Avoid Bankruptcy through Personal Debt Management

Personal debt management is easier said than done. No person chooses not to pay his or her bills. If you don’t have the money, you don’t have the money. Debt can become unmanageable for so many reasons.

Regardless of the reason, whether you have lost income or you have simply become over extended, all reports indicate that the economy is improving. Canadians are looking for options to deal with debt without sacrificing their dignity and without filing for bankruptcy.

There are pro’s and con’s to bankruptcy. If you have no means whatsoever to pay your bills, are being garnished or have collection agencies after you, bankruptcy may be the best choice. Bankruptcy immediately protects you from your unsecured creditors and stops most collection action. The drawback to bankruptcy is, it is a long process, is often expensive and has a negative impact upon your credit. The choice to file for personal bankruptcy is one that should be considered carefully.

Statistics show that Canadians are looking for other financial choices to pay off debt. The challenge is simple, it seems that no matter where you turn someone has an agenda.

The banks often pay mortgage brokers. The banks promote their products to brokers and different products carry different incentives. The larger the mortgage and the longer the mortgage term, the more the mortgage broker earns from the bank. On that basis, if a small short-term second mortgage is the best solution, a mortgage broker may propose that you refinance your entire first mortgage. Sometimes it is better to pay the mortgage broker fee yourself and negotiate a shorter term more flexible mortgage product.

Many debt companies that promote “debt consolidation” only offer two choices, consumer proposal or bankruptcy. The best way to know if you are dealing with one of these companies is to ask them what options they offer other than bankruptcy and consumer proposals.

Of course, if you turn to your bank and they offer you help at all, it will come in the form of a credit product that yields them the most benefit. Most financial services representatives in banks are paid different incentives based on the products and services that they sell to you.

So what can you do when you need help with personal debt management and at the same time want to avoid bankruptcy altogether? Hire a company that offers a wide range of financial counselling services to help you find a solution to your money problems.

Here are a few good rules of thumb when looking for a good financial advisor:

You get what you pay for! It is better to pay for a service that is impartial and can help you make responsible financial choices vs. trying to sell you products and services.

Do lots of research. If you find a company, read through their website. See how diverse their ranges of services are. For example, debt counselling services that only offer federal government programs as the solution indicate that there is no incentive to encourage you not to participate if there is another option available that they don’t offer. Google the companies’ name to see if they have lots of credible published literature online or search for positive client reviews. Ask lots of questions to ensure that whatever personal debt management program you chose, you have chosen one that gives the most consideration to your credit and future financial goals.

For more information about how to avoid bankruptcy through personal debt management please visit http://www.debtcare.ca/

Avoid Bankruptcy through Consumer Proposals

Many Canadians have learned that they can avoid bankruptcy through consumer proposals.

In the past it has been fairly easy to file a bankruptcy. A first time bankrupt used to be able to qualify for an automatic discharge from bankruptcy after nine months. Last year the bankruptcy laws changed and this has made bankruptcy a less attractive option to deal with debt.

The bankruptcy laws now state that if an individual is assessed to have “surplus income” (income that exceeds what is permitted in bankruptcy) they will not be discharged in nine months, instead they could remain undischarged for up to twenty-one months. If this occurs, the bankrupt will then have to report income to their trustee and make payments in bankruptcy for the full twenty-one months. They will also have to pay the trustee fifty cents on the dollar for each “surplus” dollar that they earn.

This is one of many changes that have changed the way Canadians feel about bankruptcy. To avoid bankruptcy, many are now choosing consumer proposals. This is reflected in the bankruptcy statistics, which show a sharp decline of bankruptcies in Canada thereby leading to an increase in consumer proposal filings.

In a consumer proposal, a settlement is presented to your creditors. Your creditors then have 40 days to accept or reject the consumer proposal. If the majority of creditors accept your consumer proposal, it is bound. Upon receiving the notice of the filing of the consumer proposal, creditors who do not respond will be considered to have accepted the proposed settlement. Once the consumer proposal is accepted, you will pay the trustee a monthly payment for 3, 4 or 5 years, until the amount of the consumer proposal is paid in full. Three years from the date that your consumer proposal is paid in full it will be removed from your credit report.

A bankruptcy trustee will assess what your consumer proposal payment is based on your assets and income. For example, if you owed $25,000 in debt and it is determined that you could afford to pay $400 per/month, a trustee may suggest a proposal paid over 5 years bringing the total you would pay $24,000. Another trustee may recommend that you present a proposal that involves making a monthly payment of $400 over 4 years. This one year difference is the equivalent of a $4,800 savings. The trustee’s objective is to present a proposal that you can afford to pay monthly and that satisfies your creditors. Your trustee will determine how aggressive they want to be.

Trying to negotiate with a trustee in bankruptcy on your own will prove to be fruitless. Most will suggest that the terms they are offering is what you HAVE to pay based on their assessment of your finances. This may lead you to believe that what the bankruptcy trustee proposes is your only option.

A good financial advisor who knows many trustees in bankruptcy can help you structure your financial information. They will work with you to determine what a fair and affordable proposal is before you even speak with a bankruptcy trustee. They can also guide you through the process, which includes being present at all of your meetings with the trustee. For more information about how you can avoid bankruptcy by choosing a consumer proposal visit www.debtcare.ca