Facing debt you cannot afford to pay is a scary proposition. Perhaps your income or your life circumstances have changed. Maybe you’ve faced personal hardships. No matter what the reason for your accumulating debt, there are ways to repair the situation without filing for bankruptcy. Many fear this is the only solution when, in reality, it should be your last resort. Keep reading to learn about four alternatives to bankruptcy.
1. Sell Your Assets
Depending on the amount of debt you owe, it may be possible to sell off some of your possessions to raise the money you need to pay your creditors. Even if you aren’t able to completely pay off your debt, taking steps to make partial payments can go a long way toward creditors’ willingness to work with you. It could also benefit your credit rating. There are some considerations to take when going this route. It doesn’t make sense to sell off all your assets. After all, you need some possessions to live. In addition, it probably doesn’t make sense to sell things at a price that is too far below their value. In some cases, it may be better to hold onto what you already own and look to other options to better manage your debt repayment.
2. Take Out a Consolidation Loan
Debt consolidation is an option that can help you to avoid bankruptcy. It can even restore your credit rating over time. This approach allows you to combine all of your debts into one simple loan. The loan is used to pay off your creditors is structured in such a way that you can pay it off slowly over time. This gives you some breathing room, as the monthly payment on your consolidation loan will be less than the cost of paying off your creditors. The interest rate on this loan will also likely be less than your past debts. Some companies can facilitate this process for you. For instance, Bromwich and Smith, which specializes in debt consolidation in Calgary Alberta, can help you figure out what options you have. They can tell you whether your credit rating is strong enough to qualify for this kind of loan and whether a co-signer is necessary. If you can secure a consolidation loan, you’ll no longer need to worry about fielding phone calls and other debt collection efforts. The new, more affordable consolidation loan lets you pay off past debts while enjoying your life and working toward improving your financial future.
3. Make an Informal Proposal
One creative way to avoid bankruptcy that many may not have considered is to make informal proposals with your creditors. When it comes down to it, most creditors would rather receive some of the money they are owed, rather than none at all. It may benefit them to compromise on your debts rather than have you declare bankruptcy. An informal proposal involves approaching each of your creditors to explain your current hardship and to ask if they would consider accepting a lower amount than the total debt. It is wise to first talk with a financial professional for advice on how best to approach your creditors to be sure you understand the process and that you end up with the most favorable negotiation possible. It’s also important to learn how to be sure you are released from the remaining debt when making a settlement proposal.
4. File a Consumer Proposal
A consumer proposal may be a better route to take because it is made through the Bankruptcy and Insolvency Act. When the majority of your creditors accept a formal proposal, it is then official and holds all creditors responsible for these terms. If your creditors don’t accept your consumer proposal, the action will at least buy you some time. Filing an official proposal temporarily prohibits creditors from taking legal action to collect on money owed. You do need to understand that there are certain types of debts like alimony or maintenance that can’t be applied to a proposal. You’ll need to acquire a bankruptcy trustee for this filing, and you will see an R7 on your credit rating for the time it takes you to pay off the proposal, plus three years.
Now that you know some alternatives to filing bankruptcy, you can take action to pursue a repayment path that works for you. Consider bankruptcy only as a last resort.