Debt consolidation is a great tool for simplifying debt repayment. Consolidating your debt means combining all your bills into one monthly payment. It also typically saves you money on interest charges as well.
Debt consolidation can be difficult for people with a low credit score to be approved for though. Debt consolidation relies on the person being able to pay on time and in full each month.
While debt consolidation makes keeping track of your financial obligations easier and can save you money on interest payments, it does not lower the amount of money you have to pay back. Only consumer proposal or bankruptcy can lower your overall debt level and reduce how much money you need to pay back.
A consumer proposal is a debt reduction plan administered by a Licensed Insolvency Trustee who renegotiates your debt with your creditors. In some cases, a Trustee can reduce your unsecured debts, from around 30-80%, and provide a great deal of relief from debt, automatically lowering your monthly debt repayment.
Consumer proposals also stop legal action being taken against you and stop debt collectors from calling you. A consumer proposal can only be filed on your behalf by a Licensed Insolvency Trustee.
To qualify for a consumer proposal, you must have at least $1,000 worth of debt that is unsecured. Unsecured debt is debt not backed by an asset and includes things like credit cards, student loans, payday loans and personal loans.
Secured debt includes things like your mortgage or car payments. These cannot be included as part of a consumer proposal. Your debt also cannot be more than $250,000 in order to qualify for a consumer proposal.
Both consumer proposals and bankruptcy are effective solutions for high levels of debt but have many differences. Consumer Proposals allow you to keep all your assets while you pay back a portion of your debt.
Declaring bankruptcy will release you from almost all of your debts but can require you to surrender assets. Only a Licensed Insolvency Trustee can file a consumer proposal or bankruptcy on your behalf.
If a consumer proposal is not accepted it does not mean you cannot get one. It is possible to redo the terms of the proposal and resubmit it to your creditors. It often means increasing the monthly payments or extending the repayment period. There are other options as well, such as filing for bankruptcy.
It is rare that a proposal is not accepted. Our team takes the time to fully assess your financial situation and will only submit a proposal if they believe it will be accepted by your creditors.
In bankruptcy you are released from most, and in some cases, all of your debts. You may need to sell some assets as part of the bankruptcy but there are many exemptions that often allow you to keep your car and your home. The vast majority of homeowners who declare bankruptcy keep their home.
A first-time bankruptcy can last anywhere between 9 to 21 months, depending on the circumstances, like your income. Bankruptcy will erase all your unsecured debts and is only used as a last resort. Many people think they need to declare bankruptcy but discover a consumer proposal can be used instead.
If you do have to declare bankruptcy though your Licensed Insolvency Trustee will be there to guide you through the whole process.
Yes, it is possible to rebuild your credit after a bankruptcy and be approved for loans in the future. There are ways to help build credit right away after beginning the bankruptcy process, such as using a secured credit card.
A secured credit card is a credit card attached to a security deposit you make. If you put a deposit of $500 in, you have a $500 limit on the credit card. Using a secured credit card responsibly and making payments on bills on time and in full will begin to rebuild your credit score.
Another way to rebuild credit is to pay all your bills on time and in full. Utility bills, phone bills, every bill. Doing so will improve your credit score over time. Be patient though, building credit is a lifelong process and does not happen quickly. Speaking to your Licensed Insolvency Trustee about ways to build credit can help ensure you’re taking the right steps.