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More and more Canadians are struggling with debt and managing their financial situation. A recent survey showed that more than half of Canadians are living paycheque to paycheque. And 27% of Canadians admit that they don’t have enough for their daily needs.
Finding the right solutions for debt relief in Canada can be difficult. Even though some ads can make getting out of debt sound easy and speedy, the truth is that eliminating debt is more often an ongoing, long-term process.
The Licensed Insolvency Trustees at Remolino & Associates are debt experts who can help you identify the right debt relief options so you can secure a fresh financial start. Read on to learn more about debt relief programs and how to get rid of debt in Canada.
Government National Debt Relief Programs
Even though there are several ads that promote this idea, there are no free Canadian government grants that can help you pay off your debt. While it’s true that the government offers grants and loans to businesses and individuals, there are no governmental programs designed to deal with national debt relief in Canada.
However, the government regulates bankruptcy and insolvency under the Bankruptcy and Insolvency Act (BIA). The BIA was established to help honest debtors repay the they owe and get a fresh financial start. It protects the rights of both debtors and creditors, and defines the roles and responsibilities of all the entities involved in a bankruptcy or insolvency process.
But bankruptcy is not the only debt relief program to get out of debt in Canada.
Your Debt Relief Options in Canada
You have multiple debt relief options to choose from. Each of the following solutions can help you get out of debt. Read on for more details or click on a service to learn more about each solution.
- Tax & CRA solutions
- Business debt solutions
- Debt consolidation
- Consumer proposal
Credit counselling is a process that enables a non-profit credit counsellor or credit counselling agency to evaluate your debts, summarize them, and prepare a repayment plan on your behalf. The credit counsellor creates a debt management plan that allows you to pay back your debt over the course of up to five years.
Your credit counsellor presents the debt management plan to your creditors, and if they accept it, you make one monthly payment toward repaying your debt.
It’s important to note that a credit counsellor cannot cancel or reduce your debt. You are still required to pay off all of your debt, but the interest relief you receive can be enough to make your debt problem manageable.
Debt consolidation means taking out a new loan to pay off your smaller debts. Combining the value of your existing debts and paying them off with a new loan can make what you owe more affordable because it usually leads to a lower interest rate and allows you to pay off your debt over a longer period of time. The new loan makes it simpler to manage debt repayment with a single monthly payment.
Taking out a debt consolidation loan can be a good solution, especially for credit card debt. However, this solution is only viable as long as the new loan covers all of your outstanding debts.
A debt consolidation loan does not eliminate or reduce your existing debt. It only makes debt repayment easier and provides interest relief. You also need to qualify for a loan in order to use this solution.
Debt settlement is a debt repayment solution that can reduce the value of your debt. Debt settlement means reaching an informal agreement with your creditors to eliminate your debt when you pay back part of what you owe.
This solution may work if you have a lump sum of money available and you believe that negotiating with your creditors can convince them to accept the partial repayment of your debt.
Many companies advertise their debt settlement services. However, we do not recommend relying on a debt settlement company as many of them charge substantial fees to refer you to a licensed insolvency trustee. Our licensed insolvency trustees offer free consultations, so you can save money by contacting us directly.
Consumer proposals are legally binding agreements made between you and your creditors, with the help of a Licensed Insolvency Trustee. A consumer proposal offers you immediate relief from collection efforts and makes monthly payment arrangements for your unsecured debts.
Negotiating a consumer proposal means that your creditors agree to forgive a portion of your debt and you agree to pay off the remaining balance.
Consumer proposals can reduce the value of your debt by up to 75%, depending on your financial circumstances. Consumer proposals also protect some of your assets, like your home or vehicle, that may otherwise need to be liquidated in order to repay what you owe.
However, this debt relief solution comes with its cons. Filing a consumer proposal affects your credit score, so banks will consider you a high-risk borrower. And filing for a consumer proposal may not include your student loans if the loans are less than seven years old.
Nobody wants to file for bankruptcy, but sometimes bankruptcy is the right debt relief solution for those who struggle to repay what they owe.
Bankruptcy is a process for eliminating debt that’s governed and protected by the Canadian Bankruptcy and Insolvency Act. Simply put, bankruptcy is a legal declaration of your inability to pay off your debts due to insufficient income or assets.
Filing for bankruptcy is often not as bad as some people make it seem. Bankruptcy stops all collection efforts and wage garnishments, and protects you from the threat of legal action. Bankruptcy gives you the opportunity to get rid of unsecured debt and secure a new financial start, with the help of a Licensed Insolvency Trustee.
The Ontario Execution Act exempts most of your personal belongings from seizure. You may even keep your house and car when filing for bankruptcy, depending on your circumstances.
Credit Card Debt
Repaying your credit card debt can be difficult because of its high interest rate. However, you can eliminate your outstanding credit card balance with one of the solutions we listed above.
You can combine all your credit card debts into a single loan that has a lower interest rate to make the debt more manageable through a single monthly payment. You can also try to settle your debt or file a consumer proposal, depending on your circumstances.
We recommend contacting one of our licensed insolvency trustees to discover the easiest way to secure credit card debt relief in Canada.
Most Effective Ways To Eliminate Your Debt
There is no universal solution to debt relief. Something that worked for a friend or family member may not work so well for your debt problem. You have to take advantage of the best solution for your particular case. However, making a plan to be debt-free can help you gain an overview of the process. Here’s what you should look for:
Identify Your Debt Problem
The first step you should take is identifying what you owe. Take a piece of paper or use an app on your phone and create a list of all your debts. For every debt you owe, list how much you owe, how much you pay monthly, and the charged interest rate.
You should make sure to include things like mortgages, student loans, car loans, owed taxes, unpaid utility bills, credit card loans, payday loans, loans from friends or family, and so on.
Then, you should review your budget, making sure you include how much you make, how much you spend, what you manage to save, etc. If you don’t know how much you spend per month, you can use a budget planner to keep track of your spending.
Deduct your regular expenses from your budget and calculate what’s left. Can you pay off some of your debts with the remaining sum? If not, could you manage your money better?
If you can’t afford to repay what you owe and your debts seem overwhelming, we recommend booking a free consultation with one of our Licensed Insolvency Trustees. Our financial experts can advise you on how to better manage your finances to get out of debt.
How to Get Rid of Debt in Canada
How Remolino & Associates Helps You To Get Out of Debt
Book your FREE virtual consultation with one of our Licensed Insolvency Trustees to learn more about the debt relief programs at your disposal. We offer free, no-obligation, confidential consultations that can help you regain control of your finances.
Eliminate your debt with our proven four-step process:
1. Free consultation
2. Thorough financial analysis
3. Personalized debt relief solution
4. A fresh financial start