Nowadays, it’s not uncommon to find yourself in some debt. According to the 2019 Canadian Financial Capability Survey, nearly three quarters of Canadians (73.2%) have some type of outstanding debt. There are many companies that offer different options to help people regain their financial freedom and leave debt behind. Not every option is ideal for every situation, but here are a handful of the more common ones.
Although bankruptcy is an option, it’s considered a last-resort option. In fact, 86% of Atlantic Canadians would prefer to pay off debt over a longer term, compared to going bankrupt in the short term.
When you file for bankruptcy, all your unsecured debts will be wiped away and you start over from scratch. The unfortunate part is that you will no longer have a credit history at all, you may have to give up some of your possessions, and the record of filing might follow you around for several years.
A consumer proposal is a debt relief option where a trustee works with each of your creditors to come up with a deal for you to pay off a percentage of what you owe. If most creditors accept this proposal, it becomes a legally binding process that all parties are bound by. You make your monthly payments to the trustee and the trustee pays the creditors.
When you’re finished you are marked as paid in full, but your credit rating will be affected for a while moving forward. The reason that creditors accept this type of deal is because they don’t want you to file for bankruptcy, as they will get nothing.
Consolidation is a common debt relief option that a lot of people pursue. You will secure a loan that will incorporate all your different debts into one. The benefit of this is to have only one payment to focus on and stop dealing with multiple creditors.
With consolidation, you’ll probably have to close all or most of those other credit avenues, so you don’t start the problem all over again.
Credit counselling services, like the ones provided by SolveYourDebts.com, may end up giving you the broadest selection of choices when it comes to debt relief. In the end, you might opt for consolidation or even bankruptcy, but there won’t be a salesperson trying to push a particular product.
Credit counselling is highly effective, with less than 1% of clients going back into debt compares to 22% of insolvency clients. The primary difference between a credit counselling agency and a bankruptcy trustee is that the former considers all your options and the latter deals primarily in bankruptcy.
A counsellor will sit with you and review your financial situation. They will work with you to develop a plan to turn it around. By following their guidance and implementing the techniques on how to manage your finances in the future, the same thing won’t happen again. It’s a process, but it will give you the skills and habits you need to manage over the long term, and you’ll feel proud having paid back your debts.
If you’re ready to learn the skills and habits you need to manage your money over the long term, get in touch today. We offer free consultations on which debt relief option might be right for you.