Option For Eliminating Credit Card Debt In Ontario
Many people in Ontario have way too much credit card debt and as a result, find it difficult to make even minimum payments on their cards. Managing credit card debt with a consolidation loan is only one of the options available to consumers and may not be your best option.
Remember your best choice will depend largely on your financial situation, speaking with a Licensed Insolvency Trustee will help you to understand all of your options so you make the right choice.
Debt Solution For Eliminating Credit Card Debt:
- Consolidation Loans
- Debt Management Programs
- Consumer Proposals
Eliminate Credit Card Debt With A Consolidation Loan
Depending on your current financial situation, you may be able to get a consolidation loan from a bank or lending institution.
This loan will most likely be a secured loan against your home or other assets. That is, if you fail to repay the loan, the loan provider will be able to seize the asset(s) that were used to guarantee the loan – and sell them to recover the money you owe.
If the loan requires a co-signer (someone to guarantee the loan) and you fail to repay the loan, then the person who co-signed the loan is responsible for the entire amount owing, and the lending institution will go after them for repayment.
While credit card consolidation loans can be a good solution for some, there is an unfortunate tendency for others to max out their credit cards again and take out more consolidation loans. In fact, it is not uncommon for us to work with people who have two or more consolidation loans.
Eliminate Credit Card Debt With A Debt
Although there are many ‘credit counselling‘ companies in the Toronto area – very few are non-profit and able to offer a legitimate debt management program. If you decide to go with a debt management program, make certain the group you are dealing with are members of the OACCS (Ontario Association of Credit Counselling Services) and have the training and qualifications needed to correctly manage a debt management program.
In order to qualify, you will need to be able to pay the principal of the debt you owe (but not at the current interest rate) and have enough income to complete the program. The counsellors will contact your credit card companies and try to negotiate an agreement to reduce the amount of interest you are being charged. This agreement is not legally binding on the creditors and some of your creditors may choose not to participate. If legal action (ie: court action, garnishees, etc) has been or is taken, the debt management program has no authority to stop the actions.
If an agreement is reached with creditors, you will then be required to make regular payments for disbursal to your creditors.
As a free service, debt management programs rely on charitable donations as well as individuals using the program and credit companies to contribute to the costs of running the service.
Caution: Do not confuse “Debt Settlement Programs” with “Debt Management Programs”. Many of the debt settlement companies that are currently advertising in the Toronto area, charge a substantial upfront fee and fail to deliver on their promises – leaving their clients in even more debt and with severely damaged credit ratings.
Eliminate Credit Card Debt With A Consumer Proposal
A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a “proposal“—an offer to pay creditors a percentage of what is owed to them or extend the time you have to pay off the debts, or both.
Consumer proposals normally require only a portion of credit card debt to be paid back over a period of up to 5 years. Once your Consumer Proposal is filed by law:
- All interest charges must stop
- All legal actions (garnishees, court actions, etc) must stop
- All collection efforts (calls, letters, etc) must stop
Once the proposal is successfully completed, you will be released from all debts covered in the proposal.
Unlike the first two options, to qualify for a consumer proposal you must be insolvent – that is, unable to repay your existing debt in a reasonable period of time.
Note: in Ontario, only Licensed Insolvency Trustees are able to file and administer consumer proposals.
After carefully reviewing your financial situation, if both you and the trustee agree that a consumer proposal would be your best option – then the consumer proposal process can begin. Once you and your trustee have prepared your proposal, your trustee will submit it to your creditors.
Your creditors will vote on whether or not to accept your proposal. If a majority of your creditors accept the proposal, it is binding on all of the creditors in the proposal. Proposals are normally accepted by creditors when they will receive more money than if you were to declare bankruptcy.
There are a number of duties that you will have to honour during the life of your proposal including, making the required payments and attending financial counselling where you will be given the tools required to build a more financially secure future.
Personal bankruptcy is a last resort solution for individuals that can’t repay their debts. A trustee will approach you with other strategies before suggesting that you turn to bankruptcy.
By filing, you are officially declaring to the Courts and your creditors that you are insolvent and that you do not have the equity to cover all of your debts. During a bankruptcy, a trustee settles your assets (although there are plenty of asset exemptions in Ontario) and distributes the funds among your various creditors. You will also manage bankruptcy duties, like making repayments to creditors and attending creditor meetings before receiving a discharge. Click here to learn more about filing for bankruptcy in Ontario as an individual and what a licensed insolvency trustee will do for you during the process.
David Sklar & Associates
Licensed insolvency trustees like David Sklar & Associates have the authority to contact creditors and hold them to agreements. So, when you sign onto a consumer proposal, and a creditor accepts it, that agreement is legally binding. The creditor has to adhere to the terms set in the proposal from that point forward.
If you are struggling financially and looking for relief, call David Sklar & Associates and book your consultation today. We offer consumer proposals in Toronto to help honest people who are drowning in unsecured debt and need an effective way out.
We also offer division one proposals and personal bankruptcy services for people who can’t meet the qualifications of a consumer proposal. You have options. We can help you pick the right ones and get the relief that you’re looking for.