What Are My Options for Debt Forgiveness?

  • By Jillian Taylor-Mancusi


It’s easy to fall behind on bills, but sometimes you get so far behind it seems like there’s no way to catch up. If you’re buried in debt, don’t panic. Take a look at these options for debt forgiveness and regain your financial peace of mind.

Negotiating With Creditors 

It’s important to keep the lines of communication open between you and your lender. If you are having trouble making timely payments, consider discussing your difficulties with your creditors. Most lenders are willing to discuss changes that make it possible for you to make on-time payments and pay off your debt.

If you have a regular income, you may be able to negotiate a partial debt forgiveness by requesting

  • a lower rate,
  • a longer time to repay your debt,
  • forgiveness of over-limit and late fees, or
  • a reduction in the amount you owe.

Creditors are often willing to listen to a well-prepared plan that works for both of you. By negotiating with you, your lender avoids losses due to a bankruptcy or proposal. In return, you get an affordable repayment plan. It’s important to honor each aspect of the negotiated plan; one late payment can cause a cancellation of the agreement.

Consumer Proposal 

When creditors refuse to negotiate with you or if you have several credit card or unsecured debts, a consumer proposal may be the next best thing. A consumer proposal is a legal option that allows you to settle with your creditors for less than you owe. It also stops all collection efforts such as annoying calls, garnishments, and liens.

A Licensed Insolvency Trustee will meet with you and help you determine if a proposal is a good solution to your debt problems. A trustee’s help is required by law. Your trustee will help you draw up the proposal, send it to your creditors, and file all the necessary paperwork. If your proposal is accepted, you will make a lump sum payment or regular monthly payments to your trustee. The Licensed Insolvency Trustee distributes the payments to your creditors.

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If your creditors refuse to negotiate with you or you can’t afford to make the payments required by a consumer proposal, bankruptcy may be your last legal option. A licensed insolvency trustee will advise and support you through the entire process.

During an initial consultation, your trustee will review your financial situation and help you understand how bankruptcy will affect you now and in the future. Once your paperwork is accepted, you are declared bankrupt, and your assets are sold to pay off creditors. You will be allowed to keep assets exempted from sale. Possessions you can keep are determined by provincial and territorial law, so what you get to keep depends on where you live.

If this is your first filing, and you have no surplus income, your bankruptcy can be discharged after 9 months. If you are required to make surplus income payments, you will likely be in bankruptcy for 21 months.

If your debts are out of control, a meeting with a licensed insolvency trustee can help you find out your options for debt forgiveness.

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