Bankrupcy or other options
March 25th, 2010 by Questions
I`ve lost my job and I am living single on EI. My debit on the cards is over $60k and I have no resources to make the monthly payments. I have no collaterals (house or any other values) and my credit score is 570.What are my options?
Posted from: Ontario
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March 26, 2010 at 11:10 am, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:
In terms of options, we always suggest people consider the following options when they are experiencing financial difficulty include:
1. Negotiate with your creditors. Explain why you have fallen behind in payments. Outline your financial situation and expectations for the future. Suggest a payment plan that is realistic and reasonable for both you and your creditors. As this is an informal process make sure that if you come to an agreement get written conformation. .
2. Apply for a consolidation loan. Take out a loan to pay off all of your debts. This can potentially lower your interest rate, total monthly and sometimes the total length of the contracts. With consolidation loans it is important that you examine your current spending habits and stop using your so you do not continue to fall further behind.
3. Make an application to Credit Counseling. This is 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 usually the interest on your unsecured debts is reduced to prime or even eliminated. You are required to repay 100% of what you owe, but because of the reduced interest your monthly payment is much lower than all of your minimum payments would have been without the plan.
4. Make a proposal to your creditors under the Bankruptcy and Insolvency Act. 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 proposal you offer to repay a portion (perhaps 100%) of the debt that you owe. Proposals are an excellent alternative to bankruptcy, but they are not well known so I suggest you contact a local trustee and ask them about proposals if you are interested in this solution.
5. File for 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.
The trick to all of this comes down to your cash flow. The general rule is the more cash flow you have the more likely you will be able to avoid the filing of a bankruptcy. Given your current situation you may find that the bankruptcy is the only possible of the alternatives, but you should discuss this with a local trustee and they will be better able to look at the specific nature of your situation advise you whether or not this solution is available where you live and makes sense for you.