Are you looking for consumer debt help in Canada? The facts are that Canadians are deeper in debt than ever before.
Consumer credit is so easy to get from payday loans to credit cards being given away to students on University Campuses. While most people succeed in dealing with their debt responsibly, there are a large number of people who just can’t.
Whether that is from sickness, loss of job, or divorce debt issues can affect your entire life.
In this post, we are going to explore three different consumer debt relief options. All of these options are ones that you will need to discuss with a financial professional.
Examples are Chartered Insolvency & Restructuring Professional, Licensed Insolvency Trustee. Also, it might be a financial advisor, credit counsellor, or mortgage broker.
You can fill out the form on this page. Once we have your information, our credit counsellor will call you. They will explain your options for the best ways to resolve your debt. You can also use the live chat function.
Debt settlement is where you systematically negotiate an alternative payment arrangement with your lender. While we outline how to do this yourself here, it is best to consult with a professional.
Make sure to watch the video at the end of this article.
What Is The Debt Negotiation Process?
Whether you do it on your own or hire a professional here is what the process would look like. In this scenario, we are only dealing with your unsecured debts.
While this may seem contradictory to what you heard before if you really want to force the lenders to hand you need to stop paying them. They do not want to send you to a collection agent or sue you. Both cost them money.
They want to have you pay the minimum payments and collect their interest. Remember their debt is unsecured.
Once you have gone 120 days without paying, the creditors will send your debt off to a collection agent. At this stage, your credit rating is an R6. You want this to happen as the collection agent is the one who has the ability to negotiate.
Typically the lender will sell your debt to a collector for 5 to 10 cents on the dollar.
Request to communicate in writing only
The collectors will be very ruthless on the phone, so you want to avoid this by sending them a letter to communicate with you in writing only. You can find a copy of a letter to do by clicking here.
Supply them with a witnessed statement of your affairs
The creditor has no idea as to your situation. So you have to tell them what you are going through. They will not believe you over the phone so send them a statement telling them about the following:
Assets- List the fair market value of everything own, after expenses to sell.
Liabilities- Show them, everyone, you owe money to. so they know where you are at.
Income- Print off your paystubs and send them to them. Show them what you are making per month
Expenses- Estimate what it costs you to live each month without your debt payments. Show them what you can afford as a repayment plan.
Put a proposal together in writing
Now that you know what your assets are worth and what you can afford to reasonably repay per month, make the creditors an offer.
Get Acceptance For Your Consumer Debt
Now the hard part. You have to get every creditor to agree to your plan. If they say yes, and you finish the payments, you have to make sure to get them to record the debt as paid in full on your credit bureau.
What are the pros and cons of an informal debt settlement?
No public record – if you file a settlement informally no one has to know about it. It’s a deal you made with your creditors.
Minimal effect on your credit rating – because you did this on your own, the only poor effect on your credit is an R6 collection. Which will be erased in 6 years.
Cheaper – you will not have any expensive fees to pay to anyone.
No stay of proceedings – your creditors could say they accept the plan and then sue you anyway.
There is no majority rule – in a court-bound proposal, the deal is legally binding on all the creditors. Informally the creditors have no obligation to accept your proposal.
May need lump sum – the collection agent may not want to accept a payment plan.
We hope it is clear that the process has a lot of moving steps, and the process can be quite daunting. If it all seems too much to handle, then hire a professional to manage the process for you, or contact us to help you.
Consumer Debt Help From a Debt Consolidation Loan
When you are faced with really high interest on a large number of small loans a great option is to approach a bank and ask for one loan to repay all the other debts. The loan can be spread out over a longer period of time at a lower interest rate.
One monthly payment – One monthly payment can save you time by paying all your bills at once.
Keep your credit rating in good standing.
High interest and fees– A consolidation loan is paying debt with debt. You need to calculate the cost to do so.
