Are your struggling with debt? Are you having trouble paying your bills each month? If you are looking for debt relief but would like to avoid bankruptcy you do have options. While there is no easy quick fix, there are debt relief solutions that will work in your situation. Learn about all of your alternatives to bankruptcy so that you make the right decision. Then talk to a trustee in bankruptcy to discuss how you can avoid bankruptcy. A trustee in bankruptcy has the experience and knowledge to help you understand ALL of your options. They will review your sitation with you and explain how each of these options can help.
1. Make A Budget
The first on our list of How to Avoid Bankruptcy strategies is household budgeting. Managing your personal finances with budgeting can be an excellent way of reducing your debt: you may be able to cut back on your expenses enough to allow you to pay all of your bills each month. If you can, consider selling some assets. By selling your home and moving to an apartment, your living costs may be reduced. A real estate advisor can give you a market value appraisal on your house to determine if this is a logical course of action.
2. Debt Consolidation
Another one of the alternatives to bankruptcy is debt consolidation: If your net worth statement indicates that you have a lot of high interest debt, such as credit card debt, you may want to try to obtain a debt consolidation loan from a bank, credit union or a mortgage broker.
You would use the debt consolidation loan to pay off all of your high interest debts (in other words, to eliminate your credit card debt) and to consolidate your debts into one: you would end up having only one monthly payment, at a lower interest rate, and that payment would be lower in amount than your existing payments together (although, you may end up paying for a longer period of time).
Debt consolidation is most successful when you meet the following conditions:
- you own an asset, such as a house or car;
- the asset is not fully encumbered, meaning the asset can be used as security for the loan; and
- you have a good job, and can therefore repay the debt consolidation loan.
3. Debt Management Plan
A debt management plan is a service provided by the Ontario Association of Credit Counselors. These are non-profit agencies created to help individuals experiencing serious money problems and financial distress.
With a debt management plan you make a monthly payment, in which case the credit counsellor distributes the money to your creditors.
4. Informal Debt Settlement
Another option may be a debt settlement. In a debt settlement, your counsellor typically advise you to stop paying your bills and to make payments into a ‘debt settlement fund’ and when this fund is large enough your counsellor will attempt to negotiate lump-sum settlements with your creditors.
5. Consumer Proposal (Proposal to Creditors)
If you have too many creditors for a debt management plan, and none of the other alternatives to bankruptcy listed above work for you either, then filing a consumer proposal through a licensed consumer proposal administrator might be just the option you are looking for: the one that will get you through your debts and help you avoid bankruptcy.
In a proposal, all creditors receive payments, and in return you are allowed to keep your assets, such as your house or your car.
What Do I Do Now?
Regardless of your situation, if you have a positive net worth, you probably have a chance to avoid bankruptcy by opting for one of the available alternatives to bankruptcy. It is important that you deal with your debt problems as soon as possible to prevent your situation from worsening as time goes on.
We recommend you arrange for a free, no obligation in-person consultation with a licensed Trustee. This initial, no-obligation consultation will help you understand all of your options.