Are you struggling with or drowning in personal debt? You need to know that you have a range of debt-resolution choices. In Canada, your choices range from spending the rest of your life paying down debt to doing nothing. And between those two extremes is a wide range of options.
Here is a bird’s-eye view of your options, assuming your unsecured debt (lines of credit, loans, credit cards; excluding mortgages) is under $250,000:
- Pay off your entire debt. But the assumption is that you are reading this article because that is simply no longer an option.
- Get a low-interest consolidation loan. Convince a bank to give you a loan that you can use to pay off your high-interest charging debts.
- Consult a credit counselling organization. These organizations put together dept management plan (DMP). Usually, the plan involves reduced (or eliminated) interest. Don’t be fooled by the terms “counselling” and “not for credit.” Do your research: find out who sponsors them, and be very clear on the small print.
- Hire a debt settlement firm. These are not regulated. They negotiate (reduce) the debt you owe your creditors. Many are American companies creeping up into the fertile lands of Canadian debt, although there are reputable Canadian companies out there too. Be careful.
- Submit a consumer proposal. This is like hiring a debt settlement firm except that it is regulated by the Canadian government and administered provincially through a trustee. A trustee’s income, in part, depends on the funds they extract from you.
- Declare bankruptcy. Contrary to popular opinion, bankruptcy is not the end of the world. It can be a new beginning. A bankruptcy can only be administered by a government-certified trustee.
- Do nothing. If you have no assets and no means to ever repay, you can ignore your creditors. The statute of limitations in Canada is determined provincially and ranges from two to six years. Seek legal advice for this option: it sounds simple but it’s more complicated than you think.
There is no universally preferred or recommended option. Begin with research. Get advice. The more you know, the more likely you are to access the solution best suits you and your circumstance.
Yes, there are costs and consequences for each option. Each (except the first) will impact your credit rating. Believe it or not, life with a damaged rating is still manageable. If you have to choose between carrying your debt for the rest of your life and eliminating all debt with a temporarily damaged credit rating, it’s in your best mental, physical and financial interest to opt for the latter.
You really do have a range of choices. Get to know them. Suffering is optional.