What You Should Know About Formal Debt OptionsJan 27, 2016
With the calendar turned over to the new year, many Canadians find themselves needing debt help after November and December spending. Shopping, dining and entertainment spending adds up and often January comes as the “moment of truth”. Debt can be stressful – especially at this time of year. Taking control of your debt using do-it-yourself strategies such as this 5 Step Plan can be effective for some Canadians. However, for those carrying large debt loads, a formal debt solution that will either help you consolidate debt or get a fresh financial start may be the right path to decreasing stress levels. Let’s look at two formal options: consumer proposal and personal bankruptcy.
What is a consumer proposal?
A consumer proposal is a formal, legally-binding debt option that consolidates your debt into manageable monthly payments. A Trustee in Bankruptcy will negotiate an agreement with your creditors that often allows you to repay a portion of what you owe. If you have a high amount of debt, accumulating interest, and you want a solution that allows you to keep your assets and avoid bankruptcy, a consumer proposal is a good option to explore with a Trustee.
While this solution does not include mortgages and car loans, it does include unsecured debt such as credit card debt. The average Canadian now carries 2.9 credit cards. For these people, a consumer proposal reduces stress by providing an effective way to consolidate debt; you only have one payment, once a month to make.
In what situation would I need to file bankruptcy?
Bankruptcy is a last resort option for Canadians who owe more money than they earn. With these high levels of debt, wages are often garnished and individuals cannot pay their bills. In this case, filing for bankruptcy can be the best solution – even though it can understandably be an emotional decision. Bankruptcy releases you from most of your debts, protects you from the legal action of your creditors, and gives you a fresh start. You will have to surrender some of your assets, but others will be exempt from seizure. In Ontario, a bankruptcy can only be filed using the services of a Trustee in Bankruptcy, who will assist you through the entire process from your initial consultation through to your discharge. During the bankruptcy process, you will also attend two mandatory credit counselling session to help you manage your finances moving forward.
When you’re considering strategies for dealing with a large debt load, it is important to know your formal options – whether a consumer proposal or filing bankruptcy is right for you. A Trustee is the only legally accredited professional that can carry out these formal solutions, but they can also look at your situation and review all debt options with you including debt consolidation, credit counselling, and debt settlement plans.
Are you feeling the stress of New Year debt? Join the conversation on social media by using the hashtag #LetsTalkDebt and #BDODebtRelief.