Debt Relief and Debt Settlement
DEBT RELIEF OPTIONS
If you feel that your financial situation is getting worse and that debt relief is more remote than ever, there are a number of preliminary steps you can take to resolve your debt - without participating in a formal legal process (such as a Consumer Proposal or Bankruptcy).
The first step is to sit down and examine your household budget. You need to determine if there are ways to cut back on some of your monthly expenses, so that you have more money available to reduce your debt load. If that is not possible, you have to look at other options. The sooner, the better!
If you debt load is high, some financial institutions offer debt consolidation loans. These loans are designed so you can pay off most (if not all) of your debts at the same time, leaving you with only one outstanding loan to pay each month. Of course, there are a number of disadvantages to these types of loans, including high interest rates (making it difficult to pay them off over time) and the possibility that, due to your current debt load, you may not qualify for a consolidation loan.
If your bank will not provide you with a consolidation loan, you can try to negotiate directly with your creditors one-by-one. This can often be a difficult and time-consuming process.
Some people consider cashing out their RRSPs to utilize those funds to reduce their debts. This should always be your last resort and you should never do this without speaking to a debt professional, such as a Licensed Insolvency Trustee.
You may be able to keep these assets by offering your creditors a settlement by filing a Consumer Proposal or by filing for bankruptcy protection (as a last resort). They are explained in the following video:
Failing that, if you own a home you could attempt to borrow against the available equity. This will provide funds to pay down your debts with the highest interest rates, but still leaves you with an additional loan.
(Dis)advantages Of Informal Debt Settlements
In summary, informal debt settlements offers the following:
- Managing your debts without a formal process allows you to avoid bankruptcy or a proposal
- You can rebuild your credit rating over time (normally 7 years from when debts are paid in full)
- There is no guarantee all of your creditors will be willing to work directly with you in informal settlements
- Some consolidation loans come with much higher interest rates & take longer to pay off
- Cashing in an asset such as an RRSP will leave you without a retirement nest egg & there are tax liabilities
Schedule Your Free Debt Relief Consultation
To obtain the debt relief that you're looking for, it is advisable to talk to a Trustee, so that you clearly understand the options available. If we believe that an informal settlement is best for you, we will advise you accordingly.
We can assist you to find the best debt solution that can solve your debts problems and get a fresh start.
Fill out the form to book a free, non-obligation consultation with a Licensed Insolvency Trustee for specific information that helps you to solve your debt problems: