Do you feel like your debts are out of control? Few things are more stressful than trying to balance bills, credit cards, outstanding loans, and your regular household expenses. If you start missing payments, you can wind up facing collection calls from creditors, service shut-offs, and a major hit to your credit score.
Financial stress can negatively impact your relationships, your work performance, and your health. It can also hold you back from achieving bigger life goals. When you finally deal with unmanageable debt, you can move on with your life and achieve those things you’ve always dreamed of.
Getting out of unaffordable debt can be a challenge, but there are solutions that can make it happen, even when debt seems like an impossible mountain to climb.
Bankruptcy
Bankruptcy can feel like a tough pill to swallow, and it can be. Bankruptcy should always be treated as a last resort, as it can expose assets like savings, home equity, second properties, and investments to creditors. It can also have a long-lasting negative impact on your credit score, which can make it difficult to qualify for loans and credit cards in the future.
That said, bankruptcy can be right if it’s impossible to get out of your existing unsecured debts. A bankruptcy will discharge you from any unsecured debts that you owe that you can’t repay after your eligible assets are liquidated. When there’s no other way out of debt, bankruptcy can provide one.
Find out how to declare bankruptcy in Canada by talking to a Licensed Insolvency Trustee. The sooner you talk to them, the more likely it is they can offer a better alternative.
Consumer Proposal
One of those alternatives is the consumer proposal. A consumer proposal will also discharge you from unsecured debts, but you don’t have to sell any of your assets. Instead, you make a smaller monthly payment to all of your creditors. It’s a payment calculated with the help of a Licensed Insolvency Trustee to fit your budget.
These payments will satisfy the remainder of your debt. Meanwhile, there are no interest charges, and you’re protected from collection actions like collection calls. A consumer proposal helps you hit the reset button and get out of debt in a reasonable time frame.
Debt Management
The above processes are both legal processes through which you can clear your debts and move on. However, even a consumer proposal can have a negative impact on your credit score.
Debt management may help if your debts are not yet out of control. A debt management plan is the option of working with a credit counsellor. They can help you with things like creating and sticking to a budget, as well as substantive relief, like negotiating lower interest rates from your creditors.
You still have to pay off all your debt with debt management, but it can make things more manageable.
Debt Settlement
With debt settlement, you approach your creditors with an offer to repay part of your debt with one lump sum payment in exchange for having the difference forgiven. It can be an effective way to manage debt if you’ve received an inheritance or a sudden windfall.
However, there is no legal requirement for a creditor to agree to a debt settlement. Your creditors have to be convinced that it’s the best way for them to recoup their costs.