You must qualify- Bankers are reluctant to give out a consolidation loan without some type of security or assurance that you can repay the loan. If your credit is bad, and your income is low then you won’t qualify.
No protection from creditor calls- If the loan is not enough to pay all your creditors then they may still be pursuing you.
Effect on your credit score- The credit bureaus do record all the applications that you make, so if you are applying at multiple locations you may be affecting your score.
We want you to know that suffering from your debt problems is optional. There are plenty of options for you to choose from if you are struggling to see the forest through the trees. Let us help you. Consumer debt help is just around the corner. Reach out to us via the form on this page.
Credit Counselling To Get Consumer Debt Help
The term counselling is a huge misnomer in the industry. The amount of marketing behind this term leads people to believe that credit counsellors are trained professionals who like a psychologist, can treat you to become happy and healthy.
Well, that is just not the case. Credit counselling agencies or companies generally take one course on how to deal with people’s finances. They are good at budgeting and putting people on a payment plan.
So what should you do?
Visit with a Credit Counsellor
There are two types of agencies. The first is not for profit. The second is for profit. Not for profit does not mean they are charitable. It just means they spend all their money in the company. Generally, not-for-profit agencies are funded by credit card companies or banks and can charge you lower fees.
For-profit agencies are not subsidized so generally charge you a fee for their service.
Choose a debt management plan
Ok, so a credit counselling company will put together what is called a DMP or “debt management plan.”
They will put together a statement of your affairs and then negotiate with the lenders, create a repayment plan. Also, the plan is typically up to a maximum term of 5 years and includes all of your debt.
What Are The Pros and Cons of Credit Counseling?
One Low Monthly Payment – if you have a lot of different creditors, the ability to consolidate the debts into one payment will save you tons of time and effort each month.
Reduced Interest – credit counsellors can typically negotiate a lower interest rate.
Collections Stop – if the lenders agree to the DMP then they will stop calling you. But the ones that don’t agree do not have to stop.
Expensive- DMP will be more expensive than a debt settlement or a consumer proposal
No forced acceptance- most creditors will accept but they are not forced to.
Credit rating– a DMP will show as an R7 on your credit bureau for 2 years after it is paid off.
We urge people to be very cautious when entering into a credit counselling service.
The only time we recommend credit counselling is when you have assets greater than your debt, or if bankruptcy or a consumer proposal is too expensive. 100% of the time a consumer proposal will be cheaper for you than credit counselling.
Where Can I get Help?
So there you have it. A complete analysis of the different consumer debt relief options. We are here to help.
If you need consumer debt help, reach out to us via the form on this page.
What is insolvency? It’s nothing good. The study of millennials is important to study. They are going to be the next generation to take over from the large population.
This takeover is from their parents who are the soon-to-be retiring baby boomer generation.
This article will discuss how debt and insolvency are affecting millennials and their financial futures today.
You need to speak to a licensed insolvency trustee, contact us using the form. Our team will ask you questions and take your information. You will then get a callback or email from the licensed insolvency trustee.
What Is An Insolvent Person?
Statistics from Industry Canada report that in 2006 7.1% of insolvency filings (either a bankruptcy or consumer proposal) were as a result of the age group 25-29 years old. This is compared to 10.8% in 2005.
As a millennial, I can echo these comments. I have a number of friends personally who have been unable to find the high-paying long-term career jobs that their parents have.
In addition, the parents are holding onto those jobs longer, as the parents cannot afford to retire, leaving less hope for future career opportunities.
Consumer Debt Help
I believe we are in one of the greatest eras ever to live based on the standard of living, as a result of all our technological advancements, but most jobs out there are entry-level positions that are low paying. Therefore most millennials need to work two or three just to make ends meet.
According to 2013 research from the Boston Consulting Group, millennials spend the greatest amount of money in the coming year on fresh fruits, organic food, and natural products.
I believe there is hope for my generation to be more financially prudent than my parent’s generation. With the amount of available financial knowledge education out there we have no excuse. We must become better savers than spenders.
