Understanding Debt Relief: How Does It Work?
Debt relief is a solution that offers those in financial distress a way out of insurmountable debt. But how does debt relief work? In this detailed guide, we will delve into the inner workings of debt relief, the strategies involved, and how it can be your ticket to financial freedom.
The Concept of Debt Relief
Debt relief is a concept that enables debtors to either extend their payment period, reduce the money owed, or pay for reduced interest rates. The resulting payments are more manageable and affordable. This concept is often applicable to large unsecured debts such as credit card debt and personal loans.
Some people might feel apprehensive about debt relief programs, fearing that they’re scams designed to trick debtors into believing they’re getting a good deal when they’re actually not. While there certainly are fraudulent companies out there, finding a legitimate debt relief service is entirely possible. The key is to look for a Licensed Insolvency Trustee (LIT).
The Role of Licensed Insolvency Trustees
Licensed Insolvency Trustees (LIT) are professionals regulated by the federal government. They provide advice and services to individuals and businesses wrestling with financial issues.
LITs are authorized insolvency professionals. They’ve undergone substantial education, training, and practical experience to administer government-regulated insolvency procedures. They provide comprehensive advice on debt discharge and help clients understand all aspects of debt relief options. They’re the only professionals licensed to administer insolvency proceedings, with their license granted by the Office of the Superintendent of Bankruptcy (OSB).
LITs are federally regulated. They must adhere to federal standards of practice and follow the Code of Ethics for Trustees. Moreover, their fees are regulated to ensure you aren’t charged exorbitant amounts. They even offer free initial consultations.
They are easy to find. You can check the Licensed Insolvency Trustee registry and find trustee offices near you. Alternatively, you can locate a trustee online.
LITs can deal with creditors. They can negotiate directly with your lenders, saving you the stress and time. Once you’ve decided on a debt settlement solution, they can protect you against collection and legal actions.
Various Personal Debt Relief Programs
1. Consumer Proposal
This legal process involves a Licensed Insolvency Trustee negotiating with your creditors for a payment settlement. Most debts can be covered, with a few exceptions such as student loans, child support, and money borrowed fraudulently. The amount to be paid is based on your ability to make payments and is usually a percentage or portion of the total owed. Unlike bankruptcy, you can keep your assets with a consumer proposal. However, this method will impact your credit score for up to 3 years after the completion of the proposal.
2. Bankruptcy
Bankruptcy is the last resort for those who cannot pay their debts. Like a consumer proposal, bankruptcy covers all debts except student loans, child support, court-imposed penalties, and debt from fraud. While some of your assets will be used to pay your debt, your insolvency trustee will explain which assets you can keep. The process takes up to 9 or 21 months for the first-time filers, and up to 35 months for those filing for the second time. Bankruptcy will affect your credit score for 7 to 14 years after completion.
3. Loan Consolidation
This method involves taking up one loan to pay off all your outstanding debts. The aim is to manage your debt by reducing multiple payments and lowering interest rates. However, it doesn’t reduce the total amount you owe. Loan consolidation isn’t for everyone and has its disadvantages, but with the right financial attitude and proper budgeting, it can be effective.
4. Debt Counselling
This involves acquiring the services of a credit counsellor or credit counselling agency to help you solve your financial issues. It includes one-on-one consultation or counselling sessions where you discuss your financial situation and money management. It’s important to find a reputable credit counselor to ensure you’re getting the best financial advice.
Say Goodbye to Debt with a Licensed Insolvency Trustee
If you’re currently experiencing financial troubles and unsure about how does debt relief work, the best step is to look for a Licensed Insolvency Trustee. Bankruptcy Canada, a Licensed Insolvency Trustee, have helped thousands of people resolve their financial problems by providing effective debt relief solutions. They can help you, too.
Understanding how debt relief works can be complex, but getting the right help can make the process easier. Whether you’re considering a consumer proposal, bankruptcy, loan consolidation, or debt counselling, a Licensed Insolvency Trustee can guide you to make the best decision for your financial health.
