Debt Relief: Understand Your Options and the Consequences

It doesn’t matter whether you are drowning in a massive amount of debt or whether you are trying to keep everything afloat because you need to know that you are not alone. The average household debt for Canadian citizens is increasing, and studies have shown that nearly half of people live from month to month. Studies have also shown that many people’s income goes toward paying off debt, with a lot of this going to interest alone. That’s not all, though. Two out of every ten people believe that they are going to have to liquidate their assets so they can clear their debt. Two-thirds of people anticipate having to take on a new form of debt.

What Options do you Have for Clearing your Debt?

You have options available if you want to try and clear your debt. If you want to learn more about them, look below.

Credit Counselling

You can undergo credit counselling if you want to get out of debt. Usually, this is a free service, and you will be able to talk to someone confidently. The only thing that you have to lose is the debt that you have. When you come to us at Fox-Miles and Associates, you will soon see that we have decades of experience and can offer you a free consultation. During the consultation, we will explore your spending habits, budgeting skills, and current debt relief options that may be available.

Debt Consolidation Programs

Another option that you have would be debt consolidation. Going through a debt consolidation program will form an agreement between you and your creditors. You will also work with a third-party agency that will work by your side. The third-party will usually be not-for-profit. When you enter debt consolidation, you will be able to eliminate interest on the debt you owe, and you can negotiate lower monthly payments. You can also end the collection calls while having a completion date in which you can look forward to your debt getting paid off.  If your creditors agree to the terms, you will get one lower payment to the counselling agency. They will then send the payment to your creditors.

One consequence is that you will have to let go of your credit cards. Many people maxed them out long ago, so this is never really an issue. If you work with someone certified and from a reputable agency, they can give you a secured credit card that you can use to rebuild your rating.

Debt Consolidation Loans

If you want a loan so you can try to consolidate your debt, then you should know that there are some advantages to this. You will have the convenience of being able to have a single monthly payment as well. With this type of loan, you will usually have to put down some collateral which could be your home. If you receive this offer, you typically need a good credit rating, which is not usually the case if you have considerable debt. The biggest negative is that it may push you into debt even more. You will be able to access the credit cards you have, as you always would, which means that you have to pay back your loan while keeping track of your personal finances.

Debt Settlement

Debt settlement agencies have been the focus of the FCAC, or Financial Consumer Agency of Canada, for quite some time. They advertise that you can pay pennies on the dollar for your debt, but many people don’t realize that you will have a lot of up-front fees. You may find that even after paying the fee, they do not end up taking action at all. Of course, many positive movements have been made in recent years regarding this. One of them would be the Stronger Protection for Ontario Consumers Act. This act implements standards of conduct, which involve banning up-front fees and limiting how much a company can charge. Detailed contracts are put into place, and you also have a 10-day cooling-off period where you can back out should you change your mind.

Consumer Proposal

Consumer proposals tend to be much more favoured when compared to bankruptcy, but at the end of the day, you have to remember that it is a form of insolvency either way. Bankruptcy eliminates all of your debt, but with a proposal, you will agree that you only pay a small percentage of whatever you owe. You will have your credit rating negatively impacted as well.

Bankruptcy

Many people think bankruptcy is a way to start over, but others view it as shameful. The truth is that neither of these points is correct. Bankruptcy can follow you around, and it will kill your credit. Additionally, you risk the seizure of any equity in your home, and your RRSP contributions and tax refunds will also be taken. You will also have to carry out some court-ordered duties. If you have exhausted your options, however, this could be a valid option, so be mindful of that if you can.

If you want some help and advice regarding your debt, or if you want to make sure that you are making the right choices, then the best thing you can do is contact a professional advice service. When you do this, you will be able to get the unbiased support you need to navigate this difficult time. Contact Fox-Miles and Associates today to find out more.