Understanding last-resort options when you can no longer pay your debts

The rising levels of indebtedness have left many households vulnerable, said Laurie Campbell, CEO of Credit Canada Debt Solutions Inc.For those feeling overwhelmed and unable to pay their debts, there are two regulated, last-resort options: bankruptcy, and the less drastic consumer proposal.

Campbell recommends first getting free advice from non-profit credit counsellors to look at your full financial picture, and explore gentler options like an interest freeze to help pay off debt. The bankruptcy process generally lasts either nine or 21 months depending on income, and then the bankruptcy stays on public record for six years. A consumer proposal generally lasts five years and then stays on your record for three more. A second and third bankruptcy have much longer terms.

If you have a house with a mortgage, you may be able to keep it if your equity in it is small and you can manage the mortgage payments. If your equity is above a threshold, which varies by province, you'd have to find a way to pay that back as well or the trustee would have the power to sell it. "For most people that go through the bankruptcy, it doesn't impact their way of life, other than they don't have access to credit until they're discharged."

So wgich resort do you recommend?

Very interesting article

Rock bottom

There is NO benefit in taking a consumer proposal. It has the same negative impact on your credit as bankruptcy.

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