Finding yourself in debt is a relatively common part of life. Things like homes, cars and even your education are not cheap. Unfortunately, getting out of debt can be even more difficult for those living in Mississauga, one of the most expensive places to live in North America.
While some residents will have high enough incomes to deal with any financial emergencies or unexpected debt, some are not as well equipped. For those currently dealing with too much debt, filing a consumer proposal in Mississauga could be the solution you’ve been looking for.
Can you pay off your consumer proposal with a loan? Find out here.
A consumer proposal, quite simply, is a legal procedure where you agree to pay back a piece of what you owe to your creditors or extend the time you have to pay your debts back. The amount that you are responsible for paying back will depend on a number of factors such as your income, how much you owe, and even your possessions. Either way, it will often result in your paying back much less than you would have originally had to.
It is similar to a bankruptcy in some ways but is less extreme. Your assets are not at risk and surplus income is not considered. If you are considering filing for a consumer proposal in Mississauga or another similar debt relief solution, you will likely need the assistance of a Licensed Insolvency Trustee (LIT). A LIT is educated, experienced and knowledgeable about bankruptcies and consumer proposals, and will be able to help you find the right solutions to your problems.
So why would a creditor or lender accept less money than they originally should have received? Well, the answer is that if you declare bankruptcy, your creditors might get nothing at all. So if you offer them a consumer proposal, at least they are recuperating some of the money.
If you are considering a consumer proposal or want to learn more about them, a perfect place to start is learning about the process. The first part of the process contains meeting with a LIT. You want to find one that is not only experienced but one that you are comfortable being around.
Once you have found the right person, it’s time to get to work on crafting the consumer proposal itself. The most important thing to consider when filing a consumer proposal in Mississauga is to make sure it’s a fair offer for both you and your creditors. If you want your proposal to be accepted, it needs to make sense for your financial situation but at the same time, your creditors need to feel like they’re being paid enough money. Once you and your LIT have created your proposal, it will be sent to all of your creditors.
If your consumer proposal is to be accepted, the creditor you owe the most to must agree to the terms. If not, you will have to try it again. When the proposal you submit is eventually accepted, you have 5 years to make the payments to pay back the agreed upon amount.
While a consumer proposal can be a great option for many consumers struggling with debt, your credit score will be negatively affected? In Canada, all credit accounts that appear on your credit report get a rating between 1 and 9. A perfect credit rating is 1 and the worst credit rating a person can get is a 9. Any account associated with bankruptcy will receive a 9, while any account associated with consumer proposal will receive a 7.
Confused about the difference between your credit score and credit rating? Learn more here.
As a result, filing a consumer proposal in Mississauga is actually quite bad for your credit, but still not quite as bad as bankruptcy would be. A note on your credit report will remain for three years once you complete all of your required proposal payments.
While a consumer proposal will hurt your credit, it’s often the right choice to start fresh and work toward rebuilding. It is completely possible to build your credit back up, and it could potentially happen quicker than you might think. Ways to improve your credit include:
By following these tips and others like them, you will soon see your credit begin to improve.
For more information about what affects your credit score, check out this infographic.Dealing with debt can be a struggle. If you feel that filing a consumer proposal in Mississauga is right for you, or want to make sure it is, don’t hesitate to contact Loans Canada.
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