How To Get Out Of Debt

  • By Jillian Taylor-Mancusi, B.A., C.I.R.P

Many people struggle with debt and have no clear path toward financial freedom. You work long hours and try to make wise decisions, but somehow, your debt never goes down. How can you get out of debt so you can begin to do the things you want and need to do?

This is a very common question many people ask. There are solutions to debt problems, and the sooner you seek assistance, the more varied those solutions will be. A Licensed Insolvency Trustee (LIT) is the best educated and most experienced professional in this field and can advise and help you through the often confusing process.

A consultation with an LIT will cost you nothing and will give you clear, specific steps you need to take to get out of debt and get your life back on track.

Learn How to Get Out of Debt – Any Debt

It’s important to understand that making the minimum required payment on a credit card is getting you further into debt. In many cases, the minimum payment required is actually less than the interest that is accumulating. Occasionally, it is helpful to consolidate debts, allowing you to make a single payment, instead of several smaller payments. The point of doing this is to take high-interest debts and pay them off with the new loan, assuming the new lower interest debt in their place. This only works if you get a low-interest rate, and can afford the payments. It usually means that the new debt will be secured on your home or your car, and you will be making payments on it for a very significant period of time. 

If you cannot afford the payments, even at a lower interest rate, or need for any reason, to get out of debt quickly, there are a couple of solutions that only an LIT can offer.  Both of these solutions will eliminate:

  • Tax debts
  • Credit cards and
  • Collection accounts.

If you are struggling to make payments and getting nowhere, one of our LITs can help you.

How to Get on Track Financially

Everyone’s needs are different, so it is essential that you meet with an LIT to advise you of all your options.  We offer free consultations to discuss your needs. We will sit down with you and do a full review of your situation — debts, assets, family situation, as well as your goals and aspirations.  We will work with you to find a solution to your problem that suits your situation. If it doesn’t point you towards your goals, it isn’t a real solution. 

Consumer Proposals

When you meet with one of our Licensed Insolvency Trustees, after reviewing your situation, they may advise you to consider making a Consumer Proposal. This is a legally binding agreement to settle your debt in a way that is not according to the original terms. In short, they will approach your creditors with a new plan that you and your LIT have worked out, based on what you can afford to pay, rather than what you owe. A Consumer Proposal is a solution for people who have a steady, secure source of long-term income, and no need to be debt-free quickly.

The benefit to a Consumer Proposal is that your debt can be significantly reduced, sometimes by as much as 80 to 90 percent. A Proposal involves you making agreed-upon payments for a portion of what you owe, for an agreed time period – up to 5 years, maximum. You do not lose your assets during this process. Your creditors will have the opportunity to vote for or against your Proposal, but once it is accepted by a majority of them, it is binding on all of them.  Then, your LIT administers the Proposal, receiving your payments, and paying out proportionally to your creditors. When all the payments are made, within the agreed time period, your entire debt is erased, regardless of what percentage of that debt you actually paid.

With a Consumer Proposal, it is also easier to make your payments on time as you have just one payment every month. Additionally, your debt doesn’t continue to grow because of interest – a common problem many face when trying to pay down debt. Because you are in a Consumer Proposal, you are no longer fighting interest. One other huge benefit to a Consumer Proposal is that you no longer have to worry about wage garnishments or collection calls. A “Stay of Proceedings” puts an end to all collection practices against you. You make payments to the best of your ability. You get to be debt-free.

Personal Bankruptcy

In cases where someone either cannot afford to pay back a percentage of what they owe, or who do not have secure long-term income, or who need to be out of debt quickly, an Assignment in Bankruptcy will often be the best option for them. This solution gets them out of debt without having to commit to a long-term repayment plan and is usually the quickest way to get out of debt.

When you work with an LIT, they will advise you whether this is an option for you. There are many benefits. Like a Consumer Proposal, there is a Stay of Proceedings that stops collection practices against you, including wage garnishments. In addition, if this is a first-time bankruptcy for you and you do not have surplus income (as determined by federal government guidelines), you may be able to be finished with the bankruptcy and debt-free in as little as nine months.

Assets are treated differently in a Bankruptcy than in a Consumer Proposal. Your LIT will be able to tell you if you have any assets that will need to be sold to repay your creditors. In Manitoba and Ontario, there is provincial legislation that protects most of your personal property in a Bankruptcy and allows you to keep that property. This includes things like your personal effects and household furnishings, registered pensions and RRSPs, tools of the trade, including a motor vehicle, and even the equity in your home. If you have assets that are not exempt, your Trustee will discuss your options: “purchasing” them back from the creditors or giving them up to be sold. 

Start Your Path to Financial Freedom

To eliminate your debt, determine where you are right now. If you have a secure, regular income, you may wish to realign your debt to make it easier to repay through a Consumer Proposal.  If you have little ability to make payments over a long term, or you need to get out of debt fast, bankruptcy may be your best option.

The first thing to do is to meet with one of our Licensed Insolvency Trustees. They will review your situation. If your situation is one that can be solved by better budgeting or something along the lines of a consolidation loan, they will give you advice on how to do that. If the situation is beyond your ability to budget your way out of it, they will explain the advantages and disadvantages of a Consumer Proposal or Bankruptcy, so you can make an informed decision. We encourage you to call today to discuss your needs in a no-risk, no-obligation, free, confidential consultation. The sooner you get the information you need, the more options you will have to solve the problem. You can resolve your debt challenges and get the fresh financial start that you and your family need.

Jillian Taylor-Mancusi, B.A., C.I.R.P

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 Vice Chair for Dressage Winnipeg. Close

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