No one wants to declare bankruptcy.
In Canada, personal bankruptcy is something people think they must do when they’re over their heads in debt. Bankruptcy can be the only thing that comes to mind when you realize that you have a humongous debt amount and have debt collectors after you. It might be a good solution to deal with your debt problems. But, before filing bankruptcy, you need to know all the options you have – because bankruptcy is not the only one. Let’s take a look at the bankruptcy alternatives that you have at your disposal.
1. Consolidate using a Debt Consolidation Loan
A debt consolidation loan is where a bank, credit union or finance company provides you with the money to pay off your outstanding debts and “consolidate” them (bring them all together) into one big loan. This usually provides you with three advantages:
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You have only one monthly payment to bother about
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You consolidate at lower interest rates and that saves your money
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Your debt will be paid off in a set amount of time
2. Use the Equity Card
A “Home Equity Loan”, “Refinancing your Mortgage” and getting a “Second Mortgage” are all different names for the same thing. These terms refer to the bank lending you money against the portion of your home that you own.This is called your “equity”. The bank may let you take out a second mortgage to use up some of this equity to pay off your debts. You would then have two mortgages: your first mortgage and a second mortgage which could be your debt consolidation loan. This might be a step to avoid bankruptcy.
3. Consolidate with a Debt Settlement
A debt settlement allows you to settle the debt through a debt settlement company. You gain assistance in ensuring that you are able to pay the debt. Debt settlement is an effective way to get debt collectors off your back and pay the debt. The debt settlement company should negotiate the best settlement rate with your creditors.
What are the advantages of a Debt Settlement?
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There is a middle person professionally negotiating with your multiple creditors
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You only have to make one monthly payment
4. Consumer Proposal
A consumer proposal is an option if your debts does not exceed $250,000. A Trustee, who represents the creditor and is an officer of the court will be required. 4Pillars will work on your, the debtors behalf. Compared to a debt settlement program, proposal is an legal way to deal with debts. Once agreed, the creditors have to back off and you make one payment for all the unsecured debts. No creditor can go against an approved proposal and try to collect an amount.
Bankruptcy should be a last resort option to solve your debt. If these four option do not solve your debt problem, you should reach out a debt consultation.
Image source:freefrombroke.com
