What Options Are Available Before Bankruptcy Or A Consumer Proposal

2019-06-25   minute read

Linda Paul

Debt Solutions

People often worry meeting with a Licensed Insolvency Trustee means they’ll be forced into Bankruptcy or a Consumer Proposal and not offered any other options. Nobody wants to be pushed into a decision that isn’t right for them. And when it comes to the stressful and emotionally laden topic of debt, the last thing someone needs is nudging them somewhere they’re not comfortable with or not prepared to go. 


Options are Our Calling Card

Rest assured, a Licensed Insolvency Trustee’s duty is not to be pushy. In fact, we have a legal and moral obligation to discuss all your potential debt solutions. Our only goal is to help you make the best and most informed choice for your individual situation. That could include Bankruptcy or a Consumer Proposal – but it also might not.   

So, before you pick up the phone, let’s look at some of the other potential options you and a Licensed Insolvency Trustee might consider during a Free Confidential Consultation.

Do Nothing

You always have the option of doing nothing. Though this isn’t something we ever advise. Pretending your debt isn’t a problem will not fix your situation. Truthfully, it’s almost guaranteed to make it worse.

Your creditors are extremely skilled at getting payment from you, one way or another. At best, they will send your file to a collections agency who will call you multiple times a day and send you threatening letters in the mail until you finally pay up. At worst, they can obtain a court order for wage garnishment, asset repossession or a lien against your home. And if you’re in the unfortunate position of banking with the same institution you owe money to, they may not even require a judgement to pull money from your accounts.

Invariably, your credit will also continue to take significant hits month after month until your payment situation returns to normal. One way or another, you’re going to have to face your debt problem head on.

Sell Assets

Liquidating your assets to settle debts is certainly an option. But you’ll want to seek the advice of a Licensed Insolvency Trustee before doing so. The Bankruptcy and Insolvency Act has specific provisions to protect portions of your property if you were to file a Bankruptcy or Consumer Proposal, potentially making the more cost-efficient option.

Real Estate
Asset exemptions may protect much of the principal value in your home during a bankruptcy. Also, do you know how much equity you have available? If it’s enough for you to remortgage, you may be able to pay off your debts while avoiding having to sell.

If your debt load is relatively low, accessing some investments might be an option to avoid filing a bankruptcy. HOWEVER, you should know your RRSPs are exempt from seizure in a Bankruptcy – save for anything you’ve contributed within the last 12 months.

Many people cash in their retirement savings in desperation assuming they would lose them in a bankruptcy anyway. After taxes and significant early withdrawal penalties, they barely make a dent in their debt and have nothing to fall back on in the future.  

Before selling anything, speak with a Licensed Insolvency Trustee. They will help you understand the costs, benefits and other opportunities available to achieve the best long-term outcome. 

Borrow the Money

The idea of borrowing more money when debt is the primary stressor in your life can often feel stressful and seem counterintuitive. But there are several valid reasons to explore this option.

Consolidation Loans
Provided the interest rate is low and the payment terms fit your lifestyle and budget, consolidation loans may help alleviate your debt problems. This would involve bundling numerous high interest debts from multiple creditors into a single less expensive monthly payment with longer payment terms – potentially revealing a light at the end of the debt tunnel.

Family and Friends
Many people tell us they’d never have scheduled a Free Confidential Consultation if borrowing money from family and friends were an option – but it is still an avenue we need to explore. You may be surprised at their willingness to help.

At best, they may be willing to extend a personal loan with better repayment terms than other creditors or financial institutions. If you already owe them money, they may even be willing to forgive all or a portion of the debt – especially if its old or minor.

The worst that can happen is they say no. But even then, at least you know you’ve explored the possibility.

Beware of “Debt Management” Companies

There is no shortage of predators looking to cash in on your debt stress. Most people are aware of so-called ‘predatory lenders’, like payday loans and other high-interest, short term options. But how about those billing themselves as ‘debt management’ or debt settlement’ companies?

These organizations make outrageous claims – promising to negotiate with your creditors and significantly reduce your debt, eliminate your ongoing debt stress within days and help you avoid bankruptcy. But as good as that sounds, they are not licensed or regulated by the federal government and have zero authority – legal or otherwise – to live up to their claims.

Committing to a program with one of these debt management companies usually makes a debtor’s financial life much worse. They often require high monthly payments and, with no legal protection from creditors, fail to eliminate stressful collections calls and other payment enforcements. Rather than finding debt relief, these flimsy debt reduction plans often add more stress and confusing to an already untenable situation. 

Do Your Homework
With that said, not all debt settlement companies are the same. If this is a direction you choose to follow, do extensive research and understand what you’re signing up for before committing to anything. Licensed Insolvency Trustees can determine whether a debt management program is right for you. And if so, we will refer you to a reputable, regulated organization who will provide accurate information and advice.   

You Have Options

Licensed Insolvency Trustees are extensively familiar with the complex and multi-layered world of debt. Every day, we work with people from all backgrounds and every imaginable debt challenge you can think. We also offer a no obligation Free Confidential Consultation to every debtor to gather the facts and numbers of your unique situation – and to better understand your challenges and short- and long-term goals.

We will help you understand every available option to achieve the debt relief you want and need. While you may benefit most from a Life-Changing Debt Solution, such as a Consumer Proposal or Bankruptcy, we will also investigate whether potential alternatives are possible or reasonable. We want you to have all the information you need to make a qualified and informed decision about your best path toward the financial fresh start you need and deserve.

Ultimately, you choose the direction you want to go. We’re just here to help you draw the map and plan the most comfortable and efficient route possible. Call us now and begin your debt-free journey today.

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