Alternatives to Bankruptcy for Your Debt ProblemsPosted on: March 3, 2015
There are numerous alternatives to bankruptcy if you do not want to go through the process. People who have difficult debt problems may think of it first, but bankruptcy is not the only feasible option. Your debt relief solution depends on your situation and some alternatives may work better than the others.
What is bankruptcy?
The legal process of seeking relief from your debts is called bankruptcy. You can consider declaring bankruptcy if the financial institutions you owed money from have started to sue you for failing to make payments. This is also applicable for those whose properties are at risk of foreclosure and if you are using a credit card to pay for your other debts. Other less compelling circumstances are when you must get a significant amount of money to pay your bills or you are getting a divorce.
The first determination really is that a person is or is not insolvent. To be insolvent means to be unable to pay your creditors and to meet your obligations in the way that the obligations are supposed to be met.
You must remember that it’s not up to anybody else to tell somebody that they are insolvent. That is something a person must realize and come to that determination themselves or with the assistance of a Licensed Insolvency Trustee.
Now if they are insolvent, then really one of the things they can do is to keep some form of control over their financial existence.
You also need to know that there are certain debts eligible for bankruptcy such as credit card debts, personal loans, CRA debt, or contractual obligations.
Bankruptcy alternatives for individuals in Ontario
As an alternative to bankruptcy, consider one of these debt relief options.
Consumer Proposal In Ontario
This is done by making a “proposal” to your creditors to lower your monthly payments or extend the period of payment. A consumer proposal also works by negotiating to pay only a portion and not the full value of the money you borrowed. This is administered by a Licensed Insolvency Trustee. A consumer proposal is one, if not the best alternative to bankruptcy. If you can strike an agreement with your creditors, you can settle your debt in a few years without filing bankruptcy.
Debt Consolidation Loan
Acquiring a debt consolidation loan is the process in which you take on a new loan to pay off all your existing debts. It is a way to save money from high-interest credit cards or Payday loans by allowing you to consolidate your debt into a convenient monthly payment with ideally a lower interest rate. It will also allow you to have an ample amount of time to pay all your debt. However, you need to talk to a Licensed Insolvency Trustee first before deciding to make sure this is the right alternative for you as sometimes the loan ends up costing you more.
Sell Your Assets
Gain money to pay your debts by selling some of your properties especially if you think your income could not keep up with the bills. Nevertheless, you need to consider if this is the best strategy. If you are a business owner, keep those assets that are necessary for the company operations. Liquidating your assets is the quickest way to get the cash to pay off your debts.
Debt Management and Debt Counselling
Look for a reputable debt counsellor or credit counsellor who can help you get a debt management plan. This is a good option especially if the negotiation with your creditors failed. Instead of paying directly to your creditors, you can pay through your credit counselling company with lowered interest rates and payment terms that you can afford. There are a lot of questionable companies in this industry, so beware.
Even though there are alternatives to bankruptcy available for you, you should be ready to make important changes in your lifestyle and financial attitude including tracking your expenses, living within your means, and creating a budget you can stick with.