Personal Debt Management – How You Can Regain Control of Your Finances

Even as the Canadian economy stabilizes, many Canadians continue to find themselves dealing with the difficulties brought on over the past few years. Debt has become, or rather continues to be, a major stressor for countless individuals. Although some Canadians have been able, over the past year, to climb out of that financial black hole, others still struggle to find a foothold.

If you are in the latter category, does this mean that you are forced to continually struggle with debt? No. There are many personal debt management options that exist which can help you get out of debt. Here are the main ones – as well as a brief description of how they work.

Debt Consolidation: Consolidating your debt means just that – consolidating all debt totals into one. This is usually done through a loan. With a debt consolidation loan, all other debts are paid off, and you are required to make only one payment each month. There are a number of benefits to this type of debt solution, including the convenience of a single monthly payment and the amount of total interest saved through consolidation (the interest rate for consolidation loans are often far lower than other types of debt, ie. credit cards). 

Depending on your circumstances, that can be a few difficulties with a debt consolidation. Since you are essentially getting another credit product, your credit will likely need to be in pretty good shape – but if you are struggling with a mountain of debt or having a hard time making monthly payments, your credit may not be stellar. Also, if you do have a large amount of debt, securing funding to consolidate all of it may also prove quite difficult.

Consumer Proposal: A consumer proposal is essentially a proposal made to your creditors to reduce the amount of your debt – the total of which is determined based on your income and ability to make the monthly payments. It is conducted by a trustee in bankruptcy and is an official process (meaning you cannot do it on your own). Once accepted by the majority of your creditors, your debt will be reduced and you are required to make manageable monthly payments to pay off the debt in a much shorter period of time.

There are many positives to a consumer proposal. Firstly, it reduces the total amount that you owe. Secondly, it consolidates all of your monthly payments into one, single monthly payment. It will also stop any collection enforcement action against you and can be paid in full at any time. That being said, it will impact your credit rating, but if you are considering a consumer proposal this has likely already taken place.

Bankruptcy: Although often considered the least popular, for many individuals bankruptcy is the only realistic option. In a bankruptcy, your creditors receive notice that you have declared and your debts are cleared. Bankruptcy involves a court determination that your assets are to be taken over by a trustee for the benefit of your creditors. During your bankruptcy you do have some responsibilities, including proving income monthly, attending credit counselling sessions, and making minimum monthly payments, but collection enforcement actions are halted against you.

Depending on your own unique situation, one of these may be a very attractive debt solution. Our best advice? Seek out some professional debt management guidance in order to choose the option that best suits your needs and circumstances.

For more on these and other debt management options, please contact DebtCare Canada today by calling 1 (888) 890-0888.