Exploring Other Options Besides Insolvency in Canada
In this dynamic economic condition, it is common for everyone to encounter unpredictable financial challenges occasionally. Overspending, non-budget expenses, unexpected medical bills, or unemployment are some common reasons. And in such scenarios, you find yourself burdened with a substantial amount of debt, and the prospect of filing for insolvency appears to be your only option.
However, in Canada, there are several alternatives available before you declare a default. And it is necessary to check all alternative avenues before abandoning your pursuit of financial freedom.
Here is a detailed guide for you.
Why Should You Consider Alternatives?
During a financial crisis, opting for insolvency may appear the only option, but it comes with significant disadvantages. It can affect your credit score for up to seven years and can significantly reduce your ability to rent an apartment, secure employment, or obtain a loan. It’s worth noting how laborious and challenging the process can be.
Fortunately, there are multiple ways you can opt before declaring insolvency.
Exploring Your Options
Here are some important alternatives to bankruptcy
1. Debt Consolidation
Consider debt consolidation as a viable solution to streamline your debts into a single, more manageable loan that can be paid off in one go. By optimizing your payback procedure and securing a loan with a more affordable interest rate, you have the potential to streamline your finances and potentially reduce costs.
2. A Debt Management Plan (DMP)
Partnering with reputable debt management services that provide credit counselling services could be a prudent decision. Through collaboration, you can create a debt management plan (DMP), negotiate lower interest rates and monthly payments with your creditors, and simplify your repayment process by making a single, consolidated payment.
3. Debt Negotiations
Reducing your existing debt can be as simple as negotiating with your creditors or as complex as seeking assistance from an expert in debt negotiations. The objective is to persuade them to accept a reduced lump sum payment. Always keep in mind that engaging in debt negotiation may potentially affect your credit score in a negative way.
4. Debt Proposal
Through a debt proposal, individuals have the opportunity to establish a formal agreement with their creditors to gradually repay a portion of their debt over a specified period, typically ranging from three to five years. Your assets, like your vehicle or house, are not sold off as in a bankruptcy case. An individual can seek the guidance of a Licensed Insolvency Trustee to help them prepare and file a debt proposal.
Taking Control of Your Finances
Here are a few additional suggestions to help you manage your finances:
1. Effective Budgeting
Creating a well-structured budget that accurately tracks your earnings and expenses is crucial. By doing this, you will gain insight into your financial expenses and find ways to expedite your debt repayment.
2. Maximize Earnings
If you’re seeking to enhance your income, even if it’s just for a short period of time, exploring alternative options would be beneficial. Consider exploring additional employment opportunities, selling any unused items, or discussing the possibility of a salary increase with your current employer.
3. Reduce Unnecessary Expenses
Minimize Your Expenses. It is advisable to avoid accumulating additional debt, exercise restraint in your spending, and explore more affordable alternatives for everyday necessities.
Seeking Professional Guidance
Seek guidance from a reputable credit counselling service without delay. Upon assessing your financial situation, they will provide guidance on a customized plan of action and assist you with debt negotiation. It’s always a good idea to seek help when needed. Achieving financial independence in Canada is possible with the right approach and a willingness to make necessary adjustments.