Debt management: what are my options

Debt management: what are my options

Debt has been the most pressing issue during this COVID-19 situation. Our previous posts have addressed some of these issues from the danger of predatory lending to the help you can get from credit counselling.

Managing one’s debt is extremely important. However, each case is unique. This is why we present you with the options available, but strongly recommend you analyze your specific situation before making any decisions, Different people can help with your situation, from financial advisors to accredited credit counsellors and licensed insolvency trustees (these deal with consumer proposals and bankruptcy). See our posts on these two topics.

Questions you should address: (from the Financial Consumer Agency of Canada)
* how much of your debt will be repaid
* what type of debts will be repaid
* how long you’ll be making payments
* how much your monthly payment will be
* what happens if you can’t make a monthly payment
* what will happen if your financial situation changes and you need to reduce your payments or can no longer make payments
* can creditors or a debt collection agency continue to contact you
* what will happen to your assets
* what will happen to your credit report
* how much you’ll pay in fees
* can a creditor change their mind and withdraw from the agreement

What are your options?
* Debt management, an informal process where you work with a credit counsellor.
* Consumer proposal, a legal process where you work with a licensed insolvency trustee.
* Bankruptcy, a federally-regulated process when you can’t afford to repay even a portion of your debt.

What debts are covered?
* With debt management, it’s the unsecured debts: credit cards, unsecured loans and lines of credit.
* With a consumer proposal and bankruptcy, it’s all debts, including tax debt, with a few exceptions such as spousal or child support payments.

How much of your debt do you need to repay?
With debt management, it’s the full amount of what you owe. Usually you won’t have to pay interest.
With a consumer proposal, most likely a percentage of what you owe with no interest. The amount depends on your ability to make payments, based on your income, some expenses and assets.
With a bankruptcy, some assets can be taken and other assets are protected. In case of assets being taken, they will be put towards your debt.

It’s important to take back control of your financial life as fast as you can. Protecting yourself from further debts is imperative and we are here to assist you.