London Debt Relief—Consumer Proposals, Debt Consolidation or Personal Bankruptcy

It’s not easy to manage your living expenses and also repay your debts at the same time. But the task is even tougher now. The cost of living skyrocketed—many borrowers feel extra pressure to eliminate their debt.

But how can you reduce your debt when you feel squeezed on all sides? Luckily, there are London debt relief opportunities available. Let’s explore some provincial debt relief plans you can use to lower your debt or interest payments.

Ontario Debt Help

Ontarians have access to a range of debt relief options. These include strategies such as Consumer Proposals, filing for Bankruptcy, or debt consolidation. Each option or plan caters to different financial circumstances. And while the pros and cons may differ, the common goal is to simplify debt management.

You can navigate each of the following solutions with guidance from financial institutions, credit counselling agencies, and Licenced Insolvency Trustees (LITs):

Consumer Proposals

In London, a Consumer Proposal is a petition to your creditors to reduce the overall debt. This process involves a Licensed Insolvency Trustee (LIT) who will file a Proposal on your behalf. If your creditors accept the offer, you will make a single monthly payment to your LIT. Your LIT then distributes the payment to your creditors. You can receive up to 60 months to pay off your Consumer Proposal.

A London Consumer Proposal offers you several advantages that help you end the debt cycle:

• Debt reduction: You may decrease the total debt owed by up to 80%.
• Asset protection: You may often keep your assets (e.g. a home).
• Simplicity: You only have one monthly payment.
• Cost: The single payment to your LIT includes all fees.
• Safety: A Consumer Proposal is legally binding.
• Peace of mind: A Consumer Proposal stops all harassing phone calls, legal action, and wage garnishments.
• Debt type: Proposals include almost all unsecured debt, including money you may owe to the Canada Revenue Agency.

Of note, there is one drawback: A Consumer Proposal will reduce your credit rating to an R7. A low credit score can make it a challenge to qualify for credit for three years after you pay off the proposal.

Debt consolidation

Debt consolidation loans can simplify your debt repayment process. These loans pay off your outstanding debts and combine them into one monthly payment. You must qualify for a debt consolidation loan and typically need enough income to make the payments.

There are several ways to consolidate debt:

• Installment loans: An installment loan gives you a lump sum to pay all other outstanding debts. You make regular payments until the primary loan is paid off.
• Credit card transfers: You can shift all debt to a credit card with a lower rate and monthly minimum payments.
• Lines of credit: You can use a line of credit to pay off debts with higher interest rates. Note that lines of credit have a minimum payment you must make each month.
• Mortgage refinancing: Include your debt in your mortgage payment.
• Home equity lines of credit: Add additional credit when you refinance your home to consolidate your debt.

Debt consolidation loans work well for people who want to simplify and destress their debt with a single payment. However, these loans sometimes have high interest rates. Additionally, you may fall more in debt if you continue to borrow.

Credit counselling

Credit counselling can help you establish an efficient budget and repayment plan.  It’s a proactive step towards financial stability. Counselling is available through credit counselling agencies, though Licensed Insolvency Trustees can also provide you with credit counselling.

Credit counselling agencies offer debt management plans (DMPs) to repay your debt if budgeting doesn’t work. With a DMP, the agency contacts your creditors to negotiate a reduction in your interest rates. Your creditors may agree to reduce your interest rate to zero in exchange for regular payments on your outstanding debt.

You then make a monthly payment to the credit counselling agency. The agency distributes the payments to your creditors. Debt management plans offer up to 60 months to repay what you owe, although you can pay it off in less time.

Debt management plans are an effective solution. However, do research beforehand and see if the agency you’re dealing with is reputable. You can look them up online to find out if they are in good standing with a governing body (e.g. check for any complaints against them with the Better Business Bureau).

Agencies charge fees to cover administrative costs and lump them into your debt payment. It’s important to know that debt management plans are not legally binding and may not stop legal action, phone calls, or wage garnishments. Debt management plans can also hurt your credit rating.

Filing for Bankruptcy

Bankruptcy offers debt relief if you’re insolvent and owe more than you can pay. Filing for personal Bankruptcy is legally binding and will release you from your debts. You can also complete the Bankruptcy process and be discharged from your obligations in as little as nine months, though a Licensed Insolvency Trustee must file for Bankruptcy on your behalf.

When you file for Bankruptcy, you can keep some of your assets. The province of territory you live in determines what type the maximum value of the assets you can keep. For example, you can keep your home as long as the equity you have in it doesn’t exceed the allowable maximum in your province or territory.

Bankruptcy is a legally binding debt solution. After you file, your creditors can no longer contact you. They must stop legal action and cannot garnish your wages. Your trustee will work with your creditors on your behalf.

Filing for Bankruptcy negatively impacts your credit rating. Your rating will drop to an R9, and the Bankruptcy will remain on your credit report for six years after discharge. However, you can rebuild your credit rating to minimise the impact filing for Bankruptcy has on your credit rating.

London Debt Relief

In summary, there are several sources you can turn to for debt help. Your financial institution or credit counselling agency may be able to help you repay what you owe. However, of all the options, a Licensed Insolvency Trustee offers the best debt relief support since LITs are government-approved, legally binding debt solutions.

Our London debt relief team at Adamson and Associates are Licensed Insolvency Trustees who will help you find the best solution for your debt. We offer credit counselling, Consumer Proposals, and Personal Bankruptcy. Please call us at 1-519-310-5646 or use our online form to book a free consultation. We’ll work with you to find the best solution for your debts so you can get your finances back on track.