Many Canadians from all walks of life encounter debt problems at some point or another. An individual’s financial crisis might be directly attributable to the global economic downturn that has persisted for many years, or it may be due to illness, divorce or a basic lack of money-management skills.
How the debt arose is not the primary issue, although it could be a mitigating factor when dealing with creditors or when attempting to enter into any kind of debt resolution. Of greater importance, however, are the ways in which the debts are dealt with and the steps that are taken to resolve the issues. When financial difficulties arise, the first and most important step is to face the problem head-on and to seek immediate assistance — just as one would with a medical issue. Debt problems are somewhat similar to physical or health problems in that ignoring the problem and pretending it does not exist will not make it disappear: It will only make matters worse.
It is much easier to take control of a debt problem before it becomes too unmanageable, or before it causes great personal hardship, embarrassment or anxiety. Many financial problems can usually be handled easily and in a straightforward manner, but more complex financial difficulties may need the assistance of an experienced professional.
Being able to identify debt problems is crucial to timely intervention. What then are the common warning signs that a debt problem exists or is imminent?
• You persist in going over your spending limit, and you view your credit card as a necessity as opposed to a convenience.
• You constantly borrow money from family or friends to pay bills or to support yourself from one payday to the next, or you are trapped in the vicious, never-ending cycle of high-interest payday loans.
• Your salary or wage has been garnished to pay long-standing debts.
• Bills are consistently paid late, or bills have to be juggled.
• Bills go unpaid and creditors are avoided or ignored.
• You become hounded by creditors and collection agencies.
• You can only pay the interest and/or service charges on your monthly statement, and the total debt remains unchanged for extended periods of time.
• Utility providers cut off vital services to you because of your unpaid bills.
If you find yourself overwhelmed by debt, do not despair! There are many means by which you can ease financial pressures with immediate effect as well as ways to reduce your burden of debt in the future. The following recommendations will help to put you on the path to better financial health.
A Prescription for Handling Debts:
– Contact Creditors Immediately: Let them know that you are experiencing financial difficulties, and explain why you are unable to meet your obligations. Ask about a lower rate of interest or suspension of interest charges.
– Make a Consumer Proposal to the Creditor: The Bankruptcy and Insolvency Act allows you to approach your creditor with a proposal to lower the amount of the debt or lengthen the repayment period, or indeed a combination of lowered debt burden and extended time for repayment. Creditors are usually agreeable to alternative payment arrangements. They would rather be paid something than nothing at all. Be sure to honour any new arrangement that has been agreed.
Further details about consumer proposals can be obtained from an administrator of consumer proposals. The administrator is typically a trustee in bankruptcy. He or she can provide guidance on how to make a consumer proposal to your creditor. Names and contact details of trustees in your area can be found in the Yellow Pages, and are typically under “Bankruptcy” or “Trustee in Bankruptcy.”
– Seek Credit Counselling: Credit counseling is an excellent resource that could help you deal with and overcome your financial difficulties. Through counselling, you may be able to better understand the importance of creating and following a budget. You will also feel less alone. By showing that you are taking action to address your situation, creditors will be more likely to be lenient and more open to negotiations.
The availability of credit counselling services varies by province. A credit counselling association or a local family/community counselling office can point you in the right direction if you are unable to locate a local credit counselling service on your own.
– Consider a Debt Consolidation Loan: Most banks or other financial institutions offer debt consolidation loans whereby they incorporate all of your debts into just one loan. When you are granted a debt consolidation loan, the bank pays off all of your outstanding debts so you do not have to make many different payments. Instead, you make just one payment per month to the bank or financial institution that grants the loan.
If you do get a debt consolidation loan, it is crucial that you do not continue to make purchases on credit and you do not take out any additional loans. If you do not change your behavior, your debt burden will become totally unmanageable. It would be very helpful to combine credit counseling with a debt consolidation loan.
When pursuing debt consolidation, do shop around and compare the rates being offered by different banks and financial institutions so that you can get the lowest rate available.
– Apply for a Consolidation Order: A consolidation order is an aspect of the Bankruptcy and Insolvency Act that covers the Orderly Payment of Debts. Residents of Alberta or Saskatchewan are eligible to apply for a consolidation order. A court will set up a schedule of payment whereby you pay a set amount at set intervals to the court. The court will then make payments to all of your creditors. You will be allowed three years to pay off all debts. During that time you will not be subjected to wage garnishment, and creditors will not be able to pursue you for payments.
Even though consolidation orders are part of the Bankruptcy and Insolvency Act, you will not forfeit your assets.
– Sign-up to the Voluntary Deposit Scheme: Residents of Quebec can make use of the voluntary deposit scheme to pay down their debts. It works in the same way as the consolidation order. A monthly payment — based on the debtor’s income and total number of dependants — is made to the court, and the court then pays the debts. Local courthouses are the usual providers of this service.
– Declare Bankruptcy: Bankruptcy is a legal process that is covered by the Bankruptcy and Insolvency Act. It should be considered only as a last resort, after you have exhausted all other methods to pay off your debts in a reasonable amount of time. When you declare bankruptcy because you are unable to pay your debts, all of your assets — except those that are legally exempt — will be assigned to a licensed bankruptcy trustee. When this happens, you will be relieved of practically of your debts, and creditors will not be able to pursue those debts.
To learn more about declaring bankruptcy, it is important that you contact a trustee in bankruptcy. Names and contact details of trustees in your area can be found in the Yellow Pages. Look under “Bankruptcy” or “Trustee in Bankruptcy.” Alternatively, get in touch with the nearest Office of the Superintendent of Bankruptcy within Industry Canada.
For questions concerning insolvency and bankruptcy, call the following toll free number between the hours of 8:30 a.m. and 4:30 p.m.:
InfoAviator Publishing is a organization determined to help Canadian consumers understand how to eliminate their debt that are currently residing in the provinces of (but not limited to) Nova Scotia, Quebec, Ontario, New Brunswick, Manitoba, British Columbia, Prince Edward Island, Saskatchewan, Newfoundland and Labrador, and Alberta, in Canada.