Choosing to file for personal bankruptcy usually occurs after one has reviewed the following options and found them lacking:
- Contact your creditors: Explain why you cannot make your payments and suggest an arrangement that could work for both of you. You may be surprised that many creditors are willing to cooperate.
- Debt Consolidation Loan: You can approach a bank or financial institution about combining or “consolidating” your debts into one loan. This creditor pays off all your debts and, in return, you make monthly payments to that creditor. Make sure that you shop around because interest rates vary. Avoid further credit purchases because this could increase your debt load and make the consolidation loan too difficult to handle.
- Informal Proposal: In some cases, we can work with you and your creditors to set up a payment plan that allows you to pay your creditors in an orderly way, thus helping to preserve your credit rating. This operates similar to a debt consolidation loan, except that you do not borrow the money to pay off your creditors.
- Private Debt Counsellors: There are a number of private debt counsellors who will make arrangements with your creditors for you to pay off the indebtedness in full. The counsellor will review your financial situation and arrange a payment program between you and your creditors. A fee may be charged by the counsellor in order to perform this service.
- Consumer Proposal: Under the Bankruptcy and Insolvency Act, a Trustee files a proposal, which is an arrangement between you and your creditors that allows you to pay off only a portion of your debts, extend the time you have to pay off the debt, or provide some combination of both. To be acceptable, you must offer your creditors more money than what they would expect to receive in a distribution under a bankruptcy.
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