The burden of debt can be emotionally draining, impacting your physical wellness, mental health, and personal relationships. However, there is a silver lining — numerous Canadian Debt Relief Programs are designed to minimize your financial stress levels. These programs are tailored according to different debt situations, from just managing to meet monthly bills to being completely drowned in debt. The good news is, you’re not alone in this journey, and there are multiple avenues to help you regain your financial stability.
Understanding Canadian Debt Relief Programs
A variety of debt relief programs are available to Canadians, including credit counselling, debt settlement, and Bankruptcy. The right program for you hinges upon the amount and type of debt you are grappling with.
However, it’s important to note that only two government programs directly deal with debt relief in Canada — a Consumer Proposal and Bankruptcy. So, when seeking assistance for your debt situation, be wary of any company claiming to be a government or federal relief program.
Exploring Your Debt Relief Options
To determine the most suitable debt relief option, consulting with a Licensed Insolvency Trustee (LIT) is advisable. A LIT can guide you through different debt management programs, helping you understand each’s benefits and drawbacks based on your unique situation. The available Canadian relief programs include:
Credit Counselling
For those managing to meet their monthly debt payments amidst struggles, credit counselling could be the right choice. Credit counselling, often termed as a Debt Management Program, provides financial education, budgeting advice, assistance in devising a debt repayment plan, and even negotiating with your creditors.
However, remember that credit counselling doesn’t offer any legal protection against creditors. If you’re considering credit counselling as a debt relief option, make sure to inquire about the company’s qualifications, rates, and fees before you commence working with them.
Debt Consolidation
Debt consolidation involves securing a new personal loan to pay off all existing debts. The advantage here is making a single monthly payment instead of juggling multiple ones. If the consolidated loan bears a lower interest rate, it can result in substantial savings on your interest payments. However, it’s critical to remember that debt consolidation doesn’t reduce the total debt balance.
Debt Settlement
Debt settlement involves contracting a debt settlement company to negotiate your debt repayment plan with your creditors. The objective is to agree upon a repayment sum less than your outstanding balance. However, creditors are not obligated to negotiate with the debt settlement company, and they may not agree to lower your debt. Before engaging a debt settlement company, ask about their fees. Some companies charge an upfront or monthly fee, which might be applicable even if they fail to negotiate a reduced payment with your creditors.
Consumer Proposal
As one of the two government debt relief programs in Canada, a Consumer Proposal is an offer to your creditors to pay back a portion of the debt you owe. You will need a LIT to file a Consumer Proposal, who will negotiate the amount you can afford to pay each month with your creditors. One key benefit of a Consumer Proposal is that it immediately stops collection calls, wage garnishments, and lawsuits.
Bankruptcy
Bankruptcy, the other government debt relief program, is a legal process available to Canadians unable to repay their debt. In Bankruptcy, most of your debts will be forgiven, except for secured loans, student loans less than seven years old, child and spousal support payments, fines, and court-ordered restitution payments. To file for Bankruptcy, you will need a LIT, who will guide you through the process. Like a Consumer Proposal, filing for Bankruptcy offers immediate protection from creditors, halting collection calls, and legal actions.
Seeking Professional Debt Relief Assistance
A Licensed Insolvency Trustee is the only federally regulated professional authorized to administer government-regulated insolvency proceedings that can liberate you from your debt, including a Consumer Proposal and Bankruptcy.
A LIT can navigate you through the different Canadian debt relief programs available, helping you choose the most suitable option.
Remember, you don’t have to grapple with your debt on your own.
Regaining control over your financial circumstances is possible. With the right information, support, and resources, you can overcome your debt and chart a path towards financial stability. Canadian Debt Relief Programs: 5 Strategies to Recover from Debt is your first step towards achieving this goal.
