I would gently point out that a bankruptcy or a consumer proposal would not make their credit rating worse, because their credit rating was so bad to start with.
I would explain that although the record of their bankruptcy would stay on their credit report for 6 years after their discharge from bankruptcy (For a consumer proposal it would be 3 years after the satisfaction of the consumer proposal), they would be able to rebuild their credit rating within 2 years after their discharge.
In many cases a bankruptcy or consumer proposal would actually improve their credit rating because when they were discharged all their debt was erased so they were, in fact, a better credit risk after filing than before.
Paying interest only to preserve a “good credit rating is a strategy many people use. This is quite common with the person carrying on this strategy for months or years, while their debt accumulates with no resolution in sight for a solution to their debt crisis. So long as this strategy is used there is no possibility that the person can save for their future. They are just a slave to the false God of a good credit rating.
My experience is that most people, suffering a financial crisis, wait too long before seeking professional advice. The longer they wait the more stress they undergo, the more sleepless nights they endure and, the longer lasts their fear of answering the phone only to have another collector on the line.
Once the person suffering severe financial crisis takes control of his debt by dealing with it, perhaps by setting up a free consultation with a trustee, the better he feels. I have never had a person tell me that filing bankruptcy was a mistake.
Invariably they say they should have done it months ago. As soon as they filed it was like an enormous weight had been lifted from their shoulders. No more collection calls and no worries about having their wages garnisheed. They also had more money because in a bankruptcy or consumer proposal debts no longer had to be paid.
If you have any questions about this or other aspects of bankruptcy or consumer proposals you can set up a FREE consultation with the Licensed Insolvency Trustees partnered with Bankruptcy Canada.
You can call 1-877-879-4770, 24/7, to book a Free Consultation with a licensed Trustee.