Are you about to go broke? It is common for many people to rely on debt, but others can be too overwhelmed by their loans that bankruptcy would be the best option available. Indeed, bankruptcy can give you peace of mind and help you recover financially if used properly. However, the problem with filing for bankruptcy is that it can have severe impacts on your credit score, so you should consider it as the last resort. Before filing for bankruptcy, it is essential to try other alternatives that can save you.
As such, read on to learn ways that you can try to turn around things.
How To Deal With Your Financial Crisis?
As you are now aware, bankruptcy can have long term effects on your credit score. Therefore, it is a good idea to consider possible alternatives available first before filing for bankruptcy. Financial advisors at BankruptcyCanada.com explain different measures that you can take when you want to file for bankruptcy. Essentially, you should have the right information when you are contemplating declaring insolvency.
You need to take your time and make an informed decision. You can talk to a bankruptcy trustee who will give you unbiased alternatives that you can try since they are not emotionally involved. Trustees are interested in helping you get the right solution to your loan problem that you are facing.
If you are experiencing financial distress, a consumer proposal can help in avoiding the bankruptcy route. When dealing with a debt crisis, a consumer proposal is a viable alternative that you can consider over bankruptcy. Creditors will accept consumer proposals because they will get more that way compared to in a situation when an individual files bankruptcy.
Many people choose consumer proposals over bankruptcy because this method of loan repayment allows them to keep their assets. When people file bankruptcy, they can lose some assets, and this is not the case with a consumer proposal. The other rule is that the length of a consumer proposal should not be more than five years. You will also receive a legal order that protects you from the creditor.
The following points are the other advantages of choosing a consumer proposal over bankruptcy:
- You will not pay unsecured debts anymore.
- The trustee will deal with creditors on your behalf.
- There will be no assets lost.
- You get protection from all creditors, meaning that all collections stop.
- You can consolidate all loans into one easy-to-manage payment account.
- You can make adjustments to your payment of the proposal if your situation improves.
- Directors can continue in their positions, unlike in a bankruptcy.
- You can have interest rates above 30%.
A consumer proposal is a viable alternative that can help you avoid filing for bankruptcy. Consumer proposals usually do not take more than five years and all creditors should stop pursuing the debtor once a consumer proposal is filed. However, if the consumer proposal is rejected, the debtor automatically becomes bankrupt.
Try Other Means To Raise Money
If you feel that bankruptcy is not the best option for you to take, you can try other alternatives available to raise the money. You need to consider if your financial crisis is temporary such that you can be able to raise money to repay your debts. If your financial problems are a result of job loss, your situation can improve after a few months. You can get another job, so you should be patient.
You can also sell some of your assets to raise money to pay your debt. It is crucial to identify the assets that you can do without and dispose of them so that you can repay your debt before you are behind on your payments. You should know better how you will reacquire the assets.
Negotiate With The Lender
You can also try the option of negotiating with the lender directly. It is no crime to let your creditors know that you are experiencing financial hardships that can push you into bankruptcy. Some lenders will be willing to adjust your loan repayment plan or lower interest rates if you talk about bankruptcy. Credit card companies are also likely to be considerate since they stand to lose a great deal if you fail to pay them. They may consider a lower fixed interest rate, but your card will be closed.
While declaring bankruptcy can give you peace of mind and financial relief, it also has consequences on your credit record. You may not immediately access any debt until after about 10 years. Therefore, you can try to exhaust other alternatives available that can help you avoid declaring bankruptcy.
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