When it comes to dealing with financial problems and debt, bankruptcy is an option, but there are alternatives. That’s why it’s important to take action before it’s too late. There are a number of alternatives for dealing with burdensome debt that can help you with your finances.
A few of the best things you can do to avoid bankruptcy include:
Organizing your finances
It’s always good to keep a budget and track your finances. This is especially true when you’re having money problems. Take a look at how you’re spending your money each month. List all of your monthly expenses, then subtract them from your monthly income. If you’re spending more money than you make each month, it’s time to redo your budget. Look for ways to cut back on your expenses. Make an effort to control impulse spending as well.
In some cases, getting your finances organized is enough to keep you from bankruptcy. If you’re much further in debt, or if you don’t have enough income even after budgeting, there are still other options.
Applying for a debt consolidation loan
A debt consolidation loan is a loan you use to pay off all of your debts. Then, instead of making multiple high interest payments on credit cards and lines of credit each month, you make just one payment on your new loan. This can save you thousands of dollars on interest in the long run. You should keep in mind, this option does not actually reduce your debt, it changes the way you pay it back allowing you to spend less out of pocket each month.
This type of loan is not always possible. In order to qualify, you have to have a good credit score and a job that shows you can make regular payments. If you have been late on bills or don’t have a steady income, you may not be able to get a debt consolidation loan.
Filing a Consumer Proposal
A consumer proposal is a legal arrangement between you and your creditors that allows you to settle your debts for less. A Licensed Insolvency Trustee prepares the proposal for you and negotiates with your creditors until an amount that you can afford is agreed upon. Then, you make a monthly payment to your trustee each month. Your trustee then distributes the payments among your creditors.
Consumer proposals are usually paid off within five years. After that, you’re debt free. However, a consumer proposal does have a negative effect on your credit. For many people, this may be a good option as it allows you to keep your possessions. Consumer proposals also protect you from collection activity from your creditors.
Deciding which option is best for you can be a daunting decision. Your first step should be to budget and organize your finances. If this doesn’t work, or if you’re having trouble getting caught up on your payments, contact a Licensed Insolvency Trustee in your area. Trustees are licensed professionals and can help you decide the best way forward.