Who should you talk to if you can’t afford to repay your debts and are really in financial trouble? If you are taking money from one source to pay another, barely keeping up with your minimum payments or are relying on bad debt options like payday loans, it’s time to look for debt advice.
When you realize that your situation is beyond repair, it is time to call an expert. You need a debt professional that can sit with you and review your situation, explain your options and help you find a way out.
So who can you talk to? You can try calling the creditor to see if they will allow you to pay them back in installments but this is only a feasible option if you can ultimately pay them back. If not, you should turn to an outside debt expert. Choosing to contact the right debt advisor is the first step in reducing the stress you feel dealing with all that debt.
- Credit counsellors are one possible debt advisor that you can speak with. Their expertise lies in helping you look at your budget and develop a repayment plan. They cannot help you settle your debt for less than you owe. A debt management plan offered through a not-for-profit credit counsellor requires that you repay 100 cents on the dollar of what you owe. If you are struggling with significant debt, this may not be the best long term solution.
There are two different credit counselling models in Canada. Small, local, not-for-profit credit counselling agencies and larger national credit counselling agencies largely supported by the major banks. Generally it is my view that you receive better service and advice when dealing with a local credit counsellor, face to face, as they will be focused on dealing with all of the reasons you may be experiencing debt problems, not just interested in placing you in a debt management program. These local agencies offer additional community support for addiction counselling, marriage counselling and other personal stress factors that may be an underlying contributor to your financial stress.
- Debt consultants, money coaches and unlicensed debt advisors are generally not a good option. There are many ‘experts’ out there that will offer to help you find the best deal for reducing your debts. However in most cases the fees charged outweigh any benefits they offer and ultimately most end up referring you to a licensed insolvency trustee anyway.
- Licensed insolvency trustees are in most cases your best source for debt advice. (Bankruptcy trustees are now called licensed insolvency trustees in Canada however they offer the same advice and service as they did before). Licensed insolvency trustees offer the most powerful debt reduction programs available in Canada – a bankruptcy and consumer proposal. Even more they are required by law to meet with you in person and review your financial situation and discuss all possible options. If your situation does not require that you file bankruptcy or a consumer proposal, a licensed insolvency trustee will not force you into either solution. They may advice you to talk to your lender about a second mortgage or may refer you to a local, reputable credit counsellor if what you need is help balancing your budget and creating a repayment plan for a few small debts.
As you can see there are differences in what services each debt advisor can offer and how they will approach your situation. My best advice is, if you are ever uncomfortable with the advisor you do speak to, get a second opinion. Also, never sign a contract to make payments unless it contains a specified plan that your creditors agree to or a legal process like bankruptcy or a consumer proposal to deal with your debts. Signing a contract to pay for debt assistance is completely unnecessary and will likely end up costing you money you should be using for your financial recovery.
In most situations, it is better to look into your options than do nothing and let the situation get worse. There are consequences for not repaying your debts.
- Initially your account will be turned over to collections.
- Eventually your creditors may sue you and take further legal action like garnisheeing your wages.
- As your debt piles up, it becomes more and more difficult to access further credit and any money you can borrow will come at a very high price.
- Unpaid balances will begin to appear on your credit report, making it very difficult to borrow in the future.
No matter who you choose to speak with, make sure that your debt advisor is going to provide you advice that will stop any of these consequences from happening.