pay off debt

Debt Getting You Down? 3 Tips to Pay Off Debt

  • By Jillian Taylor-Mancusi, LIT

Life’s pretty good at throwing curveballs. And whether it comes disguised as a lost job, a health problem, or a worldwide pandemic, that curveball often comes wrapped in financial woe and worry. Suddenly, questions like “How are we going to pay the bills?” and “Do we keep the kids or the cat?” take on far greater relevance than they used to (okay, so not the second one – but you get the drift).

While indebtedness is for most of us a fact of life – how else could you afford that nice home and new car? – there may come a time when, usually through no fault of your own, you find yourself overwhelmed by debt. For an ever-increasing number of Canadians, the sinking feeling that accompanies the inability to pay their bills can mean only one thing: bankruptcy.

But before hitting the bankruptcy ‘panic button’, be sure to conduct an honest assessment of just how bad your debt problem is. It can be as easy as making a list of who you owe money to and how much (if possible, include details of interest rates, monthly payments, and the term). Be sure to check whether your credit history has suffered (services such as those offered by Equifax and TransUnion can provide the answer), and determine whether it can: a) be fixed; or b) be prevented from getting any worse. Only then can you properly begin to understand your options.

And while bankruptcy might ultimately be the answer, it shouldn’t be your first recourse. The following tactics are worth considering in order to avoid going that route:

Start a budget

Knowing where your money’s going can be a good way to stop the bleeding, enabling you to identify problem areas while targeting (and cutting out) unnecessary spending. Yes, you’ll need to be disciplined, but for many it’s enough to make a positive change to your bottom line.

Your first step is keeping track of where you are spending. After doing that, you may be able to immediately identify some areas where you could cut back. Many people are actually surprised by some of their own spending habits, not realizing until they kept track, just how much money was going to low priorities. Once you have figured out where you have been spending your money, you’ll be ready to set a budget. Remember, budgets are not set in stone for eternity. Immediately, reducing debt will be a big factor. Once that has been accomplished, you will want to revise your budget to reflect new priorities.

Restructure your loans and mortgages

It certainly doesn’t hurt to see if you can free up cash by deferring a car loan or mortgage payment – most financial institutions are happy to help by pushing back one or two monthly payments (usually for a fee), which may be enough to help in the short-term. This works because your mortgage has a much lower interest rate than a credit card. By deferring a mortgage payment, you may be able to pay down some high-interest debt. Yes, it means you will take a bit longer to pay off your home, but that will be over several years, and at a lower interest rate. The same is true of car loans, although the interest rate there may not be as low.

Alternatively, look into a lower interest / lower payment option that might spread the debt out over a longer period of time. Second mortgages, using the equity in your home, or a consolidation loan would be examples of this. Just remember that this does not reduce your debt, just reduces interest rates and spreads the payments over a longer period. If you can’t afford the payments that this would involve, it is not an option for you.

Take stock of your assets

Document anything of value – be it land, your vintage 1962 Mustang, or that collection of Disney originals Great Uncle Walt gave you. Don’t be tempted to sell them until you’ve had your situation assessed. These assets could be used to fund a Consumer Proposal that may, in turn, be an alternative to filing a bankruptcy.

When looking at assets, be aware that there are some assets that are out of the reach of your creditors — things like registered pensions and RRSP’s. Don’t be tempted to cash in something like that. Those funds are meant to help you in retirement. Even in a bankruptcy, they will be exempt from seizure.

What to do next?

These suggestions will work for some people — but not for many. If finding a solution to your debt issue is overwhelming, don’t hesitate to seek professional help. Licensed Insolvency Trustees have the expertise and experience that you need. When you come in for your (free) assessment, we will go through your situation with you, and help you to review all the possibilities available to you. Maybe, with some guidance, one of the suggestions mentioned above might work. If not, then we will review both a Consumer Proposal and Bankruptcy with you and help you to decide what is the best option for your situation. Either way, you will be on your way to a new, debt-free future.

But remember: simply ignoring the problem won’t make it go away. Eventually you will need to take some kind of action. The sooner you seek help, the greater the variety of options available to you. Once there is a wage or bank account garnishment in place, it is too late for any of the non-legislative options. At that point, only a Consumer Proposal or a Bankruptcy can stop the wage garnishment.

Give LCTaylor a call today. Our experienced Trustees will be able to find a solution that works for you.

Jillian Taylor-Mancusi, LIT

Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a Read More Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a member of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). She is Past President of the Manitoba Association of Insolvency and Restructuring Professionals (MAIRP). Jillian has held positions on the Armstrong Point Association, Executive of her local EDA Riding Association, Manitoba Highland Dance Association, and the Continuing Education Committee of CAIRP. Previously, Jillian was the Treasurer for the Parent Association at her daughter’s school. Currently, Jillian serves as the Chair for Dressage Winnipeg. Close

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