If you’re having problems paying your bills, you might consider getting help from a Canada debt settlement agency. You should be aware, however, that this process comes with some concerns, which have resulted in debt settlement agencies becoming the focus of a consumer alert from the Financial Consumer Agency of Canada (FCAC).
Typically, debt settlement companies require that:
- you have a minimum of $10,000 in unsecured consumer debt (credit cards, personal loans, lines of credit, overdraft, and utility bills), and
- you have some income or the ability to raise approximately 50-60% of the amount of your total debt within a three-year period.
This type of debt settlement is informal, and not all of your debts are included. You’ll be asked to stop making payments to your creditors, and instead start saving money to make payments to the debt settlement company. These payments are set aside into a settlement fund.
At some point, the company representing you will contact your creditors and attempt to negotiate favourable settlements, often at 30-50 cents on the dollar.
Working with a debt settlement company in Canada is not for everyone. If any of your bills are left unpaid for two or three years, you’ll see a negative impact on your credit rating. Your creditors might also sue you in the meantime – a process that can be just as stressful as overwhelming debt.
Formal Debt Settlement: Consumer Proposals
A better option may be to consider debt negotiation and settlement through a formal consumer proposal in Canada. This is better than an informal debt settlement because:
- it is legally binding on all of your creditors,
- it reduces your debts for less than you owe,
- it’s the only government debt relief program administered through the Bankruptcy and Insolvency Act, and
- it’s the number one alternative to bankruptcy in Canada
Learn more about making a consumer proposal.
Debt Settlement Help
If you need help exploring your debt negotiation options, we recommend you talk to a licensed bankruptcy trustee. Even if you don’t plan to file bankruptcy, they’re some of the most knowledgeable experts you can talk to about debt relief. For a free evaluation, contact a MoneyProblems.ca trustee today.