Debt Resolution
It is important to manage debt well. After separation, most couples find that there are more expenses, but not more income. Whenever possible, it is best to pay debt off. When this is not possible you will need to manage your debt.
Ways to Manage Debt
- Consolidate your debt into one loan.
- Use a combination of reducing and eliminating non-essential expenses to pay down debt.
- Approach creditors directly to initiate a payment plan that works for you.
- Use credit counselling to get a debt management plan, with a credit counsellor arranging a payment plan that you can afford. Understand that some creditors will not cooperate with credit counsellors. Be careful to determine the fees charged.
- Arrange a lump sum cash settlement with creditors. Some creditors will take a cash payout and eliminate the debt. For example, some may accept that you make one payment of 50% of the total amount.
- Get financial assistance to make a consumer proposal, a commercial proposal or to file for bankruptcy. These are legal solutions available under the Bankruptcy and Insolvency Act for debtors who cannot pay their debts. Each of these options has its own guidelines and outcomes, so it is important to get professional help.
The Debt Cycle
Income is generally fixed, and the outflow of expenses only seems to increase. When too much money gets spent, the shortfall gets added to the debt load. As the debt load increases, more of the money coming in goes to paying the debt, which leaves less for spending, which increases the debt. It’s called the debt cycle and it’s pretty difficult to get out of it. When money is short, there is stress deciding what to spend the money on, and when, and how much, and where, and on and on.
The Resources section provides more information about agencies and services that can help you resolve debt issues.
