Bankruptcy is a means to an end that enables individuals to gain some financial relief when they are unable to pay their debts. However, this is one of the lowest points of life that a person can face because even before you know it, your debts slowly pile up, and you are frustrated. However, it may not be too late for you. If you have not filed for bankruptcy, there are chances that you can still get out of debt without having to file for bankruptcy. This article outlines and discusses some of the debt reduction strategies through which you can avoid bankruptcy.
1. Liquidate Some Assets
If you have assets that you can sacrifice to save yourself from bankruptcy, it would be an excellent time to sell. Some of the best assets to sell include items such as jewelry, cars, and sometimes houses. Before selling your assets, consider the impact it will have on you. For instance, if you sell your car, how will you get around the city? You can also find how you will sell these items to get the utmost value for them. Avoid taking options such as emptying your retirement account to pay a debt as this will impact your life after retirement.
2. Filing a Consumer Proposal
Another way to go with your debts instead of filing for bankruptcy is to file a consumer proposal. There are tons of detailed resources that address the issues of bankruptcy and how filling a consumer proposal could save you. One of the advantages of taking this option over bankruptcy is that you will not have to surrender your assets. You will not need to carry out any duties required of individuals who have declared bankruptcy. Instead, you will have to come up with a debt repayment plan in which you arrange with your creditors how you will repay whatever you owe.
A Licensed Insolvency Trustee administers the repayment arrangement. Once you are finished paying a portion of what you agree with the debtor, they cancel the entire debt. If you owe less than $250,000, mortgage excluded, and you can file for a consumer proposal.
The first step towards repaying your debts in this way involves assessment and establishing the payment plan. The second stage involves electronically filing your signed documents with the government, so you are protected from creditors. Your creditors then vote yes or no accept or reject your terms, ask for a follow-up meeting after rejecting your or do nothing.
If around 75% of your creditors accept your terms and do not ask for a meeting, your proposal gets automatic approval. When a creditor’s meeting is called, you still have a chance to go through with your payment plan if more than half of them approve it. However, the secret to obtaining a popular vote is to use a trustee when developing the payment plan. With their expertise, most proposals are usually accepted; if not, they understand how to renegotiate the terms of a contract. After this stage, you have to start paying the debts and rebuilding your credit credibility. After three years, the notice on your credit report will be removed.
3. Debt Consolidation
Sometimes, paying a debt becomes difficult because of the interest that has been accrued. If this is the situation you have found yourself in, there is a way you can avoid the debt. Enrolling into a debt consolidation program gives you access to a credit counselor that will work with you to ensure that your debt is paid.
For starters, they will help you with the development of a budget with affordable bill payments. They will also come in handy in negotiating with creditors, so your debt is reduced to make the debt payment affordable according to your budget. They will also pay the money from your insured trust account to your creditors monthly. This combination of steps during a debt consolidation program will help you get rid of debt entirely without filing for bankruptcy.
4. Negotiate with Your Creditors
Bankruptcy is a process that leads to a loss on your side. However, if your creditors learn that you are filing for bankruptcy, they are likely to negotiate with you to find ways to repay the debts without necessarily having to go bankrupt. They find it better to negotiate with you because sometimes, debtors get nothing when a business files for bankruptcy.
Bankruptcy may be one of the most viable options you have. However, before finally deciding to take this big step, you can read this article to see if there are any viable options for you. Through the tips provided above, you can eliminate some of your debt successfully.