Where Is The Debt Coming From?
These AFS products scare me, because they charge enormously high-interest rates, and target the most vulnerable in our society.
Most of the people who use these products do not realize the cost of borrowing and find themselves stuck in the proverbial hamster wheel unable to get out.
Coupled with high student loan payments, AFS products are a big cause of insolvencies in this demographic.
Cited from the National Financial Capability Study, half of the millennials who are credit-card users say they carried over a balance—for which they were charged interest—in the last 12 months. A sizable share has been hit with late fees (22%), over-the-limit fees (13%), and fees for cash advances (14%).
This is just more debt that is unnecessary. I find it frustrating that credit card companies can get away with such power to charge these large fees. With more knowledge and education I think the millennials can do a better job avoiding this debt.
I am still optimistic that good spending habits will be a saving grace keeping this generation away from insolvency.
Personal Bankruptcy And Insolvency
How is Generation Y different? There are a number of reasons I believe this generation will be more responsible with money. As already mentioned generation y will not have the high-paying jobs that the boomers had.
With lower incomes, and fewer assets it is not as easy as this generation to get into large amounts of consumer debt.
In addition, they do not spend as much as their parents. The generation is also averse to the big banks and takes pride in dealing more local and within their communities.
If faced with debt problems this local banking mentality will allow the debt issues to be resolved easier than with a large chartered bank.
Consumer Debt Help Canada
Another differentiator is that this generation will not inherit as much wealth as their parents did. Due to longer life expectancies and poor retirement planning the millennial will only inherit around $50,200 on average. Cited from a survey done by Vancity in 2016.
The poor planning of our parents is going to put more pressure on the millennials when they get to retirement age, and therefore our economy and already dwindling Canada Pension Plan.
All in all, there is hope for the future. We live in a great era filled with opportunities, and a great standard of living. Although with lower-paying jobs, and less transfer of wealth the echo generation is going to be able to live a simpler more stress-free existence.
Are you looking for credit rebuilding programs? Do you have to file a bankruptcy or a consumer proposal? Your credit rating has been damaged.
And you want to know how to rebuild it. This article will teach you everything about credit ratings, and a few tips on how to improve your rating after your insolvency.
You should speak to our credit counsellors today. You can do so by filling out the form on this page.
Consumer Debt Help Canada and The Impact On Your Credit Score
Good credit history is an important deciding factor in whether a home loan application is approved. Credit scores differ from credit ratings. Scores give a more detailed “snap-shot” of your credit profile.
While credit ratings have been available to Canadian consumers for years, credit scores have only been available since 2002. The best credit score is 900 and the poorest is 300.
Only 5% of Canadians have a credit score above 850; 24% are at 800-849; 27% are at 750-799; 19% are at 700-749; 11% are at 650-699; 6% are at 600-640; 4% are at 550-599; 4% are at 549 or less.
Consumer Debt Help
Sometimes a score cannot be obtained due to lack of credit history or too few lines of credit.
- 720-900 You are at the top with the best rates and terms offered to you.
- 700-719 Excellent You are a very desirable borrower.
- 680-699 Good credit. You should be in strong shape to buy.
- 660-679 OK credit. Don’t look for other exceptions.
- 640-659 Borderline. OK if everything else is strong.
- 620-639 Weak. The rest of your file must be perfect.
- 600-619 Difficult. Needs some work, or a special program.
- Below 600 Trouble! Try to fix up your credit!
How To Improve Your Score Using Credit Rebuilding Programs
How To Get Your Own Credit Report On-Line? Consumers may obtain a copy of their credit report, plus credit score, and a score analysis online in Canada, for a fee (of approximately $21.95).
Equifax Canada provides consumers online, real-time access to their credit information starting at www.equifax.ca
Get Your Discharge
In order to move your credit rating, you first need to be discharged from the bankruptcy or the consumer proposal you filed.
