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Options Other Than Filing for Bankruptcy

If you are having trouble meeting your financial obligations, you might be considering bankruptcy. This is an option that is available to most people who cannot pay their debts as they become due. However, it is typically not the only available option. While bankruptcy is likely the most well-known solution for those who cannot pay their debts, it is typically the last option that is considered and usually only done if all other options have been tried or if there are no other options available. The good news is that, for most people, there are other options. These options include:

  • Negotiation

    • You may be able to speak with your creditors individually, explain your situation to them and negotiate with them. In some cases, individual creditors will agree to reduce the amount of interest that you are expected to pay or give you more time to repay your debts.
    • It’s important to note that creditors are under no legal obligation to negotiate with you and those who do not choose to are still able to take action against you to collect the debt that is owed to them. This can include taking legal action against you.
  • Debt Consolidation

    • Debt consolidation can reduce the amount that you pay in interest, which can save you a significant amount of money and make it possible for you to afford your debt repayment costs.
    • One way is to take out a new loan with a lower interest rate than the current overall interest rate on your outstanding debt. If you can manage to get a loan with a lower rate, you can save yourself some money in the form of interest costs. However, the overall amount that you owe will not change. Getting a lower interest loan with a new lender may be difficult if you have bruised credit
  • Consumer Proposal

    • A consumer proposal is also a legal procedure that can help you alleviate your debt issues. A consumer proposal, like a bankruptcy, is administered by a licensed insolvency trustee. However, there are many differences between the two processes.
    • Through a consumer proposal, you make an offer to your creditors to repay them on terms that you can afford. In most cases, a person submitting a consumer proposal will offer to repay a portion of what they owe, sometimes around 30% of the original debt, in monthly payments over a specific period of time. Consumer proposals can be completed in between one and five years.
    • Once you submit a consumer proposal to your creditors, they are able to vote on whether or not they will accept the proposal. If the majority accept, then the proposal is legally binding for all of your unsecured creditors. A majority is determined by dollar value. Therefore, if you have $10,000 in outstanding debt, the creditor or any collection of creditors who are owed at least $5,001 is considered the majority.
    • When you file a consumer proposal, you receive legal protection from your creditors. They cannot contact you directly and are unable to take civil legal action against you to collect debt.
    • In effect, a consumer proposal lets you reduce the overall amount that you owe to your creditors to the amount of the proposal. This makes it a good option for those who are able to repay a portion of what they owe but not the full amount. The interest stops accruing and you have a long time frame within which to make the payments

As you can see, filing for bankruptcy isn’t the only route to take if you are having trouble repaying your debts. The processes listed above are just some of the options that may be available to you. Each financial situation is different and, therefore, different options apply to different people. In order to find out more about the options that are available to you, it’s a good idea to meet with a licensed insolvency trustee . A trustee is a person who is trained, registered and licensed and is able to review your financial situation and give you details on the available options. A trustee will never push you to choose one option over another and will always give you information on all options, not just the ones that they can administer. After speaking with a licensed insolvency trustee, the decision for how you wish to proceed is always entirely up to you.