A consumer faces the need to file for bankruptcy when it is no longer possible to pay debts. While this sounds bad, there are many reasons why a person might be faced with bankruptcy besides simply mishandling money. For example, when people lose their source of income, they are no longer able to pay debts, bills, and other expenses. Whatever the reason for bankruptcy, consumers need to understand their options in order to find a solution that works.
Filing for Bankruptcy
If a consumer can no longer pay debts, the next step is to declare bankruptcy. When this happens, the consumer will have to sell off all or most assets to pay the debts. Selling off possessions will not typically allow the creditors to make back all of the money that they have lent, but it is a way for them to recoup some of their losses. While filing for bankruptcy is never pleasant, it is one way for a person to get rid of debts. There are other ways that can work better.
If a debtor is insolvent, declaring bankruptcy is not always the only option. Instead, debtors can make what is known as a consumer proposal. In this case, the debtor will agree to make payments to creditors for five years. These payments should be something that the debtor can manage and will not typically cover the full extent of the consumer's outstanding debts. Even through, creditors won't make back all of the money they lent in the first place, they will typically accept a consumer proposal because they will make back more money than they would otherwise.
It is important to note that creditors will not make money off of any type of bankruptcy. Instead, it is a way for creditors to cut their losses. Thus, they will likely be most in favor of whichever option helps them to make up most of the money that they have lent to the consumer. If consumers show that that it is possible to pay of some of their debts, this option will most likely be a consumer proposal because a proposal allows the person to make payments, and ongoing payments will hopefully allow a consumer to pay back more money than selling off assets would. People should always be careful with their debts and try to make sure that they can easily handle what debts they have, but if the worst happens, it is nice to know that you have options for getting rid of debts that you can't pay. Professionals like Vine & Williams Debt Management can help you if it comes to this.Share
26 February 2015
Debt is something that many Americans have to deal with, so if you're struggling with debt, don't feel as if you're alone. Because so many people have debt burdens, there are also a lot of people with opinions about how you should go about getting out of debt. The problem is, not all of those people have your best interests at heart. If someone is telling you that they know just the things you need to do to get out of debt, you may want to ask yourself what they stand to gain from you using their debt reduction method. The truth is, debt has no one size fits all solution -- what works for your neighbor may not work for you. The purpose of this blog is to examine different debt reduction strategies, so that you can choose the one that suits your family the best.