he word bankruptcy does not have good connotations and many people dread even the consideration of it. While it doesn’t have to mean financial ruin, there are other options that can help eliminate your debt and let you get back to living your life, without worrying about insolvency.
If you’re looking at the possibility of declaring bankruptcy, your first action should be to talk to a credit consultant or a trustee in bankruptcy. That person will be able to advise you on the course of action best suited to your individual situation. If it does come time to declare bankruptcy, only a licensed trustee can file for you.
But in many cases, restructuring is the answer to avoiding bankruptcy. A consolidation loan or renegotiating your mortgage to pay off your debts may be a possibility; both will likely result in monthly payments that are lower than your current mortgage + servicing your debts. If that option is not available, you might be able to negotiate with your creditors to take less in repayment than the amount you currently owe them. In this scenario, your debts are considered paid off in full when the negotiated amount is paid. It’s called a consumer proposal, and a credit counsellor can help you.
A consumer proposal is a negotiated payment plan to pay off a fraction of your debt. Say you owe $30,000 on credit cards (or personal loans or any other unsecured debt). If you negotiate to pay $12,000, the company may accept your proposal and write off the rest of the debt (because it would be likely to receive less than that if you were to declare bankruptcy). Structured properly and negotiated professionally, few consumer proposals are declined.
A consumer proposal is a legally binding agreement with your creditors, governed by the Bankruptcy & Insolvency Act of 1985. In a proposal, both parties agree to resolve their debt issues in a prescribed manner over a set period of time. In many cases, interest payments stop and the consumer is left with a manageable monthly payment over a number of years, at which time the remainder of the debt is written off by the c
If a secured debt, such as a mortgage, is your biggest financial burden, a consumer proposal won’t help, and not even a bankruptcy will immediately solve your financial problems. Usually a secured debt can be repaid by selling the item (such as a home) and using the proceeds to repay the debt. If you’re at the point where making such a hard choice seems like your only option, talk to a credit counsellor to