YOU HAVE FOUR BASIC CHOICES
If your credit history will still allow you access to credit, a consolidation loan can help you lower your payments by hopefully getting a lower interest rate than you are presently paying as well as spreading your payments over a longer period of time.
A proposal is made through a trustee in bankruptcy and the rules are very simple. You make an offer to your creditors to settle your debts. All interest payments stop. The trustee prepares the paperwork and mails your offer to the creditors. The creditors then vote to decide whether they will accept what you are offering. You can offer full payment or less but the closer you are to paying in full the more likely they will accept what you offered. Usually they want at least 30% (that is 30 cents on the dollar) after the court, trustee and administrator’s fees.
NEGOTIATING ON YOUR OWN
The negotiating can be done by you or by someone on your behalf (e.g. a lawyer) this is usually an approach used if you know your money situation will soon improve. For example, if you are receiving unemployment insurance and will be back to work in two months. This method is simply asking the creditors to be patient and to lower or suspend your payments until your income improves. Creditors are often reasonable if you talk to them before you get too far behind in your payments.
The essence of insolvency is to “rehabilitate” the debtor to start a new life without debts. In an insolvency, you are simply saying that you want relief from your debts you owe and in return will give up your assets. The assets are turned over to the trustee; under the BIA, the trustee is not required to take basic clothing and furniture and a car under $5,650 in value considered as “exempt assets”. The trustee realizes what he can obtain for those un-exempt assets available to your creditors and pays each creditor their share of the money received.
RRSP’s are exempt from seizure except any contributions made in the plan within the 12 months preceding filings of bankruptcy. Also exempt are certain Life Insurance Policies and Pension Plans.