What are the solutions to your debt problems ?

Many people are dealing with debt issues, especially in the current inflationary environment. Contrary to the widely held belief, filling for bankruptcy is not the only option. There are several solutions to quickly resolve your financial woes and get peace of mind. Here are five, in addition to bankruptcy.

1. Adapted personal budget

As we keep saying, setting up a personal or family budget and reviewing it on a regular basis will help you take control of your finances and manage them better. If you have debts, in some cases the simple act of reviewing your budget will allow you to settle them without even needing professional help. By doing this exercise, you will see what your expenses are and which ones you can reduce or eliminate. You can then calculate how much you can put towards your debts. Our online budget tool can help you easily set up your budget.

2. Debt consolidation

Debt consolidation consist in combining all of your debts into a single loan with a financial institution to get a better interest rate (compared to the high rate on your credit card, for example, if you keep your credit card debt separate). The numerous benefits of this solution include:

• Reducing the interest rate you pay;
• Paying a lower debt repayment amount each month;
• Avoiding an impact on your credit rating (provided you pay the minimum required amount on time, every time).

In order to consolidate your debts, you have to have an acceptable credit rating and prove that you are able to make the monthly payments. A licensed insolvency trustee can analyze your situation and let you know if debt consolidation is a good fit for you.

3. Agreement with your creditors

Your creditors may be open to reaching an arrangement with you, as they want their money back as soon as possible. It is best to contact them directly.

By talking with them clamly and showing that you want to pay off your debt or a large portion of it, you may be able to negotiate:

• A reduction in the total debt amount;
• A reduction in the interest amount;
• A repayment timeline extension.

Naturally, this agreement needs to be put in writing and signed by both parties.

However, this can become a tedious exercise when you have to contact and negotiate with several creditors.

4. Voluntary deposit

Voluntary deposit is a measure under the Civil Code of Quebec that is designed to protect you from having your wages and certain assets seized.

• You can repay your debts through the Court.
• You will be required to pay a percentage of your salary to the Clerk of the Court of Quebec on a regular basis (30% of gross income after deduction of amounts for dependents).
• The Court will then serve as an intermediary between you and your creditors and allocate the amounts you pay.
• The voluntary deposit ends once all of your debts have been repaid.

In addition to protecting you from wage garnishment, a voluntary deposit lets you avoid personal bankruptcy and allows you to benefit from a fixed interest rate of 5%. However, it does not protect you from having your services disconntected (electricity, cable, telephone). In addition, it will have an impact on your credit rating.

5. Consumer proposal

This consists in negotiating with your creditors to repay as much debt as possible. An insolvency trustee, like those at Raymond Chabot, will handle the agreement with them and guide you throughout the process and at every step.

With a consumer proposal among others, you can:

• Repay only part of your debts;
• Pay a lower amount each month;
• Keep your assets, RRSP and life insurance.

To find out more about a consumer proposal, consult our web site section on this option.

6. Personal bankruptcy

Filing for bankruptcy is often a last resort. But it may be right for some people who don’t qualify for the above solutions and want to eliminate their debts to get off on the right foot. You will have to sell some of your assets and/or make monthly payments to pay off your creditors. A licensed insolvency trustee or bankruptcy trustee, like those at Raymond Chabot, will help you file for bankruptcy. You will be discharged from your debts generally between 9 and 21 months from the date of your first bankruptcy.

For more information on a bankruptcy and its impacts, consult our website section on this option and related FAQ.

Your financial situation is unique and only a licensed insolvency trustee like those at Raymond Chabot can help you determine the best option for you. Don’t hesitate to call on one of them. Once your debts are settled, you can look forward to the future with renewed pleasure.

Do you have financial worries? Don’t hesitate to contact one of our licensed insolvency trustees who can guide you each step of the way.