Choices for getting out of debt could include any of the following, either alone or in combination with other choices.
Paying your bills as they become due:
That is always the right choice and should always be the first choice, but if you are reading this blog that one might not be working out to well for you. You may have too much debt and be unable to make meaningful payments or have to little income and, well the same thing, be unable to make meaningful payments. But, paying your bills as they become due is always the very best option for you and your family.
Wait for a Statute Bar
If you stopped paying your bills and waited long enough, if the creditors didn’t bother to sue you, they would eventually become statute barred. After two years the creditors would be barred from taking you to court, you’d still owe the money and they could still call in attempts to collect. Interest would continue to accrue, but they would be unable to sue you or garnishee your wages. After fifteen years there would be an ultimate limitation period and there would be no recourse, for the majority of creditors.
Debt Management Programme
Some not for profit credit counselling agencies offer debt management programmes, something of a wolf in sheep’s clothing. In order to provide this service, the agency must be a licensed collection agency. The agency really works for major stakeholders, like the banks who pay them a commission – although for tax avoidance purposes they disguise it as a “charitable donation”. The commission is between 20% and 25% of the monies collected for the creditors and there may also be administrative fees for processing the funds. The impact on a credit report is exactly the same as for a consumer proposal, discussed below.
Only lawyers, licensed collection agencies and licensed insolvency trustees can help you with a debt settlement. Debt settlements work best with statute barred debts because the collectors can’t sue or otherwise enforce a payment regimen. That leaves their hands somewhat tied for collection activity and with little more than hollow threats, therefore it makes sense to close the account off the books for a negotiated value, usually paid as a lump sum.
Consumer Proposals are filed under the Bankruptcy & Insolvency Act and only Licensed Insolvency Trustees can help you file them. There are various debt or credit consulting firms that are sometimes owned by trustees or related parties who profess to be able to help with consumer proposals – but the help they can offer is limited, unlike their fees. Over thee years we have seen some of these companies get paid more for helping with filling out an application in preparation for the trustee than the trustee has been paid for administering the file and negotiating with the creditors.
Bankruptcies the big bad boys of the insolvency world – at least that’s the way that many people view them. In fact, bankruptcies are generally much simpler for consumers than any other solution that could be chosen. Bankruptcies are more work for trustees and provide relatively less revenue than proposals – but they have several advantages including the creditors do not get to vote, they are cheaper and quicker proposals, almost all the time.
Those are summaries of most of the choices for resolving debt problems, call the office at 519-646-2222 to arrange your free confidential consultation to find out which one may be best for you and your family.