Are your debts choking and looking for a solution? The ones we have already suggested to you are not enough to get you out? Here are 5 others that could help you! They are more radical, but perhaps the only way to regain control of your finances and fix your debt problem.
5 solutions to eliminate your debts
1. Negotiation with creditors.
You would be surprised at the number of times agreements are possible. You could for example:
- Reduce the interest rate on a loan or credit card;
- Stop interest. Refund the balance due on the day of the agreement without adding additional fees;
- Spread the debt over a number of months x, with monthly or weekly payments fixed in advance;
- Cancel the interest and reimburse only the capital;
Before negotiating you must prepare yourself to demonstrate your good will. Present a realistic plan, specifying the other solutions put in place to make the agreement work.
To increase your chances of success, contact your creditors as soon as a payment is late. You can also seek the help of a budget consultant. This will demonstrate the seriousness of your approach.
- Permits to temporarily solve your financial difficulties if you anticipate an increase in your income.
- Reduce the risk of losing property, or having your wages seized.
- Limits harassment from your creditors.
- Avoid intermediaries.
- You must have enough money to negotiate an agreement that is attractive to the creditor.
- If you have a bad credit history, the creditor could refuse any agreement.
- The new reimbursement conditions can be disadvantageous in the long term. For example, if the interest is maintained or if the repayment period is interminable.
No need to pay $ 1,000 to a financial rectifier to negotiate an agreement for you! Other resources will help you for free.
2. The delivery of property to a creditor
Do you have an installment sale contract, a car rental or a mortgage on your home? You could return the property to the creditor and cancel your debt.
- Eliminates a monthly refund.
- Cancels a debt.
- There may be delivery costs, for example in the case of a car rental.
- The merchant or financial institution must agree to take back the goods.
- Impact on the credit report.
- Is the value of the property lower than the value of the debt? The creditor may obtain a judgment to recover the balance to be paid. He could then seize other assets or your salary.
- Is the value of the property greater than the value of the debt? You will lose the equity that could have been used to pay off other debts.
It is not a solution to be taken lightly – especially with a house. Take advice from a professional before making this choice. You could make your situation worse.
3. Voluntary deposit
This solution consists of paying to the Court of Quebec the garnishable part of your salary. The Court distributes the money among your creditors (certain exceptions apply). Usually it is a measure used temporarily, the time to put in place a recovery plan.
- Protection against garnishment of wages.
- Prevents a single creditor taking over the garnishable part of your salary, leaving you little money to pay off your other debts.
- Reduction of interest payable.
- Can save you from bankruptcy.
- Helps stop harassment of creditors and collection agencies.
- Don’t protect yourself from foreclosure on your home if you have mortgage delays. Just like foreclosure on your car if you have a car loan or rental.
- Unpaid furniture can be seized by the creditor concerned.
- Deposits are paid until debts and 5% interest are fully paid. This sometimes represents a long time.
- The failure rate for this solution is high. The amounts to be paid are high and the repayment period is long.
- Failure to make a single deposit exposes you to seizure of furniture and wages.
- She leaves very little money to live on.
- The file is public.
4. The consumer proposal
It is usually the last solution before bankruptcy. The consumer proposal is made through a trustee, administrator of the Bankruptcy and Insolvency Act. It is an agreement negotiated with all of your creditors to reduce your monthly payments and the total amount to be reimbursed. For example, you could offer to repay 50% of your debts for 5 years, the maximum duration of a proposal.
- Stop the procedures undertaken by your creditors to recover their money (for example, the attachment of your wages).
- Protect your assets (home, car, RRSP, etc.)
- Your debts are erased by a partial repayment if the offer is accepted by the majority of your creditors.
- No interest to pay.
- It puts an end to harassment of creditors and collection agencies.
- The reimbursement is made over a maximum period of 5 years.
- Requires the agreement of the majority of creditors.
- Your credit rating will be similar to that given for bankruptcy.
- You cannot include your secured debts such as a mortgage, car loan, or installment sale. You must maintain these payments under penalty of seizure.
- The monthly payments are generally higher than those to pay in the event of bankruptcy.
The ultimate solution, bankruptcy allows you to free yourself from your debts and start fresh. You assign your seizable assets to a bankruptcy trustee, so that the latter can distribute your assets among your creditors.
- Release of your debts.
- Allow the cessation of all procedures undertaken by your creditors to recover their money (for example, attachment of your wages).
- End the harassment of creditors and collection agencies.
- A secured creditor could leave the property with you, if the monthly payments are maintained and you are not late. This is the case for example for a house or a rental car.
- You could keep your house, if it has no equity.
- The endorsed loans will have to be paid by your endorser. This could cause conflicts or financial difficulties for the latter.
- The monthly payments to be paid to the trustee vary depending on your assets and your income.
- Your access to credit will be frozen during bankruptcy and a note will be placed in your file for a period of 7 years.
- Some debts will have to be repaid after bankruptcy. For example fines; sentences imposed by the court; maintenance debts; alimony; student loans if your studies have been completed for less than 7 years; debts obtained fraudulently or as a result of a false declaration.
As you can see, each solution offers its advantages. Their value varies depending on your personal situation. But no matter which one you choose, you need to identify the causes of your debt and make a budget. This will ensure the success of your recovery plan.