The good news is that in Canada the economy seems to be looking up. People are going back to work and bankruptcy rates are down; however some families are left picking up the pieces. The pieces left to be picked up include accumulated debt, a record of late payments and bruised credit. It could be worse; you could have been one of the thousands of Canadians forced into bankruptcy during the recent recession.
The reason that bankruptcy rates in Canada are on the decline is two-fold.
One cause is recent changes to the Bankruptcy Act in Canada. The changes make it much more difficult, much more expensive and a much longer process to file for bankruptcy.
Another reason that bankruptcy rates are declining is that Canadians generally have been more optimistic about the economic outlook in Canada and are looking for other ways to deal with their debt. While it is nice right now that things are looking up, historically low interest rates are what continue to prop up the economy.
Interest rates have nowhere else to go but up. The is the natural course – as the economy improves, interest rates rise; if the economy falters, interest rates are frozen or reduced – this we saw in the recent recession and continue to experience post-recession.
Last year in addition to changing bankruptcy laws, they tightened lending requirements on CMHC insured mortgage products in an effort to force Canadians to borrow more responsibly. The Bank of Canada and major banks continue to release opinions concerning the high levels of debt that Canadians are carrying.
Another reason that bankruptcy rates are declining is that Canadians have more options than ever to deal with debt. There are many different types of companies that promote solutions to consolidate debt and/or get out of debt. The tricky part is figuring out which one you should deal with.
Banks who promote consolidation loans require good credit and often involve consolidating the debt into a single payment but they do not provide meaningful long-term strategies to get the debt paid off. Why? Because as long as you have the debt they are earning interest.
Finance companies offer consolidation loans but the interest rates often exceed 20%. Mortgage brokers offer mortgage options to consolidate debt; these options can involve stretching your debt out over 15, 20 or even 30 years.
Credit counsellors, debt counselling companies and trustees may offer options that can provide immediate debt relief – however they often won’t highlight how these options will destroy your credit.
We are the first organization to offer a program to consumers that it not one-dimensional. We can access all of the resources listed above and more. Financial Consulting is an emerging industry that involves helping consumers work through all of the solutions that are available to them. For more information about getting rid of debt without declaring bankruptcy please visit http://www.debtcare.ca/