Many people believe that when their debt gets out of control they have one option: bankruptcy. But, depending on your specific financial situation, there are other debt management solutions available. Some strategies for getting out of debt you may even be able to handle yourself—with discipline. Of course, with so many solutions to consider, it can be hard to know which is right for you—meet with a Grant Thornton debt professional for help in settling on the best course of action.
Do-it-yourself debt management
Review your debt
Before you can make a plan to manage your debt going forward, you should understand how much debt you have and how long it will take to pay down. High-interest debt should be the first to go, but if there is a small debt that can provide you with an early win, then that may be the best route.
Explore these five strategies for taking control of your finances.
Start a budget
If you don’t feel you have a good understanding of your finances, creating a budget is a great place to start. Following a budget can help you take control of your finances, give your income a purpose, and achieve your financial goals.
Explore our complete guide to creating a basic budget that works for you.
Manage your debt with a debt consolidation loan
If you have multiple debts at multiple (and high) interest rates, one strategy for managing your finances is to consolidate your debts. This leaves you only owing one lender, leaving you with the simplicity of a single monthly payment to repay the full amount you owe.
Learn about the difference between a consolidation loan and a consumer proposal.
Informal debt settlement
Present your creditors with a plan outlining how you can pay them back. Creditors will often negotiate with you, as their goal is to obtain the money that is owed to them. Explain your financial situation honestly, and submit a realistic proposal and payment schedule.
Formal debt management control
Credit counselling
A credit counselling agency can help you learn to manage your money, handle your debt, and create a budget. Note, however, that a credit counsellor cannot help you with everything a Grant Thornton Licensed Insolvency Trustee can—like consumer proposals and bankruptcies.
Debt management plan
A debt management plan is an agreement between you and your creditors to reduce your debt payments. Note that a debt management plan does not offer the same benefits as a consumer proposal and you will have to pay back everything you owe.
Orderly payment of debt
This debt management option is also called a Consolidation Order. The court consolidates your loans, and you pay an administrator who pays your unsecured creditors the full amount owed on your behalf, with interest. This option is offered only by government-approved institutions and is not available in every province.
Consumer proposal
A consumer proposal is an offer to your creditors to repay a portion of the debt you owe. Once accepted, a consumer proposal can provide fixed and lower monthly payments based on what you can afford. A reduced monthly payment, spread out over a maximum of five years, allows you to keep your assets, stay consistent, and find financial freedom. Many see their debt reduced by up to 80%.
Only a Licensed Insolvency Trustee can administer a consumer proposal. Learn more about how a consumer proposal could work for you.
Filing for bankruptcy
Bankruptcy releases you from the majority of your debts, which means you will not have to pay them back. Like a consumer proposal, bankruptcy also immediately stops all legal action against you and can only be administered by a Licensed Insolvency Trustee. For some people, it’s the most efficient way to regain financial stability. We consider bankruptcy, however, only after we explore other options first.
Find more information on how to file for bankruptcy.
You don’t have to manage your debt alone
If you’re looking for support and want to learn more about your debt relief options, we’re here to help. There is no cost to meet with a Licensed Insolvency Trustee to discuss the best options for your unique financial situation. We offer judgment-free, 30-minute consultations to help you find the best path to debt freedom.