You’re deep in debt and there’s no way you could possibly pay it back. Your wages are being garnished, your creditors are taking legal action to collect on their debts, and you’re being hounded by debt collectors every day. It can be tempting to think that bankruptcy is an easy out when debt has you down.
But bankruptcy can have far reaching consequences that you haven’t considered – and there may be a better way to settle your debts. When you file for bankruptcy, you will have to part with any equity you have in your assets beyond certain strict exemptions. Exempt equity includes personal goods like clothing and appliances, tools of the trade up to a certain amount, up to $6,600in a motor vehicle, and up to $10,000 in your primary residence. Any additional automobiles, properties, or assets will have to be settled by your bankruptcy trustee (they are now known as Licensed Insolvency Trustees), with the money going to your unsecured creditors.
If you have any surplus income after settling your assets, you may also have to make substantial payments to your unsecured creditors for months to come. Plus, bankruptcies do not affect the debt you owe on mortgages or as part of alimony or child support agreements.
A better option may be a consumer proposal. Available in Canada since the 1990s, consumer proposals are regulated by the same laws as bankruptcies. They were designed to protect your assets, future income gains, and future inheritances, all of which might be taken in a bankruptcy. A consumer proposal is a proposal to your unsecured to creditors to pay back a reduced amount of debt over a fixed period of time (up to five years). If they accept the proposal, you can reduce your debt by a significant amount.
The amount you agree to pay will be based on several factors:
1) How much income you earn every month.
2) What your monthly expenses look like and how much they can reasonably be reduced.
3) How much money you owe unsecured creditors like credit card companies and utilities.
In addition to reducing the balance that you owe, your debt will also stop accumulating interest. Often, a consumer proposal is a better way to pay back debt if you have assets you want to save.
There are times when bankruptcy really is your only option. If that’s the case, a bankruptcy trustee will tell you. According to Toronto-based David Sklar & Associates, bankruptcy trustees who handle insolvency cases every day, bankruptcy is a last resort option. If you have an option like a consumer proposal that protects your assets, you should take it. Bankruptcy trustees in Ontario will help you determine which options are open to you.
Consumer proposals in Ontario are a better way to get out of debt. If you need to get help to avoid bankruptcy in the Greater Toronto Area, you have options. Keep in mind that bankruptcy trustees are the only professionals who can file a consumer proposal or bankruptcy for you in Ontario. One option for bankruptcy trustees in Pickering, Ajax, Brampton, Mississauga, and Toronto, is David Sklar & Associates. With six offices throughout the GTA, they serve thousands of clients going through insolvency. Avoid bankruptcy with a consumer proposal if you’re in debt.