Every person’s financial problem is unique; it can be difficult to find a debt relief solution that can help you get out of your debt burden. Debt burden often leads you to the easiest way of filing bankruptcy, but there are many alternatives to debt settlement that people are unaware of. Non-bankruptcy alternatives can help you control your debt and be financially strong. This blog explores non-bankruptcy alternatives, their pros and cons, to help you make an informative and calculative choice.

Why Avoid Bankruptcy?

Bankruptcy may be a simple solution to debt, but it has consequences, such as:

• Damage to credit score up to seven years
• Potential loss of assets (Car\Home)
• Difficulty to claim a loan or any other credit in the future
• In extreme conditions, need to face a court case

For these reasons, it is wise to explore other non-bankruptcy alternatives.

Top Non-Bankruptcy Alternatives

1. Consumer Proposal

A Consumer Proposal is the only debt relief program run by the Canadian government. It is a formal, legal debt settlement program available under the Bankruptcy and Insolvency Act. It can only be filed through a licensed insolvency trustee.

2. Debt Management Plan (DMP)

A debt Management Plan is arranged through a Credit Counselling Agency to help individuals. They work directly with the creditor to reduce the interest rate and create a single manageable payment plan.

3. Debt Consolidation Loan

A Debt Consolidation Loan is provided by banks, credit unions and many online lenders. It will combine multiple high-interest debts into a single low-interest loan. It can be a good credit card debt solution as long as it deals with all outstanding debts.

4. Debt Settlement

Debt Settlement is done by you or by hiring a debt settlement agency to negotiate with creditor to reduce debt amount. It is ideal for those who don’t want the negative credit impact on their credit score.

Pros and Cons of Non-Bankruptcy Alternatives

Pros

• Most non-bankruptcy alternatives don’t have the long-term negative effect on credit score that bankruptcy has.
• Unlike bankruptcy, these options don’t involve selling assets like a home or car.
• Options like debt management and consolidation can reduce the overall amount of interest and make it easier to repay debt.
• A credit counselling program often provides financial education, which can help prevent future debt problems.

Cons

• Many non-bankruptcy solutions require a long-term commitment, mostly 3-5 years.
• These alternatives help to manage debt, but they don’t always reduce the main amount owed.
• Some solutions require a good credit score to get favourable terms.
• If your debt is too high or you have been way behind on payments, these options may not provide relief.

Comparative chart of Alternatives

Points to keep in the List

Before searching alternatives that suit your financial condition, keep this current affairs point in your check list:

Economic Condition: Interest rate and job markets can influence the effectiveness of this option.

Agencies/Advisers: Choose a reputable credit council agency with experience in debt relief. Check on Government approved agencies or councillors.

Debt Settlement laws: Many Frauds has happened; be aware of state-specific regulations regarding debt settlement companies.

Taking Decision

The debt relief option depends on an individual’s financial conditions. Bankruptcy is an easy way to wipe the slate clean, but consequences might leave you behind in financial terms. Alternatives to debt settlements can help you to improve your financial condition by reducing debt interest, improving your credit score and achieving financial goals.

It is always helpful to consult with expert; a financial adviser can give you more punctual guidance. Our trusted financial adviser from Credit720 can guide you through your journey to healthy finance.