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Consumer Proposal, Bankruptcy, & Personal Finance Blog

April 12, 2018

How to Manage Your Debt Without Filing for Bankruptcy

A man sitting in a dark room on a leather couch, holding his head in stress and frustration over his financial issues.

Steps You Can Take to Reduce Your Debt Load before Contacting a Personal Bankruptcy Trustee

Filing for bankruptcy should be a last-resort debt management option. After all, it’s a significant step with serious commitment, not a quick fix for your financial woes. If you’re feeling overwhelmed by your debt, there are things you can do to help get back on your feet.

While filing with a personal bankruptcy trustee or filing a consumer proposal can help you get out of debt, don’t overlook the benefits of developing your own debt management skills. Taking the time to work on personal budgeting can help you stand on your own feet financially and doesn’t prevent you from seeking help when you need it.

Not sure where to start? Here are a few things to focus on:

Spending, Budgeting, and Smart Finances

Debt management needs to start with an honest appraisal of your finances. Take a look at your spending by preparing a monthly budget for your household. Record your earnings per month and look at how that money is spent each week, tallying up expenses and expenditures. Are you spending more than you’re earning? If so, it’s time to take a closer look at your habits and find ways to change them.

Your monthly budget should account for bills, food, rent, entertainment, and more. Laying everything out can give you an immediate idea of where you can save some money. For example, cut unnecessary expenses – if you’ve got Netflix and a complete cable package, say, chances are you can make some sacrifices there.

Here are a few tips that can help you rethink your spending:

  • Create grocery lists and stick to them – planning out meals for a week can prevent you from quick trips to the store to grab one item that quickly turn into impulse-buying sprees.
  • Commit to paying off your debts – create a realistic payment plan that covers at least the minimum payments and work to pay off larger debts first; once a debt is paid off, you can apply the savings from it to the next debt and so on.
  • Save for a rainy day – even if all you can save is $5 per week, that’s still $20 a month and $260 a year. A rainy-day fund can help you out of unforeseen expenses and emergencies, giving you peace of mind when things go wrong.
  • Take the time to treat yourself – modestly. If you’ve been making payments and getting things back on track, then there’s nothing wrong with a nice dinner in or out – even if it’s just pizza for the family.

Taking control of your debt and spending can help you manage your finances in the long run, getting you out of debt and keeping you debt-free.

Getting Effective Debt Help

In some cases, though, you do need a helping hand with your debt issues. There are a few options available to you, but working with a financial expert can help you determine the approach that’ll work best for your unique situation.

Debt Consolidation Plans

Debt consolidation means consolidating your debt payments into one monthly payment. So instead of making multiple payments each month to various high-interest debts, you can make one payment to a new lower-interest loan.

Consolidation pays off debts with the new loan, so you end up saving on interest payments over time. It’s also easier to manage one payment each month, instead of multiple payments, especially if you tend to skip payments to some debts.

Debt Management Plans

A debt management company will take your debts, negotiate new payments with your lenders, and make the payments on your behalf. You will make one monthly payment to the debt management company, and they will split up the money to pay each creditor/lender accordingly. These plans bear a lot of outward similarity to a consumer proposal but lack the legal enforcement and oversight you get when working with a Licensed Insolvency Trustee.

Debt Settlement

You may be able to reach a debt settlement with your credit card lender if you’re very far behind on your payments. This could mean paying off a discounted balance with a lump sum. Or, you could go through a debt buyer who buys debts at a lower price and will likely lower the amount you owe as long as they still make a profit.

Consumer Proposals

A Licensed Insolvency Trustee can arrange for you to file consumer proposals with your creditors. These propose a new set of terms between you and your creditors and indicate that you will make monthly payments to pay back part of what you owe. You pay the LIT directly, not your creditors; your payments are then distributed accordingly. This immediately halts collection calls and actions, unfreezes any holds on your accounts, and much more. Your creditors will then agree to the proposal or not.

Hopefully one or a combination of these options will help you manage your debt. But if not, use the help of a personal bankruptcy trustee to stop living with mounting debt on your shoulders.

August 1, 2017

Why You Shouldn’t Hire a Non-Licensed Debt Consultant or Credit Counsellor

A few things to keep in mind before committing to working with a non-licensed credit counsellor or debt consultant.

a) Unlike Licensed Insolvency Trustees (LIT), credit counsellors and debt consultants are unregulated. Anyone can call themselves a credit counsellor or a debt consultant. They are not subject to formal training or professional development standards.Read More