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Can you negotiate your way out of debt?

Carrying debt is stressful, but most Canadians have at least some financial obligation. It could be from a mortgage or credit card bills or student loans, but whatever type of debt you might have, you could be struggling to pay it down.

Too often, people in this position either hope the situation goes away on its own or assume that aggressive measures like bankruptcy are their only options. However, in many cases, parties can negotiate resolutions that make it easier to eliminate debt.

Consumer proposals

Consumer proposals allow individuals to negotiate repayment of a percentage of their debt over a specific period. Typically, people work with a debt specialist who will deal with creditors to reach an agreement.

This option allows you to protect your assets and stop creditor harassment. It can also alleviate stress, as it provides a clear map of expectations. Further, consumer proposals have a less severe impact on credit reporting compared to bankruptcy.

Negotiating with individual creditors

If you have one or two sources of debt that you struggle with, negotiating with a creditor yourself might be an option to consider. Often, companies have repayment programs or alternatives for consumers that fit specific criteria.

If you negotiate repayment on your own, however, it can be wise to prepare accordingly. You might approach the situation like a business transaction rather than a personal issue. And keep in mind that creditors typically would prefer to receive some money rather than none at all. Thus, you might use potential bankruptcy or repayment of other debts as a bargaining chip.

Debt consolidation

There are several ways consumers can consolidate debt to minimize penalties and make repayment more manageable, including negotiations with creditors and consumer proposals. However, there are other means of consolidating debt, such as loans and debt management programs.

When you consolidate your debts, you make one monthly payment. You might also have lower interest rates and amounts when you combine multiple bills into one payment. 

Keep in mind that your debt relief options will depend on the specific details of your situation, including the types of debt you have and your financial resources. However, this can help you understand the various options you might consider when searching for financial peace. 

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