If you find yourself in need of debt help, you are not alone.
Maybe you’re still reeling from a holiday season. The financial impact of overextending ourselves – particularly when we’re already stretched thin – lingers on well after the festivities end.
Or perhaps you’re feeling the pinch as a result of unforeseen medical expenses, car repairs, or illness that has kept you off work longer than expected.
Whatever the reason, you’re reading this post because you find yourself in need of help with debt reduction.
Well, congratulations! This realization is the first step to eliminating your debt. The second step is to get help.
But what type of assistance do you need, and how can you get it? Here are 5 ways to get debt help in Manitoba, as well as their respective pros and cons.
#1. Reduce the debt on your own.
If you believe your debt is manageable, you can try to develop a plan to pay it off. There are plenty of free resources online that might help, such as budgeting worksheets and debt calculators. Perhaps you simply need to actually see what’s coming in and what’s going out in order to understand where you can cut back.
This probably isn’t an option for those of us that are not financially savvy (which is likely how we got into debt in the first place) or where the debt has spiraled out of control. Most of us need outside help to resolve our debt.
#2. Borrow money from friends or family.
Depending on how much debt we have and the amount our close contacts are able to lend, borrowing from loved ones may be an option. One significant caveat to keep in mind is that close relationships often become strained when it comes to money. It may even be enough to destroy the bond entirely.
#3. Enter into a debt management plan.
Credit counselling agencies help to negotiate your debts – on your behalf – with your creditors. You’ll still end up paying the entire amount of the debt owed, but if successful, your creditors may agree to reduce or eliminate the interest rate and/or give you more time to repay the debt in full. So how does it work? You pay your credit counsellor, and your credit counsellor pays your creditors.
Note that this option is not legally binding and is completely voluntary. So let’s say you’ve entered into a plan with one creditor. You’ll still need to repay any other creditors that opt out of the plan. Finally, this option is not for you if you cannot repay the entirety of your debt.
#4. Negotiate settlement of your debts.
There are companies out there that will contact your creditors and negotiate the settlement of your debts for less than what you owe. Here’s how it works. You enter into a contract with the debt settlement company and begin paying a monthly sum directly to them instead of paying your creditors. The debt settlement company holds these monies in an account until they get a lump sum that is big enough to offer a settlement of your debt to a given creditor.
Do you see the strategy? You’re not paying your creditor directly, so your creditor receives nothing until it strikes a deal with the debt settlement company. That lump sum, which is less than the full amount you owe, might look good to your creditor because the alternative – receiving nothing – isn’t as appealing.
So what’s the problem? During this period of non-payment to creditors, your credit score will suffer more than it already has. That’s because you’re not making any payments to your creditors at all. Also, you will need to deal with one creditor at a time, since your lump sum is being saved for one debt at a time.
Additionally, a creditor that’s not being paid may elect to send your debt to collections. Since you have no legal protection, enforcement of the debt may be brought against you – through wage garnishments, a lawsuit, etc. In order to stop any such enforcement action, you’ll likely end up filing a consumer proposal or bankruptcy (more on this below).
As a final note of caution, many individuals working in debt settlement companies hold themselves out as credit counsellors when they have next to no formal education or credentials. They also charge you fees up front and a percentage of the debt before they even attempt settlement with your creditors. For these reasons, perhaps your best debt relief option is to reach out to a Licensed Insolvency Trustee.
#5. Contact a Licensed Insolvency Trustee.
Arguably the best financial advisors in the country, Licensed Insolvency Trustees (LITs) are licensed and regulated by the Canadian government. Not only are they required to adhere to strict rules when it comes to provision of debt services, but they have the education and practical training needed to help you with your finances.
This means you will get the best and most ethical financial advice to help you get out of debt.
LITs offer the full range of debt relief options, from budgeting, money management, credit counseling, and debt consolidation all the way to consumer proposals and bankruptcy. In fact, they are the only professionals licensed and authorized by the Canadian government to assist debtors with consumer proposals and bankruptcies.
What’s a consumer proposal?
Consumer proposals are designed for those debtors who cannot pay back their debts in full. Your LIT will make a proposal to your creditors based on what you can afford to pay. If accepted, you will pay back only a portion of the debt you owe over a period of up to five years. What’s more, you will not be paying for the LIT’s services up front. LITs are paid through the settlement, and only when creditors receive payment.
What about bankruptcy?
Bankruptcy is a way for honest, hard-working Canadian debtors to get relief from the financial pressures of overwhelming debt. If you qualify for bankruptcy, your credit card balances, unsecured personal loans, unpaid medical bills, and payday loans will be completely extinguished, typically within 9 months if it’s your first bankruptcy.
What’s so great about consumer proposals and bankruptcy?
The best part about these two debt relief options are that they can improve your financial situation almost immediately upon filing. You see, in Canada, consumer proposals and bankruptcies are legal processes that protect you from your creditors.
So the moment you file a consumer proposal or bankruptcy, an automatic stay of proceedings takes place. This means that your creditors must not contact you directly to recover the debts you owe. It puts an end to collection calls, wage garnishments, frozen bank accounts, and lawsuits.
Get The Debt Help You Need Today
Getting debt help today will almost certainly make for a better financial tomorrow. In fact, the sooner you get help, the more options you may have available to you.
It is our mission to help you experience the best financial health you possibly can. At your free initial consultation, we’ll review your financial circumstances and explain each and every debt relief option available to you. You’ll also get our seasoned advice on which might be the best for you and your family. Let LCTaylor help you achieve the financial freedom you seek. Call us at 1.800.463.8371. We look forward to hearing from you.