Managing your Debt & Improving your Financial Life
If you have a large amount of debt, it may seem hopeless to try to manage the situation. Debt management may not seem possible and the possible options can seem confusing. You may feel as though there is no way to escape the calls from creditors, the harassment from collection agencies or the pile of bills that are causing you to lose sleep. This is understandable. Debt is frustrating and scary and stressful. It can lead to anxiety, tension, worry and even sickness. Studies have shown that high levels of debt can result in health issues such as depression.
However, there is hope. There are a number of strategies and processes available to help you manage your debt.
Personal Debt Management
You may be able to come up with a plan to manage your debt yourself. Sometimes this can seem like an overwhelming thought, but that is often because people are unsure of where to start. Being organized and coming up with a plan can sometimes help you understand your debt more clearly and this can lead to you finding a strategy that works for you.
The first step is to make sure that you understand your debt situation correctly. Many people are unaware of how much debt they actually have. Sit down and figure out every creditor that you owe money to and how much you owe. Also write down the payment schedule, how often you pay this creditor and the interest rate associated with the loan.
One debt management strategy is to contact each of your creditors individually and try to negotiate with them. In some cases, after you explain your situation to a creditor, the creditor may reduce the amount of interest that you have to pay on your loan or give you more time to pay them back. This can be helpful as either of these outcomes will reduce your monthly debt repayment costs.
Through negotiation, you might find that you are able to reduce your monthly payments to a level that allows you to fit them into your monthly budget. However, you may also find that not all creditors will be willing to negotiate with you. If you fail to negotiate successfully with a creditor, you will still need to pay the original amount owing. Otherwise, you could be opening yourself up to legal action from the creditor.
Another way to manage your debt is to look for a debt consolidation loan. This is a situation where you take out a loan and then use this loan to pay all of your outstanding debts. The goal of debt consolidation is to get a loan that has a lower interest rate than the overall interest rate of your existing loans. However, if you have missed debt payments in the past or have a bad credit rating for a variety of other reasons, you may find it difficult to get a loan with a favourable interest rate.
Getting Help with Debt Management
Many people need help with debt management. Levels of household debt in Canada reach new record highs all of the time. This means that more and more people are seeking debt management advice. If you have a large amount of debt and you’re unsure as to what you can do to improve your financial situation, you may wish to speak with a financial professional.
A trustee in bankruptcy is an individual who is licensed and registered to review financial situations and provide information on the debt management and debt relief options that are available. Bankruptcy trustees do not just provide information on filing for bankruptcy. They are required by law to present all of the options that are available to you. While bankruptcy may be an option, there are other debt management processes as well, such as a consumer proposal. This may be an option for you, depending on your situation.
A consumer proposal is a legal process where you make an offer to all of your unsecured creditors to pay them a portion of what you owe over a specific period of time. Once you have made all of your payments, the remaining outstanding debt is discharged. Unlike debt settlement and negotiating with individual creditors, if the majority of your unsecured creditors accept your proposal, then all of your unsecured creditors are bound by its terms.
A bankruptcy trustee can help you understand the consumer proposal process and assist you in filing if this is the option that you choose to pursue.
Bankruptcy is also an option that you may be presented with by a trustee in bankruptcy. Like a consumer proposal, this is a legal process that your trustee can help you understand and pursue if you choose.
While debt management can seem scary and intimidating, it doesn’t have to be. There are strategies, processes and people who can help you.