Robert (not his real name) works in a shoe store. Or if you ask him, he’ll proudly say that he’s now the Assistant Manager at a London fine footwear retailer.
It’s not a bad job for a 26-year-old single guy, and his increased responsibilities let him focus on operational details like inventory and display.
It’s an OK job – there’s even a decent coffee shop and gym nearby, and he rarely has to work nights anymore. Though it’s a fairly secure industry – everyone needs shoes no matter the shape of the economy – what’s less secure are his finances, especially after his landlord advised him that rent was going up.
Robert earns a little bit more than he used to, but the salary doesn’t add up to much. There isn’t much left for himself, especially when he pays hefty student loans and older credit card debt from that time when he got carried away buying clothes, decor, and appliances for his new place.
So Robert is in a tough position, and he isn’t alone. A recent Joe Debtor bankruptcy study showed that young debtors age 18-29 represent 14% of the study’s total insolvency filings. That’s an increase of 2% from the previous survey. General financial management issues are often a cause, as is the appeal of the quick, but dangerous solution of high-interest payday loans.
The survey also has shown that average take-home pay of all ages has dropped by 2% when compared to other costs that have grown. But millennials like Robert are especially vulnerable – many of them are working hard just to keep themselves in debt, and it doesn’t take much to go wrong for them to reach a crisis. Even a rent increase like Robert’s could tip the tables from “hanging on” to “panic”.
But there are options out there for Robert and the thousands like him.
Bankruptcy is One Option to Get Out of Debt
The process of personal bankruptcy is certainly an option if someone’s debts are especially significant, and threats of wage garnishments, lawsuits, repossessions, or calls from collectors are happening.
The legal process of bankruptcy discharges most unsecured debt, but may limit your financial options fr the near future such as the ability to not take out major loans, or receive credit cards for six years.
Depending on what you own, some assets like savings or a high value car likely must be given up.
Consumer Proposal Is An Alternative to Bankruptcy
In this case, you create a legally binding settlement to pay your creditors back a portion of what you owe them, and then have one monthly payment over the next five years.
Interest is also frozen when you file, which means that the amount you owe won’t increase as it will with credit cards or payday loans. Your payments remain exactly the same over the term of the proposal.
This solution has some advantages for people with high unsecured debt and can save up to 70% when compared to paying off debt balances on your own.
A Licensed Insolvency Trustee can help explain the process and see if it’s right for you.
Other Debt Solutions
Some people’s financial circumstances can be easily improved by putting conscious effort into their day-to-day spending and saving. This requires some discipline, but can also be educational for people who may not realize how quickly costs can add up. Eating takeout for lunch every day instead of bringing it from home, or picking up coffee on your way in instead of making it at home can impact your finances over time. If cutting costs, or increasing your income can solve your debt problems, that should be your first choice.
Debt consolidation can help combine small bills into one payment that’s easier to handle, and also cuts down on the interest from several cards. However, debt consolidation requires a recent credit score, and still leaves you in debt, and paying interest.
A debt management plan through a reputable credit counselling agency is also an option if you can afford to repay your debts in full. If you think debt relief is a better option than debt management, it’s best to speak with a Licensed Insolvency Trustee.
After hearing the options and receiving a free no-obligation consultation from a Licensed Insolvency Trustee, Robert has more answers and feels more comfortable about his finances.
While Robert’s income was stead, it wasn’t high enough to trigger any surplus income. So, for Robert, a bankruptcy would be the cheapest solution and would only last nine months.
If you’d like to follow Robert’s example and learn about financial options and debt management solutions, talk to a Licensed Insolvency Trustee.