How to Get Out of Debt With a Repayment Plan
If you can’t pay your bills then you need to know that you are not alone.
Thousands of Canadians file for bankruptcies, consumer proposals and insolvency claims every single year.
So many people find that their bills get ahead of them and find that they end up paying more in interest than they do their debt.
If you want to stop this from becoming an issue, then it is possible for you to get out of debt if you know the steps you need to take.
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The great news is that there are some very good options available to you if you want to try and get out of debt.
Millions of Canadians explore these options every single year and they find that they are way better off as a result.
For this reason, if your debt situation somewhat worries you, then you may be able to get everything under control if you simply get a little help.
Learn Better Money Management
One thing that you can do is create a budget by listing all of the monthly expenses you have.
Analyse your budget to see if it is possible for you to raise your income or even lower your expenses.
You may surprise yourself that when you write everything down, you can see ways to economise your money without having to worry about impacting your lifestyle in general.
Realising that you are buying a lot when you don’t need to is also not necessary.
Impulse buying might feel good, but at the end of the day it could impact your finances far more than you realise.
When you have effectively reduced your expenses, you can then use the cash that you have spare to try and free up capital.
You can then use this money to repay some of the debts that you have.
Now is the time for you to stop using your credit cards so that you can focus on paying down your debt.
When you do this properly, you can then rebuild your credit rating and you can also use them way more responsibly.
It is possible for you to get some help with this if you go to a credit counsellor.
Get a Bank Loan
If you are able to qualify for a debt consolidation loan, then this might be able to help you far more than you realise.
You will be able to use it to replace your unsecured debts with a single consolidation loan and when you do this, you can combine everything into one payment with a much lower interest rate.
In some instances, you can take advantage of a lower payment period too.
If a lot of your debt is tied up in high-interest credit cards, then the lower interest of the loan will make it much easier for you to get back on track.
Constructing a debt management plan will also assist you if you get the help of a credit counsellor.
A credit counsellor can help you to build good money management skills.
If you look at a typical plan, you will see that it has a minimum monthly payment, a low-interest rate and longer to pay.
Orderly Payment of Debts
If you live in Saskatchewan, Nova Scotia, Alberta or Prince Edward Island then you may qualify for this program.
This is an arrangement that can be made with your creditors so that you can make a single monthly payment which is geared to whatever you can afford.
The program will normally provide you with very low-interest rates.
You will gain protection from legal actions and you will also get extensive help with your financial skills.
If you feel out of options and you do not live in any of the listed areas, then you can find some other options below:
An insolvency trustee will be able to help you with this.
They can help you to file a consumer proposal to all of your creditors.
When you do this, you will be able to make set payments for up to five years.
The payments will be distributed to your creditors.
It’s important to know that a consumer proposal is a fantastic alternative if you believe that you have more debts than you can handle, but are still bringing in a stable income.
The Trustee will meet up with you and they will determine whether or not a consumer proposal is right for you.
As soon as the consumer proposal is filed, your creditors will then not be able to take you to court and they won’t be able to garnish your wages either.
Your creditors will have 45 days in which to accept your proposal.
It’s important to know that most proposals are in fact, accepted.
Once you have been accepted, you will then have a legally binding proposal, and this will stop any legal action against you.
With a consumer proposal, you won’t have any interest on your debt, and you may even find that you end up paying less than the full amount owed.
This does of course, depend on your resources.
Creditors would much rather accept a deal where they get part of the money as opposed to none of it if you end up filing for bankruptcy.
Why should you Get a Consumer Proposal?
One of the main benefits of getting a consumer proposal is that all of your assets will be protected.
You will keep any tax refunds, investments and even equity that is in your home too.
You will also avoid surplus income.
When you go through bankruptcy, the more you earn, the more you pay.
When you go through a consumer proposal, you will have fixed payments that never actually increase.
If you know that your income is going to increase, then you would be better off with a consumer proposal rather than a bankruptcy.
In a consumer proposal, you will need to negotiate to repay a portion of your debt.
It’s really not uncommon to see debts fall by up to 70% of the amount that is due.
A consumer proposal is easily one of the best and also one of the safest options that are available.
Your interest will stop, and you may even find that you are able to save a huge amount when compared to a debt consolidation loan or even a second mortgage.
As the legal process under the Bankruptcy and Insolvency Act progresses, you will be given creditor protection.
You will be able to put an end to those wage garnishments, and you will also be able to carry on with your life as normal.
When your consumer proposal has been approved, it is then binding.
If you feel as though you want to repay what you can then a consumer proposal option is certainly something that you should look into.
It will give you a good amount of protection and you may even find that you are able to take advantage of significant savings as a result.
File for Bankruptcy
Bankruptcy in Canada is another option.
If you are unable to pay even a small fraction of what you owe, then you can choose to file for bankruptcy.
Bankruptcy is stressful and it is a long process, but it will give you a fresh start financially.
At some points, you may become so overwhelmed that you stop paying your bills altogether and carry on this way.
You may find yourself not opening your bills, not answering the phone and dealing with a lot of guilt.
Avoiding your creditors will make the entire situation worse.
You may be hoping for a windfall that is never going to arrive.
If you stop paying and you have a good history, then your creditors might just send you a reminder letter politely asking you to make the repayment.
If you have missed two payments, then you will receive a letter that is much more strongly worded.
After three missed payments, your creditor might start enlisting the help of a collection agency.
They will then press you for payments.
They will use a variety of tactics to try and get the money out of you.
If you do not pay, then even stronger methods will then be used against you.
This can include wage garnishments or even liens against your property.
You don’t want to be in a situation like this, so it is imperative that you do everything you can to try and set up a consultation with an insolvency trustee.
When you do, they can then give you some advice on your behalf and they can also give you some direction on your options.
At the end of the day, setting up a get out of debt repayment plan doesn’t need to be difficult, especially when you have the right advisor working by your side.
Contact Bankruptcy Canada by phone or by email to find out more.