What Alternatives to Bankruptcy are Available if I Can’t Afford to Pay My Bills?
One of the most common questions that we get asked is, what are the alternatives to bankruptcy if I can’t pay my bills?
Many people find themselves in a position where their debt is building up and they can no longer afford to make all of the monthly payments, and they need to find a way out.
Filing for bankruptcy is one option, but it is a drastic one and you should look into the alternatives first.
If you are looking for an answer to the question, what are my alternatives to bankruptcy if I can’t pay my bills, read on to find out everything you need to know.
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Doing nothing may seem like the worst plan, but in some cases, it is actually the best thing to do.
It’s important to note that doing nothing is not the same as pretending that there is not a problem.
You need to be realistic and accept that you have a lot of debts, but you can choose not to do anything about them for the time being.
There are laws in place to protect certain groups from their creditors, and if you qualify for protection, the do nothing strategy can be very effective.
If you have no income and no assets that can be turned into cash, there is not much that your creditors can do.
Pensions are also protected and creditors are not allowed to take that money.
If you do not fall into these categories, doing nothing is not a good strategy for dealing with debts and it will only make matters worse.
Even if you are protected from the law, avoiding debts is not a long term solution.
Borrowing more money may not seem like a sensible idea, but debt consolidation can actually be a very effective way to get out of debt, as long as you do it in the right way.
By replacing your expensive loans from credit cards or loans with a low interest consolidation loan or a line of credit, you make payments more manageable and reduce the amount of interest that you pay.
Unfortunately, many financial institutions in Canada are not willing to lend money to pay other people’s loans, they will only consolidate their own debts.
In some cases, people also end up spending on their credit cards again after consolidating, so they double their debt rather than paying it off.
If you are going to take out a consolidation loan, it’s important to get rid of your cards right away.
Credit counselling is an option that is normally offered by not for profit organizations.
All of your debts will be combined into one single payment that is made to the not for profit organization, usually at zero or very low interest.
This is an effective way to clear your debts, but it’s important to note that it’s a voluntary scheme and your creditors do not have to agree to it.
In most cases, they will agree because it means that you will pay back a larger portion of your debts, but be aware that they could refuse.
In most cases, you pay back around a third of what you would normally pay over 5 years.
Many people assume that this is too good to be true because they can’t understand why a creditor would ever agree to this.
But a consumer proposal is an alternative to filing for bankruptcy and, in most bankruptcies, the creditor receives very little money.
With a consumer proposal, they know that they will at least get some of the money back, so it’s the best option for them.
It is called a consumer proposal because you propose a deal to your creditors and they vote on it.
If 50.1% of your creditors agree, the rest of them are forced to agree as well.
When making a proposal, you have to offer an amount of money that is either equal to what your creditor would receive if you went bankrupt, or an amount large enough to convince your creditors to agree (usually around one third of the total debt).
If you are wondering what the alternatives to bankruptcy if I can’t pay my bills are, these are the most common strategies.
If you are in a lot of debt and you want to know more about debt relief options, get in touch today.
You can reach us on the phone or fill out an evaluation form and we will get back to you.
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