore, debt settlement does not have as serious a negative impact on your credit as a bankruptcy or a consumer proposal. This also makes it a good choice for those who are unwilling to destroy their credit score but who cannot pay the total principal that they currently owe to their creditors.
Is a Consumer Proposal Right for Me?
It’s important to fully understand all options available to you to determine which one will help you the most. Fill out the Canadian debt relief form for a free consultation with an adviser to learn if a consumer proposal is right for you.