Bankruptcy Alternatives in Newfoundland
With more people faced with unmanageable debt, an increasing number of local residents are being declared insolvent in Newfoundland and Labrador, and are looking for bankruptcy alternatives to deal with their insolvent status.
While many people try to avoid filing for bankruptcy, sometimes it is the most viable way to resolve on-going financial issues.
Due to the serious consequences associated with bankruptcy, however, you should always consider other options that may be available to you.
As the need for help with debts rises, individuals, families and even businesses are actively looking for support and guidance.
Fortunately, there are a number of bankruptcy alternatives in Newfoundland.
To find out how you could resolve your debt issues and repair your financial standing, take a look at the alternative forms of debt resolution that are open to you:
1. Informal Debt Settlement
If you approach your creditors and ask them to issue new repayment terms on an outstanding debt, it’s known as an informal debt settlement.
These types of agreements can take various forms, so there’s no ‘one-size-fits-all’ style of informal debt settlement.
In some cases, you may want to ask a creditor to offer you a lower interest rate, whilst other cases may benefit from a lower minimum repayment.
Informal debt settlements are voluntary on both sides, so your creditors don’t have to accept any requests you make or change the terms of your agreement in any way.
However, approaching your creditors and discussing your situation is usually the first course of action someone should take if they begin to experience financial problems.
You may even find that your creditor is willing to accept a one-off payment as a full and final settlement.
This means that you’ll pay a reduced sum to clear the debt and avoid having to pay any repayments in the future.
While you’ll need to find the money to make this payment, this could be an effective way to reduce your liabilities permanently.
2. Debt Management Plan
A debt management plan (DMP) is usually agreed with assistance from a credit counsellor.
A trained professional will work with you to assess your finances and determine how much you can afford to pay your creditors each month.
They will then assist you in communicating with your creditors and laying out the terms of your proposed plan.
Often, a debt management plan involves some form of debt consolidation.
Instead of paying each creditor individually, for example, you might make a single payment to the credit counsellor, who will then distribute it to your creditors in accordance with the agreed debt management plan.
When negotiating a debt management plan, you can ask your creditors to reduce the outstanding amount owed, lower your interest rate or stop adding interest on to your account entirely.
Although they don’t have to agree to this, it’s worth asking whether this type of reduction is available.
3. Debt Consolidation
Although debt consolidation can take place as part of a debt management plan, you can also choose to consolidate your debts without assistance from a creditor counsellor.
In fact, many high street lenders offer a range of debt consolidation loans, so you won’t need an independent third-party to act on your behalf.
Providing you can obtain a consolidation loan; you can then use the funds to pay off your existing debts.
Although you will still need to make repayments on the consolidation loan, you will only be paying one credit each month, rather than several.
Furthermore, securing a debt consolidation loan with a lower interest rate than your existing debts can mean you pay back less overall while also paying less each month.
Although debt consolidation is one of the more popular bankruptcy alternatives in Newfoundland, you do need to have a relatively good credit rating in order to be able to obtain a debt consolidation loan with a low interest rate.
This highlights why it’s so important to take a proactive approach to financial issues as soon as they arise.
Waiting for too long means your credit rating could be damaged, which may make it harder for you to access some debt solutions.
If you can’t obtain a consolidation loan as an individual or with your partner, however, you may be able to secure a loan if you have someone who is willing to act as a guarantor.
This gives the lender more security and means they are far more likely to lend to you.
4. Consumer Proposal
A consumer proposal is one type of insolvency and, as such, it must be handled by a licensed insolvency trustee (LIT).
He or she will ensure the process is handled fairly and will be available to answer any questions you may have.
You’ll need to be willing to disclose financial information to your LIT, although you can be assured that it will be held in the strictest confidence, but you won’t need to communicate directly with your creditors.
In fact, your licensed insolvency trustee will communicate with creditors and the court of bankruptcy on your behalf, so filing a consumer proposal is relatively easy.
When you make a consumer proposal, you can reduce the amount of debt you owe by up to approx. 70%, as well as stopping interest from being added to your accounts.
In addition to this, creditors won’t be able to pursue you for additional payments, nor will they be able to garnish your wages.
Unlike bankruptcy, filing a consumer proposal doesn’t mean you have to relinquish ownership of your assets.
Due to this, many people prefer to file a consumer proposal rather than a bankruptcy.
However, consumer proposals can last for a maximum of five years and do have a significant impact on your credit rating, so it’s important to understand exactly how the process works before you commit to moving forward.
Explore Bankruptcy Alternatives in Newfoundland Now
If you’re experiencing financial difficulties and you want to find out more about the debt solutions that are available to you, we can help.
Contact Bankruptcy Canada now on 877-879-4770 and start moving towards a debt-free future today.