Consumer Proposal vs Bankruptcy in Toronto: Advantages of Fixed Payment
There are many reasons why a Consumer Proposal is a preferable alternative to Bankruptcy. One key distinction between the two options that we often get asked to elaborate upon is the different payment methods: Bankruptcy payments may vary, while a Consumer Proposal has fixed payments. This has the great advantage of certainty.
What Does ‘Fixed Payment’ Mean?
‘Fixed payment’ means that the payments stay the same, regardless of changes to your income. Unlike with Consumer Proposals in Toronto, Bankruptcies work with a ‘surplus income‘ formula that only allows you to retain a certain amount of your income each month. Under this mandatory formula, your income over a standard threshold is split between you and your creditors,
Fixed Payment Advantage: Changes in Income
In Bankruptcy, any income above the standard threshold will result in additional payments to the Trustee.
With a fixed payment plan in the Consumer Proposal process, however, your payments stay the same, no matter how much more you earn from raises, promotions, new clients, or new employment.
Fixed Payment Advantage: Windfalls
With the ‘surplus income’ system of Bankruptcy, it’s not just your regular income that is subject to higher payments. The ‘surplus income’ limit applies to one-time payments as well, like work bonuses. It is important to know that in Bankruptcy windfalls, inheritances and lottery winnings may also be available to the creditors.
A fixed payment plan in the Consumer Proposal process, however, doesn’t touch any more than the previously agreed monthly payment amount, no matter how great your windfall.
If you are struggling with debt and would like to learn more about your options, please contact us for a free consultation with one of our experienced Licensed Insolvency Trustees. Together, we’ll review all your potential Torotonto debt solutions, including credit counselling, debt consolidation, Consumer Proposals, and Bankruptcy. With offices in Toronto and Hamilton, we’re here to help you get a fresh start and lead a FULLER life.