File Bankruptcy or Debt Consolidation – What Does it Take?
At times when you’re on the verge of giving up on your debt, filing for personal bankruptcy can be very tempting. After all, you can have relief from debt collectors who are trying to chase you with the money that you owe. The significant fact in filing for bankruptcy is that you will be compelled to give in all your assets and the negative effect that it can bring on your credit rating. On the other hand, debt consolidation is said to be less drastic as compared to the outcome of filing for bankruptcy.
In this guide, we will take a look at these two debt relief options and find out the positive and negative aspects of both.
Filing For Bankruptcy – A Brand New Start At High Cost
Claiming for bankruptcy implies that you are unable to fulfill debt repayments. Once you filed for bankruptcy, your debt collectors will be prohibited from collecting the money that you owe. we have talked before on what happens to your debt when you declare for bankruptcy, and you knew that it is a great way to eliminate most of your unsecured debts. Also, it can’t abstain from paying all your other obligations such as penalties imposed, alimony, and other debts that are not discharged in bankruptcy.
Moreover, there are certain bankruptcy exemptions, which may vary depending on the province or territory. In general, you are to retain records of your total income as well as expenses. To give you a clear picture of what it takes to file for bankruptcy, it is essential to know some of its pros and cons.
Pros and Cons of Filing for Bankruptcy
Below are some of the positive and negative aspects of filing for bankruptcy to solve your problems with debt.
- You can find relief from debt collectors through an automatic stay.
- It can eliminate most of our unsecured debts, which allows you to restore and build a new life without loads of your debts.
- It can impact your credit score drastically for a couple of years.
- You will have to surrender your assets to qualify for bankruptcy.
- Filing for Bankruptcy can cost you great money, reason why you must know how much it will cost to file for bankruptcy in Canada?
- People or institutions who have the right to know about your bankruptcy may find out.
Debt Consolidation – A Way To Pay Off Debts
In debt consolidation, all your debts will be consolidated into a single monthly payment. When seeking debt consolidation loans, the company or agency will settle your debt for a set amount. Essentially, this will be done through a loan with lower interest rates. By doing so, you’ll get favorable advantages which are way better than bankruptcy. However, each debt-relief option bears consequences – so as debt consolidation.
Pros and Cons of Debt Consolidation
Here are some of the positive and negative aspects of managing your debt through debt consolidation:
- Debt consolidation protects your reputation and credit ranking. It is not a public record. Unlike bankruptcy, your records can be check via a federal bankruptcy courthouse or when subscribing through PACER. Though it can be viewed in your credit report, your credit score will not be lowered basically, unlike in bankruptcy.
- You can still possibly maintain your access to credit in debt consolidation unless hindered by the agreement.
- It simplifies the managing of your debt, especially when you owe money to several creditors or lenders.
- Debt Consolidation lowers the interest charges and the amount that you’re paying every month.
- It allows you to pay back what you owe which can eventually boost your poor credit.
- Debt consolidation enables you to free up a significant amount of money each month.
- It is impossible to miss payments since all your debts are consolidated into one payment each month.
- You can possibly lose your property if you default on your debt consolidation loan.
- The tendency to extend the repayment period that can end up paying more in the long course.
- Depending on the situation of your finances, it may bear negative consequences in terms of tax payments.
Which Is Best For Me?
Comparing the two debt relief help can aid you in making a sound decision on what to choose. However, before you conclude, it is a must that you consider professional advice. Bear in mind that help is always available and all you need is to SEE IF YOU QUALIFY.
CONSUMER PROPOSAL EXAMPLE
Example Unsecured Debts
|2||Credit card 1||$6,812|
Your Monthly Repayments Would Be
a Consumer proposal $748
(total contractual repayments)
a Consumer proposal $295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances.