The word ‘bankruptcy’ causes many people to shudder. It shouldn’t really – it’s not the end of the world, nor anything like it.
Over 120 thousand Canadians were insolvent last year. For people with significant debt problems, the bankruptcy process can be a great solution.
But personal bankruptcy is not your only option. This is why it’s good to do what you are doing right now – research. Knowing what your bankruptcy alternatives are will help you to find the solution that is best for you circumstances.
In this four-minute video, I’m going to cover your four main alternatives to bankruptcy. They are:
- Debt Settlement
- Credit Counseling
- Debt Consolidation
- Consumer Proposal
So let’s get started.
1. Debt Settlement
You can negotiate a settlement with your creditors on your own or with the help of a professional. However, it means you will need to come up with a hefty lump sum to settle the account.
Even if you manage to negotiate a reduction in the total amount owed, assembling the money to ‘settle’ may not be feasible for you. Be extremely cautious of any company that claims it can:
- Arrange to have your debt drastically reduced
- Quickly and easily mend your credit score problem
- Provide you access to a ‘government program’
The government has issued warnings about people calling themselves ‘debt consultants’ and companies making claims like these. Long story – short, rather than be a miracle cure, they can waste your time and money and potentially make your situation a lot worse.
2. Credit Counseling
Credit Counseling is another option. If you can afford to pay most of what you owe back and wish to avoid the implications of a bankruptcy, then credit counseling may be an option.
As the name implies you will receive counseling and advice about your problem debt. A credit counseling agency can also arrange to consolidate all your debts into one monthly payment. But be cautious if they also claim that they can stop collection calls and save you thousands of dollars in interest payments.
A few things about this option. Consolidating your debt is often not enough help. If you can’t afford your debt any longer – how will piling the payments into one monthly installment makes things better? Possibly saving the interest payments would make a difference, but this would depend upon your circumstances and the size of your debt.
Credit Counselors may be able to stop collections – however, credit counselors cannot provide you legal protection from your creditors. So if anything goes wrong with the arrangement, your creditors can still take you to court.
3. Debt Consolidation
The third alternative to bankruptcy is Debt Consolidation. It allows you to repay all or most of your creditors with one monthly payment. This may help you avoid the risk of missed payments. The process may enable you to move debts from a high interest rate to a lower interest rate debt, if you can provide security such as a second mortgage on your home, or a co-signer.
Again, there are a few things you should know about this option.
- The assumption is that you will pay most or all of your debt – you may not be able to do that.
- The arrangement is not legally binding – so if your creditors change their minds they can still take you to court.
- Often you will be charged a considerable up-front fee to arrange this sort of deal and if the creditors refuse you will be out that money.
4. Consumer Proposal
Consumer Proposal is your fourth option and can only be arranged with the assistance of a Consumer Proposal Administrator (also known as a Licensed Insolvency Trustee – or LIT for short). The main features of a proposal are:
- It is legally binding and provides immediate legal protection from your creditors.
- With the help of your administrator, you will be able to arrange a significant reduction in the overall sum owed.
- You will not be required to forfeit any assets – in a bankruptcy this can happen
- Wage garnishments are stopped, as will all collection calls or letters.
It is easy to see why Consumer Proposals are such a popular choice for Canadians in debt.
You are probably researching your options right now. If that’s the case, it makes sense to talk to a professional who can offer the widest range of debt solutions. In Canada – that would be a Licensed Insolvency Trustee, such as LCTaylor. You can arrange a free consultation by calling toll-free 877 814 1320 to-day.
You have nothing to lose and potentially a great deal to gain. You deserve a fresh start… it can begin right here