What to Do If You're Drowning in Debt

The effects of debt can string into just about any aspect of your life. Not only do you have to dedicate a portion of whatever earnings you have into your debt, but you have to also deal with the emotional effects of debt, and the hardship it places on you and your loved ones. Depending on your situation, fighting against debt may take a little or a lot of effort, but there are always things you can do.

Make the Small Steps

One of the first things you need to do, if you haven’t already, is to stop feeding any potential sources of debt, if you can help it. This mainly applies to those who have credit card debt as the main source of their worries. Stop using them and find alternatives to cut down your spending. Look at past bank statements and see if there are areas that you can cut down on.

Another potential option is to try and negotiate with your creditors. Generally, this only works if you don’t have a lot of debt or haven’t had it for very long. But, if you can provide proof that you’ve been working to steadily pay down your debt, you may be able to negotiate something like a lower interest rate. Remember, at the end of the day, creditors are ultimately looking to get their money, the same as you. Use this fact to your advantage.

Make the Big Step

At some point, though, debt becomes too much. You have collectors demanding money, but there’s no possible way you can pay back what you owe. If you need fast debt relief, most people are likely to say declaring bankruptcy is the ideal situation to handle your problems. However, bankruptcy comes at a major cost along with its debt relief. You may be forced to give up many of your prized assets, and will also be stuck with the worst credit rating possible for many years, hobbling future financial plans..

For this reason, Canada has an intermediate option for debt relief that allows you to pay back less than what you owe to creditors, but hold on to your assets. This is a consumer proposal. A consumer proposal is a legal contract made between you and your creditor, that serves as a payment program for the next five years. The exact terms are negotiated by a licensed insolvency trustee, but it generally comes in the form of a monthly payment you make to your creditor.

There are some restrictions, though. You can’t have debt that exceeds $250,000 (not including a mortgage) and you need to be able to put together evidence that you will be able to stick to the monthly payments. In addition, the creditor isn’t required to accept anything. This is where your trustee comes in, mediating the process to come up with something that is fair to all parties. If you need financial help, visit Chande.ca to see what options are available to you, especially if you think that a consumer proposal is your best chance to stop your debt woes. Many Canadians are coming to the exact same realization and taking their financial situation into their own hands.