How to Assess Your Debt Situation
Assessing Your Debt Situation
The first step in assessing your debt is to write down all of your debts.
By making a list of everyone you owe money to, you can determine your current debt situation.
You should write down all of your credit card debt, car loans, mortgages, student loans, payday loans, utility bills, and any other regular debts you pay each month.
If you feel surprised or overwhelmed about how much you owe, you are not alone.
Once you see your debt laid out in black and white it can be startling; some people aren’t truly aware of their debt situation until they see it on paper.
You could write out your debt as follows:
Creditor I Type of Debt I Interest Rate I Amount Owing I Monthly Payment
Credit Card 1 I Credit Card I 21% I $12,000 I $300
Some people might be able to get their debt problem under control on their own.
However, if you feel you need to meet with a debt professional, such as a bankruptcy trustee, having all your debts written out will help in your initial consultation.
You will be able to better explain your situation if you have all of your debts and the payments necessary to service all your debts each month.
Your debt relief expert can then give you customized debt relief advice, which is a crucial first step towards debt recovery.
If you start to assess your debt situation you can work out a plan that works for you and your situation.
Getting Out of Debt on Your Own vs Professional Help
Once you have written down all of your debts and have a clear picture of your debt situtation, you should start examining your income and assets.
Create a budget for your monthly expenses.
If there is enough money left over in your budget for debt repayment you should put it all towards paying down your debt faster.
If you can reduce your expenses, you should also put that money towards debt repayment.
Remember to ensure there is enough in your budget to cover not only the interest payments, but enough to make a substantial dent in the debt principal as well.
If you owe $10,000 in credit card debt and your budget allows $1,000 a month for debt repayment, you can probably manage getting out of debt on your own; however, if you owe $40,000 in credit card debt, and only have $500 in your budget for monthly debt payment, you won’t even cover your interest payments and should seek professional debt assistance.
Examine Your Debt to Income Ratio
Even if you can cover your monthy debt payments, if you don’t have enough money to start paying down the debt you might have too much debt.
You should examine your debt to income ratio.
If the ration is over 30 or 35% you should seek professional debt assistance as soon as possible.
Debt Repayment Calculator
BankruptcyCanada’s debt repayment calculator can help you determine how long it will take to get out of debt.
It can help you determine if you can get out of debt on your own, or if you should seek debt assistance.
After assessing your debt, you should create your own personal debt management plan or decide to seek debt assistance from a professional.
A Licensed Insolvency Trustee is the only debt professional who can provide a complete range of debt solutions from debt consolidation to bankruptcy or a consumer proposal.
Talk to an advisor today.