What factors are involved in qualifying for a Bankruptcy in Canada?
A common myth about bankruptcy is that anyone who is drowned in unmanageable debt can go for it. However, statistics claim that only 10 per cent of individuals who file for bankruptcy in Canada get approved for it. Factors like a person’s annual income and financial history are thoroughly assessed by a Licensed Insolvency Trustee (LIT) before anyone can declare bankruptcy.
If you are in a situation where you’re unable to qualify for bankruptcy in Canada, take these existing alternatives into consideration:
What are alternatives to bankruptcy?
What is a Consumer Proposal?
A consumer proposal is a legal document that covers an individual’s financial situation. It is presented to creditors as an action plan for paying back debt and might contain a plea to extend the time period you have for paying back money owed. Once a person has dealt with an LIT to develop this proposal, it is sent to creditors to be examined.
Creditors have up to 45 days to either accept or decline the offer. If accepted, an individual is responsible for making payments to their designated LIT, who will act as the financial middleman. Moreover, a person needs to adhere to all of the conditions in the proposal as well as attend credit-counseling sessions.
If creditors decide to disapprove a consumer proposal, statement in the documents could be re-edited and re-submitted or you can go with a debt management program.
What is a Debt Management Program?
With the help of a credit counselor, debt management programs are put together to assist a person to pay off debt. A contract must be signed to ensure that payments are being consistently made to the credit counselor, who will channelize how the money will be paid back to creditors. In some scenarios, the interest rate or fees on unsecured debt may be eliminated or reduced.
Before agreeing to a contract, it’s a good idea to research all programs available in your area to make sure that you’re opting for the one best suited for your financial situation.
What is a Debt Consolidation Loan?
A debt consolation loan is an allowance from a financial establishment that is equivalent to a person’s unsecured debt. This loan allows an individual an opporunity to repay all credit at once, and instead of focusing on several late bills, there’s only one outstanding fee.
After you enter into a debt consolidation loan, all unsecured debts are settled and in return, monthly payments are made to the financial institution instead of creditors. Further, debt consolidation loans usually have lower interest rates compared to what is charged by creditors, which is good for helping someone save extra money.
If you’ve been refused to get financial aid, it’s important to realize the other options that are readily available in every province. In times of financial crunch, there’s no harm in meeting with a professional for advice on what alternative is best for you. Whether it be an LIT or a financial adviser at a bank near you, any step towards managing your debt will get you close to being debt-free. Interestingly, loosening up the debt can affect your credit to an extent. Call Canada Auto Experts at 1-855-550-5565 or click here to see options for rebuilding your credit, especially if you have been through any of the scenarios listed above!