What Actually Happens When You Decide to Get Debt Help?

Getting Debt Help in Canada

When debt piles up, it can seem like a mountain that’s impossible to climb. But there’s good news for those grappling with significant debt in Canada: there are legal and effective solutions available. As you navigate your financial journey, understanding what happens when you decide to get debt help can be a critical step towards achieving financial freedom. In this guide, we’ll explore the processes, options, and outcomes that unfold when you decide to seek debt assistance.

 

Identifying the Need for Debt Assistance

Before delving into the specifics of debt relief options, it’s crucial to recognize when to seek help. Acknowledging that you need assistance is the initial step towards resolving your debt issues. Here are some indicators that you might require support:

  • Constantly making minimum payments on your credit cards
  • Struggling to pay bills on time
  • Receiving “past due” notices or collection calls
  • Relying on credit to cover basic monthly expenses
  • Feeling stressed or anxious due to mounting debts

If these signs resonate with your current financial situation, seeking help to manage your debts might be the most beneficial decision.

Understanding the Legal Debt Relief Options in Canada

Canada provides two legal mechanisms for debt forgiveness — a Consumer Proposal and Bankruptcy.

Consumer Proposal: This is a legally binding agreement administered by a Licensed Insolvency Trustee (LIT). It allows you to repay a portion of your debt over a maximum period of five years, offering full forgiveness of the outstanding balance upon completion.

Bankruptcy: This legal process enables you to be absolved from your unsecured debts. However, it might involve surrendering some assets and will likely impact your credit score adversely.

Navigating the Role of Debt Settlement Companies and Credit Counsellors

When exploring debt relief options, you might encounter debt settlement companies and credit counsellors. These entities offer to negotiate with creditors on your behalf, often promising to settle your debt for less than what’s owed. However, the reality can be quite different.

Debt settlement companies typically require upfront fees. While some provincial regulations aim to curb such charges, this area is not a regulated industry, making it essential to proceed with caution. On the other hand, credit counselling does not usually involve debt forgiveness. Instead, these services help you manage your debts better, potentially reducing or eliminating interest.

Qualifying for Debt Relief and Forgiveness

To qualify for legal debt solutions like a Consumer Proposal or Bankruptcy, you need to owe at least $1,000 and be unable to repay all your debts as they become due. Meeting with a Licensed Insolvency Trustee will help you evaluate your overall situation and determine which option is most suitable.

Exploring the Personal Bankruptcy Route

Bankruptcy offers a legal solution for debt relief. While it may sound daunting, the process is straightforward and private for most Canadians. Here’s what you need to know about declaring bankruptcy:

  • Bankruptcy provides forgiveness for various types of debts, including credit card debt, overdrafts, tax debt, payday loans, and student loans.
  • It protects assets and income that might otherwise be vulnerable to seizure by creditors.
  • It alleviates the stress of mounting balances and overwhelming payments, offering a clear “debt-free date” and a fresh financial start.

Declaring Bankruptcy: The Process

Declaring bankruptcy involves these steps:

  1. Connect with a Licensed Insolvency Trustee for a confidential consultation.
  2. Complete some intake forms and sign the official personal bankruptcy documents.
  3. Work through and complete the bankruptcy process.

Evaluating Consumer Proposals

A Consumer Proposal is a unique legal debt solution that consolidates all your debts, halts all future interest charges, and requires you to repay a portion of the debt. This repayment plan is tailored to your needs and can be completed through a single lump-sum payment or extended up to 5 years.

Perks of Choosing a Consumer Proposal

Choosing a Consumer Proposal offers several benefits, including:

  • Consolidation of diverse debts without borrowing
  • Substantial reduction in total debt to a level you can afford to repay
  • Protection from creditors without declaring bankruptcy
  • A clear “debt-free” date

Choosing the Right Debt Relief Option

The best debt relief solution for you depends on your personal circumstances. It’s crucial to seek professional guidance to explore your options. You can connect with a Licensed Insolvency Trustee confidentially to learn more about your options and gain information specific to your situation, without impacting your credit history or committing to enter bankruptcy.

Final Thoughts

Debt can be overwhelming, but remember, there are solutions available. By understanding what happens when you decide to get debt help, you can make informed decisions and take the first step towards financial freedom. Whether you choose bankruptcy, a consumer proposal, or another option, the goal is to reduce your financial burden and set you on the path to a debt-free future.

We hope this guide has answered your question, “What Actually Happens When You Decide to Get Debt Help?” Remember, seeking professional advice is crucial to ensure you choose the best path for your unique situation.

Find Your Personal Debt Relief Solution

Licensed Insolvency Trustees are here to help. Get a free assessment of your options.

Discuss options to get out of debt with a trained & licensed debt relief professional.