Get Credit Again
Unfortunately, we live in a credit world, and the only way to improve your score is to use credit again.
There are 2 types of credit ratings. Revolving ratings or “R” ratings, and Installment ratings or “I” ratings. Revolving refers to credit cards, payday loans, or utility bills. Things that are in a sense revolving items.
Installment credit refers to your car loans, mortgages, or lines of credit. This type of credit product is paid back on a term with installments.
In order to improve your credit rating, you need to establish both types of credit.
But how do you get credit when you’re credit rating is so poor? There are a number of credit companies out there that will lend money to people who have been discharged.
The reason is that you no longer have any debts. You have been through the process and they know they can charge a higher interest rate, and it is likely you are not going to default again.
As long as you are discharged from your insolvency you will have a chance to apply.
Consumer Debt Help Canada and Credit Bureaus
Here are a few of the companies that can lend you both types of credit even after your insolvency:
Improving Your Credit Score With Credit Rebuilding Programs
Make Your Payments. So now that you have credit again, you must make your payments on time. On-time means within the 21 day grace period.
Also, most people think they need to spend a lot of money to build up this credit, but it’s not true. Also, you could buy a stick of gum every month and the credit granter has to report that you made the payment on time.
Therefore, do this for 12 consecutive months, and voila your credit rating will go up.
We hope you have learned a thing or two about credit ratings and how you can improve your score even after insolvency. The important thing to remember is that you are not going to be prevented from credit again.
Millions of people have been through the process and everyone will get a second chance to rebuild.
Who Is A Licensed Insolvency Trustee?
A lot of people are wondering who is a Licensed Insolvency Trustee (or LIT)?
A LIT is a federally licensed individual that can provide a consumer or corporation with debt relief under the law.
They can provide consumer debt help in Canada.
If you or someone you know is struggling with debt in Canada there are 2 routes to take, formal and informal. Dealing with debt informally means doing it yourself or getting representation.
You could call each creditor and ask them to lower your payments. Or you could try and get a consolidation loan and pay them off.
Formal debt relief includes two government-regulated options:
1. File bankruptcy
2. File a consumer proposal
The word insolvency is defined by the Bankruptcy Act of Canada to mean, a person who has more debts than assets. Also, they cannot meet their obligations as they are due to be paid.
In order to help these people, there is only one person to offer formal government programs. Therefore, that person is a Licensed Insolvency Trustee.
Consumer Proposals and Credit Rebuilding Programs
In Canada, a person who provided formal options was previously referred to as a Trustee in Bankruptcy.
As of December 2nd, Industry Canada and the Office of the Superintendant of Bankruptcy released a new directive that changes the name of a Trustee in Bankruptcy to Licensed Insolvency Trustee (“LIT”).
The Government recognized that the word bankruptcy is charged with a lot of emotion, and this new name will take away the fear and stigma associated with that word.
The process to become licensed is not easy. One must hold a university degree, go through an intensive 2-year training program, and then pass the national oral board exam.
Only until one is licensed can they then offer bankruptcies and consumer proposals.
How Do I Get Started?
- The first step is to call and set up a free initial consultation. This meeting lasts 30 minutes and the Licensed Insolvency Trustee will help you to organize your financial affairs to uncover the best way forward.
- Once a solution is chosen the Trustee will communicate to all your creditors, stop all collection calls, and any legal proceedings,
- Provide advice on money matters
- Provide you with a certificate of completion so that you are clear of your debts forever.
Consumer Debt Help Canada and Moving Forward
We are excited to help people with their bad credit. Also, our credit repair team gives consumers the ability to make more informed decisions. Further, our team can help with credit rebuilding programs.
In conclusion, we have licensed insolvency trustees who are ready and waiting to help you with your situation. Don’t let your debt take control of life anymore. Take action.
We hope you found this consumer debt help guide in Canada helpful.
Author: Alistair Vigier is the CEO of ClearWay Law