Are you looking for consumer debt help? 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.
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 call us today. 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. What Is The Process?
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. For more information, you may call us directly. We are here to help.
If you need consumer debt help, reach out to us via the form on this page.
Author: Alistair Vigier is the CEO of ClearWay Law