Finding your way out of a debt crisis can be frustrating and stressful. If you don’t have the money you need to pay back your creditors, there are several debt solutions available and one of them will probably provide you with the financial help you’ve been searching for. Take a moment to accurately assess your situation and then see if one of these solutions fits the bill.
Talk With Your Creditors
One of the first things you should do when you are experiencing money trouble is to talk with your creditors. Letting your creditors in on your difficulties may seem counter-intuitive, but here are some excellent reasons to give them a call:
- Creditors get nervous when your payments are late. Your call and honest conversation lets them know you want to pay them back.
- Creditors know that if you file bankruptcy, they may lose a great deal. Once they understand your situation, they may be willing to set up a more affordable payment plan, lower your interest rate, or waive late fees and other charges.
- Creditors may postpone serious collection efforts when they feel they can trust you to answer their inquiries.
Consolidate Your Debt
Consolidating your debts into one loan is a very simple solution, especially if you have debts that charge a high interest rate. When you roll all of your debts into one, you avoid paying several interest payments each month. Often, the resulting payment is much more affordable than the payments you were previously making.
If you can qualify for a consolidation loan at a reasonable rate, you may have found your answer. Avoid creditors that charge high fees and interest rates, and always read the fine print.
Investigate Your Legal Options
If your creditors aren’t helpful and you can’t qualify for a consolidation loan, there are two legal options that can help you get a fresh start. A Consumer Proposal or bankruptcy are available to Canadians who find themselves in deep financial difficulties.
A Consumer Proposal is administered by a Licensed Insolvency Trustee and involves negotiating new terms with your creditors. You and your Licensed Insolvency Trustee draw up a proposal to present to your creditors. You may ask for:
- A reduction or complete forgiveness of the balance owed, including back fees and charges
- A lower interest rate
- A longer amount of time to pay back your debt
- A more affordable payment
- A combination of any or all of the possibilities
If accepted by your creditors, you have up to five years to complete the terms of the proposal.
Bankruptcy is a debt solution for those with no other options. A Licensed Insolvency Trustee will consult with you and administer the process, selling your non-exempt possessions and using the proceeds to pay your creditors. You may keep possessions that are exempted by provincial or territorial law.
During the 9 to 21 months of bankruptcy, you will meet with your trustee to learn money management skills and report on your financial situation. After discharge, your debts are forgiven and you are ready for a fresh start.
When credit problems become unmanageable, seek professional advice about the debt solutions that are available to you.
Jillian Taylor-Mancusi, LIT
