By Adriana J. Noton

While lenders always expect and want borrowers to pay their debt in full, there are some situations in which a debtor faces a number of money problems and simply cannot be able to pay a loan as agreed. If you find yourself in such a situation, you can get into a debt settlement agreement, which will allow you to offset part of the credit in exchange of your creditor’s willingness to negate the remainder of the balance.

Creditors will often consider taking these agreements if it is apparent that you are not in a position to pay off your arrears as agreed and can either default or even decide to file for Bankruptcy Toronto. In several situations, bankruptcy really is the best option, but it is always important to understand the different options at your disposal such as credit counseling and Consumer proposal Toronto before you can make a final decision.

While a consumer proposal is not in any way bankruptcy, you should note that only a government licensed Toronto Bankruptcy Trustee can administer the proposal. On your part as a debtor, the agreement is a way of reducing the huge burden of a debt as you avoid bankruptcy, and in most cases, to stop further damage to your credit history.

In most cases, a negotiation will take place directly between you and your creditors, but in other cases you may need the services of an attorney to facilitate the process. It is always however advisable to work with a bankruptcy trustee Toronto who will see to it that the process runs smoothly and fairly.

The government appointed trustee’s role include liquidating all your assets and sharing them among your creditors; formulating and enforcing viable reorganization plans, and overseeing the repayment of the arrears and ensuring that abuse and fraud does not occur once your estate is liquidated. By the same token, the trustee will see to it that all costs related to the liquidation are levelheaded and that your creditors do not harass you.

Most creditors, reluctant to give you a free ride, may need to see tangible proof of your money problems before settling for the debt settlement agreement. If you can therefore demonstrate that your financial situation is wanting but you have some cash to spare, it can be very easy to convince your creditors to agree to the agreement and that it is better to get something than nothing at all, should you end up filing for bankruptcy.

If you have a significant amount of money to spare for the arrears, you may even convince your creditors to delete your troubled account from your report, thus improving your credit score in the process. Always ensure you get your settlement agreement done in writing before you can send any money to any creditor.

While debt settlement is a viable option, it is to be mentioned that you may suffer some not-so-good consequences i. E. Tax consequences or significantly lowered credit score. Should you fail to convince your creditors to delete your settled account from your credit report, it may be reported as settled for less than the money owed, which may have negative effects not only on your credit score but also on your ability to get credit in future.

About the Author: With over 30 years of experience

Toronto Bankruptcy Trustee

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