There are several ways to settle debts in Canada, depending on the type of debt, the amount owed, and your financial situation. Here are some of the most common options:
- Bankruptcy: Bankruptcy is a legal process that allows you to eliminate most of your debts and start fresh. This is typically done through a licensed insolvency trustee (LIT). Bankruptcy can be a good option if you have a lot of debt that you can’t afford to pay back, but it can also have a negative impact on your credit score and it may not be the best option for everyone. It’s important to do your research and talk to a financial professional before choosing this option.
- Consumer Proposal: A consumer proposal is a legal process that allows you to make a formal offer to your creditors to settle your debts. This is typically done through a licensed insolvency trustee (LIT). A consumer proposal can be a good option if you have a lot of unsecured debt and you can’t afford to make your minimum payments, but you don’t want to declare bankruptcy. With a consumer proposal, you can negotiate a payment plan with your creditors that fits within your budget.
- Credit Counselling: Credit counselling involves working with a credit counsellor to create a budget and a debt repayment plan. This can be a good option if you have a lot of debt and you need help managing your finances. Credit counselling is often provided by non-profit organizations and it may be available for free or for a small fee.
- Debt Consolidation: Debt consolidation involves taking out a loan to pay off your existing debts. This can be a good option if you have several high-interest debts (like credit card debts) and you want to simplify your payments and reduce your interest rate. However, it’s important to make sure that the interest rate on the consolidation loan is lower than the interest rate on your existing debts.
- Debt Settlement: Debt settlement involves negotiating with your creditors to settle your debts for less than what you owe. This is typically done through a debt settlement company or a licensed insolvency trustee (LIT). Debt settlement can be a good option if you have a lot of unsecured debt (like credit card debt) and you can’t afford to make your minimum payments. However, it can also have a negative impact on your credit score and it may not be the best option for everyone. It’s important to do your research and talk to a financial professional before choosing this option.
- Do-It-Yourself Debt Repayment: If you have a small amount of debt and you can afford to make your minimum payments, you may be able to pay off your debt on your own. This involves creating a budget, prioritizing your debts, and making regular payments.
There are many resources available for Canadians who are struggling with debt. Here are a few helpful links:
Financial Consumer Agency of Canada (FCAC) provides information and resources on debt management, including debt settlement, consumer proposals, bankruptcy, and credit counselling.
Credit Counselling Canada is a national association of non-profit credit counselling agencies. Their website provides information on credit counselling and debt management.
Ready to explore your debt settlement options? Contact us today and let our team connect you with trusted licensed insolvency trustees (LITs) and debt settlement professionals who can provide personalized guidance tailored to your financial situation. Take the first step towards debt relief by getting in touch with us now