People struggling with debts are usually under a lot of anxiety and stress from just thinking about how they will repay them. Well good news: there are more than a few options that might work for you. Each of these options will vary for each person with different situations therefore it is only wise that you take the time out and consult a licensed insolvency firm or consultancy to discuss all your options first and then plan your repayment options accordingly. Your options include:
When discussing all debt repayment options, it is only wise to start with the most basic one: bankruptcy and work our way through. This type of debt repayment method involves minimum obligations and money that the creditors are likely to receive once the person files for bankruptcy. Usually people have to repay a very little amount of money to attain relief from their debts.
2. Consumer Proposal
The No.1 alternative to bankruptcy, consumer proposals allows a settlement offer with the creditors to repay a portion of your debt over a fixed period of five years. Once you pay off that fixed portion of your debt to your creditors, you are a free man; the remaining debt will be released. But the creditors must be offered or be able to receive much more than they would have received in a bankruptcy. If majority of the unsecured creditors approve of your consumer proposals, others too have to comply with it in case of few exceptional debts.
3. Debt Management Plan
Debt Management plan (DMP) is a viable option to repay debts. You simply need to consult your certified non-profit counselor if you can keep up with a budget with reduced interest rates. Debt Management Plan will help you pay all your debts in a period of a five years with reduced or no interest at all. In case your debts are tax debts, DMP will be of no help.
Consolidation may seem like a good idea if you are overburdened with debt. In consolidation of debts, the bank usually lends enough money so that you can combine all your debts into one with lower interest rates. This means reduced monthly payments, making the debt more affordable than before and additional repayment duration. However, this may not be an option for those who already have a bad credit rating.
5. Sell Assets or Liquidate
You may have sufficient assets to sell to pay off your debt but you may not be willing to do so, especially if it means selling your house and uprooting your family. Not only that there are other things to consider when selling assets such as home since there are possible tax consequences and their long term impacts on your retirement plan. So be sure if you want to go that way.
If you can make a budget work for you, you can easily repay your debts over time. If a person believes that just be reducing his spending he will be able to repay all his debts in a given amount of time, it is better to consult a credit counselor to kick start your budgeting plan. But once you do, stick to it.