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Canadian Debt Relief Programs: 5 Strategies to Recover from Debt

Debt is stressful. Not being able to pay your bills can be hard on your physical and mental health. It can consume your thoughts, make it difficult to sleep, and it can take a toll on your relationship.

However, there are several Canadian debt relief programs available to those who are struggling with varying debt levels. Whether you are just barely able to pay your monthly bills or you are totally consumed by debt and unable to manage your repayments. Financial help is available, and there is a path forward for you. You can recover from your debt and you don’t need to figure it out alone.

What Are Canadian Debt Relief Programs?

There are several debt relief programs available to Canadians ranging from credit counselling to debt settlement and Bankruptcy. The type of program that is right for you will depend on how much debt you are carrying and the type of debt you have.

Before choosing a debt management program or service, it is important to know that there are only two government programs related to debt relief in Canada. These include a Consumer Proposal and Bankruptcy. If you are looking for assistance with your debt, be cautious of any company that claims to be a government or federal relief program.

What Debt Relief Options Are Available to Me?

If you are trying to determine which debt relief option is right for you, it’s a good idea to speak with a Licensed Insolvency Trustee (LIT) as soon as possible.  A LIT can walk you through the different debt management programs and help you to weigh the pros and cons of each based on your specific situation. Available Canadian relief programs include:

Credit counselling

If you are managing to pay off your monthly debt but it is a constant struggle, you may be well-suited for credit counselling. Credit counselling is often referred to as a Debt Management Program. It can involve elements of financial education, budgeting advice, assistance in creating a debt repayment plan, and even help negotiating with your creditors.

While credit counselling can be a helpful debt relief strategy, it does not offer any legal protection against your creditors. Say, for instance, you work with a credit counsellor and they try to negotiate pausing your interest payments for a period of time. There is no guarantee that the negotiation will be effective. It is completely up to the creditor to decide if they are open to making any kind of deal. If you are considering credit counselling as a debt relief option, be sure to look into the companies qualifications and ask about all of their rates and fees before you begin working with them.

Debt consolidation

Debt consolidation involves taking out a new personal loan that is then used to pay off all of your existing debtors. The benefit of debt consolidation is that you will now only have one monthly payment to make instead of trying to coordinate and remember to pay multiple creditors. Additionally, if the consolidation loan has a lower interest rate, this will allow you to save on your interest payments.

However, consolidating your debt does nothing to eliminate or reduce the total balance of debt you owe. If you are really struggling to pay your monthly debts and looking to reduce the overall amount to make things more affordable, you may need to try a different debt relief option.

Debt settlement

With debt settlements, you typically enter into a contract with a debt settlement company that takes on the responsibility of negotiating your debt repayment plan with your creditors.

The goal is to negotiate a repayment amount that is less than your outstanding balance. It is up to you to save a lump sum of money that is given to the debt settlement firm. The firm is then responsible for offering the lump sum amount to your creditors. Note that the creditors are not required to negotiate with the debt settlement company. As a result, some of your creditors may not agree to lower your debt or even be willing to negotiate with the debt settlement company.

Before working with a debt settlement company, ask about their fees. Many companies charge an upfront or monthly fee which you may be required to pay even if they are unable to negotiate a reduced payment with your creditors.

Consumer Proposal

There are two government debt relief programs in Canada, Consumer Proposal and Bankruptcy. A Consumer Proposal is a proposal to your creditors to pay back a portion of the debt you owe. In order to file a Consumer Proposal, you will need the support of a LIT. Your LIT will work with you to determine what you can afford to pay each month and negotiate this amount with your creditors.

If your proposal is accepted, one of the benefits of filing a Consumer Proposal is that all of the collection calls, wage garnishments, and lawsuits will stop immediately.

Bankruptcy

Bankruptcy is a legal process that is available to Canadians who are unable to pay back their debt. In Bankruptcy, the majority of your debts will be forgiven, with the exception of secured loans (like your mortgage), repayment for student loans that are less than seven years old, child and spousal support payments, fines and court-ordered restitution payments.

In order to file for Bankruptcy, you will need to reach out to a LIT. The LIT will be responsible for the filing and will walk you through the Bankruptcy process.

Similar to a Consumer Proposal, one of the biggest pros of filing for Bankruptcy is that you gain immediate protection from your creditors. This means no more collection calls and no more legal actions can be taken by your creditors.

Who Can Help Me With Debt Relief?

A Licensed Insolvency Trustee is the only federally regulated professional authorized to administer government-regulation insolvency proceedings that will allow you to be freed from your debt. This includes a Consumer Proposal and Bankruptcy.

A LIT can guide you through the different Canadian debt relief programs that are available and help you decide which option is right for you. At Adamson and Associates, you can schedule a free consultation with a LIT to discuss the various financial supports that are available. You don’t have to deal with your debt alone. Reach out to a LIT today at 519-310-JOHN (5646), or contact us contact us online.

John Adamson, CPA, CMA

John Adamson, CPA, CMA

John is a Licensed Insolvency Trustee (1994), a Chartered Insolvency and Restructuring Professional (CIRP – 1994), and a Chartered Professional Accountant with a Certified Management Accounting designation (CPA, CMA – 1992). His experience includes more than 25 years of helping individuals, small businesses, their owners and even lenders, find solutions to their debt problems.

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