There of course are many options besides a formal filing of bankruptcy or consumer proposal to deal with your debt load.
The most common alternatives are:
- Better money management
- Borrowing from friends and family
- Debt Consolidation
- Credit Counselling
If you are carrying debt and have stable earnings, better money management may be all you need to get a handle on your debt and pay it off in a reasonable period of time. Make a plan to pay the debt while not incurring any further debt and you can succeed at being debt free. If you cannot make payments on your debt without having to use them to get through the month, you will need a different option, or you will need to cut back on your expenses.
In my experience, borrowing from friends and family is a temporary solution as you have traded one creditor for another, but perhaps you won’t need to pay your family or friend’s interest. You will need to have a plan of action to pay these funds back without incurring new debt and if you cannot, you will need a different option to help you with your financial problems.
Debt consolidation is a good option if you want to combine your debts into one payment and reduce the overall interest you are paying. Many people get into further debt with this option as the credit cards now have no balances and they end up using the cards again to make ends meet.
Credit counselling offers an option called a Debt Management Plan (“DMP”) which allows you to consolidate your debt into one payment, often without any further interest. Government debts cannot be included in this option. Your credit rating will be impacted in the same way as filing a consumer proposal.
A Consumer Proposal allows an individual to consolidate their debt into one monthly payment, without interest and often greatly reducing the total amount of debt. For example, a person owing $60,000 may be able to offer $20-$25,000 over a period of 60 months. As everyone’s situation is different, this is an example only. Once the creditors agree to the offered or negotiated amount, it becomes a legally binding contract between the individual and the creditors to settle the debt. Only a Licensed Insolvency Trustee can file a consumer proposal for you.
Bankruptcy is the option available when no other option will work for you. This option allows you to get a fresh start in as little as 9 months depending on your circumstances.
To find out which option is the best for you, contact one of our Licensed Insolvency Trustees today for a free, no obligation, consultation.