Consumer Proposal
No problem is without solution, and the burden of debt is no exception. Unfortunately, many of those who find themselves in debt fail to adequately educate themselves on the options available to them. This lack of education and research often leads to many Canadians filing a claim of personal bankruptcy. While this is one method of eliminating the strains of debt, it is not the only option and should be considered only as a last resort. There are three viable alternatives that should be explored prior to the consideration of a claim of insolvency. They are (from least to most beneficial):
A. Debt Consolidation Loans: By taking advantage of a debt consolidation loan those in debt are given the ability to reduce the amount of money they pay each month by combining each of their debts into a new loan. The main drawback to this form of debt relief is the need to obtain more credit. Often times it is difficult for those in debt to obtain an interest rate good enough to make consolidation a worthy option.
B. Debt Negotiation and Settlement: Negotiation of one’s debts is becoming a popular bankruptcy alternative among Canadians; one that in most cases produces favourable results. Through effective debt settlement and negotiation, those with an exhausting debt load are given the oppourtunity to alleviate a significant amount of stress through a reduction in their on-going monthly payments, fees and interest. Under a debt settlement, creditors agree to accept a lesser amount than the balance outstanding and in many cases will agree to repayment via installments. It is not uncommon for debts to be settled at less than 75% of the amount owing. In order to qualify for a debt settlement, the debtor must have a total unsecured debt value of more than $10,000.00.
C. A Consumer Proposal: For those with financial difficulties who wish to avoid filing bankruptcy and possibly losing their assets or having their wages garnished, the most beneficial solution comes from filing a Consumer Proposal. Under a proposal, a debtor seeks the advice of a trustee and undergoes stringent financial background and budget interviews to determine how much he/she can afford to pay on their existing debt. Once the financial numbers have been formulated, they are then submitted to the creditors for review. A proposal will allow for substantial financial savings, while still honouring financial obligations. It is possible to begin rebuilding credit worthiness almost immediately after the terms have been met.
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