9,075
edits
Difference between revisions of "You Have Options for Getting Out of Debt"
From Clicklaw Wikibooks
You Have Options for Getting Out of Debt (view source)
Revision as of 01:08, 7 November 2023
, 01:08, 7 November 2023→Work out the problem
m (Elena Renderos moved page When You Can't Pay Your Debts (No. 253) to You Have Options for Getting Out of Debt: change title) |
Drew Jackson (talk | contribs) |
||
| Line 42: | Line 42: | ||
==Work out the problem== | ==Work out the problem== | ||
There are several options for getting out of debt. | There are several options for getting out of debt. | ||
===Option 1. Budgeting out of debt=== | |||
To tackle your debts, you need to understand your financial situation. Your first step should be to list your '''assets''' (what you own) and '''debts''' (what you owe). | To tackle your debts, you need to understand your financial situation. Your first step should be to list your '''assets''' (what you own) and '''debts''' (what you owe). | ||
| Line 77: | Line 63: | ||
We provide more detailed guidance on making a budget. See [https://www.peopleslawschool.ca/everyday-legal-problems/money-debt/getting-out-debt/budgeting-out-debt budgeting out of debt]. | We provide more detailed guidance on making a budget. See [https://www.peopleslawschool.ca/everyday-legal-problems/money-debt/getting-out-debt/budgeting-out-debt budgeting out of debt]. | ||
===Option 2. Negotiate with your creditors=== | |||
First, a caution. Have more than two years passed since you made a payment on a debt or the creditor demanded payment? If so, the creditor may have lost their legal right to enforce the debt. You should seek legal advice before contacting the creditor. See [https://www.peopleslawschool.ca/options-legal-help options for legal help]. | First, a caution. Have more than two years passed since you made a payment on a debt or the creditor demanded payment? If so, the creditor may have lost their legal right to enforce the debt. You should seek legal advice before contacting the creditor. See [https://www.peopleslawschool.ca/options-legal-help options for legal help]. | ||
| Line 84: | Line 70: | ||
We offer step-by-step guidance on negotiating with your creditors. See [https://www.peopleslawschool.ca/everyday-legal-problems/money-debt/getting-out-debt/negotiating-payment-terms negotiating payment terms]. | We offer step-by-step guidance on negotiating with your creditors. See [https://www.peopleslawschool.ca/everyday-legal-problems/money-debt/getting-out-debt/negotiating-payment-terms negotiating payment terms]. | ||
===Option 3. Consolidate your debts=== | |||
Consolidating your debts means combining them into a single payment. There are three main ways to do this: | Consolidating your debts means combining them into a single payment. There are three main ways to do this: | ||
| Line 97: | Line 83: | ||
With a '''debt repayment plan''', you set up an account with a credit counselling agency. You deposit a monthly amount into the account. The credit counsellor uses this amount to pay your creditors until your debt is erased. | With a '''debt repayment plan''', you set up an account with a credit counselling agency. You deposit a monthly amount into the account. The credit counsellor uses this amount to pay your creditors until your debt is erased. | ||
We walk you through each of these options in more detail. See [https://www.peopleslawschool.ca | We walk you through each of these options in more detail. See [https://www.peopleslawschool.ca/consolidating-your-debts/ consolidating your debts]. | ||
===Option 4. Negotiate a debt settlement=== | |||
With a '''debt settlement''', you pay your creditors a lump sum that is less than the full value of what you currently owe. This can range between 20% and 80% of the debt currently owed. (Settlements at the low end of this range are very rare.) | With a '''debt settlement''', you pay your creditors a lump sum that is less than the full value of what you currently owe. This can range between 20% and 80% of the debt currently owed. (Settlements at the low end of this range are very rare.) | ||
| Line 108: | Line 95: | ||
You can get help with negotiating a debt settlement. Non-profit credit counselling agencies offer these services. (So do for-profit companies, some of which don’t have your best interests at heart. So be careful.) | You can get help with negotiating a debt settlement. Non-profit credit counselling agencies offer these services. (So do for-profit companies, some of which don’t have your best interests at heart. So be careful.) | ||
We have in-depth information on debt settlements. See [https://www.peopleslawschool.ca | We have in-depth information on debt settlements. See [https://www.peopleslawschool.ca/negotiating-debt-settlement/ negotiating a debt settlement]. | ||
===Option 5. Make a consumer proposal=== | |||
A '''consumer proposal''' is an offer you make to your creditors to settle your debts. If they accept your proposal, you pay them a portion of what you owe and they forgive the rest. | A '''consumer proposal''' is an offer you make to your creditors to settle your debts. If they accept your proposal, you pay them a portion of what you owe and they forgive the rest. | ||
It’s a formal, legally binding process overseen by a licensed insolvency trustee. It can take up to five years. Some of your assets may need to be sold. We explain the process in detail. See [https://www.peopleslawschool.ca | It’s a formal, legally binding process overseen by a licensed insolvency trustee. It can take up to five years. Some of your assets may need to be sold. We explain the process in detail. See [https://www.peopleslawschool.ca/making-consumer-proposal/ making a consumer proposal]. | ||
===Option 6. Declare bankruptcy=== | |||
'''Bankruptcy''' is a legal process where you give up most of your assets to get rid of your debts. Going bankrupt is a long process with serious consequences. It’s the most drastic option for getting out of debt. | '''Bankruptcy''' is a legal process where you give up most of your assets to get rid of your debts. Going bankrupt is a long process with serious consequences. It’s the most drastic option for getting out of debt. | ||
A licensed insolvency trustee must file an application for you with a government office. The trustee guides you through the process. They sell your assets (except for a few that are exempt) to pay off your creditors. When the process is complete, you’re “discharged” from bankruptcy. [https://www.peopleslawschool.ca | A licensed insolvency trustee must file an application for you with a government office. The trustee guides you through the process. They sell your assets (except for a few that are exempt) to pay off your creditors. When the process is complete, you’re “discharged” from bankruptcy. [https://www.peopleslawschool.ca/declaring-bankruptcy/ We walk you through declaring bankruptcy]. | ||
==Who can help== | ==Who can help== | ||
