Bankruptcy Alternatives in Ontario

As more people experience financial difficulties, the number of individuals exploring insolvency options in Ontario continues to increase. Although a significant number of local residents filed for bankruptcy in 2019, there were many more who used alternative debt resolution methods to overcome their financial problems.

If your debts are becoming unmanageable or you’re unable to make repayments, it’s important to seek help from the right sources. When you know what the bankruptcy alternatives in Ontario are, you’ll be well-placed to decide what’s right for you. To make a start, take a look at these top debt solutions now:

1. Debt Management Plan

A debt management plan (DMP) can be an effective way to manage your finances and overhaul your budget. Working with a professional, such as a credit counsellor or a licensed insolvency trustee, to create a DMP can give you the foundation you need to resolve your debt problems.

Acting on your behalf, the appointed professional will contact your creditors and discuss potential repayment plan options. Although you’ll still need to repay 100% of what you owe under a DMP, having longer to make repayments may lower the amount you need to pay each month. Although DMPs don’t generally run for longer than 5 years, you can ask for interest relief and prevent interest from being added to your account while the DMP is active. This prevents your debts from increasing and reduces the total amount you’ll owe.

Once your creditors accept your proposed DMP, you will make the pre-agreed payments to the appointed professional, who will forward them to your creditors.

This option is most suited to people who owe debts to just a small number of creditors. As your creditors will need to agree to your suggested DMP, having a smaller number of creditors increases the likelihood of your debt management plan being accepted.

2. Debt Consolidation Loan

If you have multiple debts, keeping track of them can be time-consuming. When you take out a debt consolidation loan, however, you can pay off your outstanding debts and replace them with one, straightforward loan instead. This simplifies your finances and makes it much easier to manage your debts.

One of the major benefits of taking out a debt consolidation loan is the potential to drastically reduce the amount of interest you’re paying. Credit cards often charge interest ranging from 17-30% APR, for example, whereas debt consolidation loan interest rates can be as little as 5%. Providing the rate of your new consolidation loan is lower than the interest rates of your outstanding debts, you’ll reduce the total amount that you owe.

While a lower interest rate can have a major impact on the amount you end up repaying, a debt consolidation loan doesn’t reduce your actual debts. If you owe a creditor $5,000, for example, you’ll simply be paying them with funds from the consolidation loan and owing the $5,000 to the loan provider instead.

However, debt consolidation loans are consumer financial products, so you’ll need to have reasonably good credit in order to obtain one. Furthermore, you’ll need to have a reliable source of income to prove that you will be able to repay the loan in accordance with the terms and conditions.

3. Debt Settlement

If you’re in a position to offer your creditors a one-off lump sum payment, they may be willing to accept this in full and final settlement of your debt. This can be an effective way to reduce the amount you owe and pay off the debt faster than if you make monthly payments. Of course, most people with unmanageable debts don’t have access to the funds needed to make a debt settlement offer, which means this isn’t an option that’s suitable for everybody.

However, if you do want to use debt settlements as an alternative to bankruptcy in Ontario, be sure to seek professional advice. How the agreement is worded will determine whether it is a genuine full and final settlement or whether the creditor can continue to pursue you for non-payment. By having potential agreements drafted or checked by a professional, you can protect your interests and resolve your debts once and for all.

4. Consumer Proposal

Consumer proposals are one of the most popular bankruptcy alternatives in Ontario. In fact, the number of people making consumer proposals in the region increasing every year. Although a consumer proposal is significantly different from bankruptcy, many people believe it offers many of the advantages of bankruptcy without some of the downsides.

When you file a consumer proposal, for example, you’re able to retain ownership of your assets. Similarly, once a consumer proposal has been agreed, your monthly repayments won’t increase, even if you have a capital or income surplus.

With a consumer proposal, you can drastically reduce your debts. In many cases, people reduce the amount they owe by up to 65-70%, so it’s certainly an attractive option when it comes to resolving financial issues. In addition to this, filing a consumer proposal means that collections activity and wage garnishments will cease. Furthermore, interest can’t be added to your accounts once you file a consumer proposal, so the amount you owe won’t increase.

Consumer proposals can last for a maximum of five years, so they aren’t necessarily a quick way to resolve debt problems. However, the amount you repay in total and the amount you pay every month is likely to be drastically reduced. This means managing your debts becomes far easier and much less of a burden.

Find the Right Bankruptcy Alternatives in Ontario Now

Before you decide which type of debt resolution is right for you, it’s important to speak to someone you can trust. With more people experiencing financial difficulties in Ontario, the need for debt support is increasing. By accessing advice and information from a licensed insolvency trustee, you can find out everything you need to know about debt relief in Ontario.

At Bankruptcy Canada, we’re always on hand to provide the help you need. Our 24-hour helpline makes it easy to get in touch with us whenever you need to, so why wait? Call Bankruptcy Canada now on (877) 879-4770.