Options, how do we deal with our existing debt.

May 16th, 2009 by Questions

We owe big money to different credit card companies including line of credits. Now its been almost a year and after a while they stopped sending us any kind of letter. Now we dont want to file a bankruptcy but want to pay in installments (minimum). We have equity in the house which is close to the loan amount but real estate market is down and we cannot sell the house. what other options do we have.

Posted from: Alberta

Questions

One Response to “Options, how do we deal with our existing debt.”


, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:

While this is difficult to discuss without knowing how much equity and how much debt you are dealing with, the standard options that we suggest people consider when they are experiencing financial difficulty include:

1) A consolidation loan – you approach a bank or other lender and apply for a loan to repay all of your existing debts. This solution is the only one listed here that will not adversely affect your credit rating. The advantage of a consolidation loan is that the interest charged is generally significantly lower than credit card interest rates. If you apply for a consolidation loan at a bank and your application is turned down that means the lender thinks you have accumulated more debt than you can reasonably be expected to handle.

2) Credit Counselling – a voluntary program where your debts are pooled together (they aren’t actually paid off) so that you are only required to make a single monthly payment to a non-profit counseling agency. As you make your payments the agency forwards funds to each of your creditors in proportion to your total debt. The advantage of this procedure is that the interest is fixed at 5%, and while you are required to repay 100% of what you owe, due to the reduced interest your monthly payment is much lower than all of your minimum payments would have been without the plan.

3) A Proposal to Creditors (also called a consumer proposal) – this solution is used by people who cannot afford (or get approval for) a consolidation loan or a credit counseling plan, but don’t want to file bankruptcy. In a consumer proposal you offer to repay a portion of the debt that you owe. Proposals are an excellent alternative to bankruptcy, but they are not well known so if you would like to know more details about a proposal you are best to contact a local trustee.

4) Bankruptcy – if none of the other procedures listed is appropriate for you then bankruptcy may be correct solution. The concept behind bankruptcy is that you cannot afford to repay even a portion of your debts. To file bankruptcy you must meet with a licensed trustee.

Please post a follow up comment below:

(Note: comments are reviewed by moderators and then posted after approval. In addition, due to high volume some of the comments might not be posted.)