Don’t Wait to Take Charge of Your Debt

The year is coming to a close and while some families are fortunate enough to find themselves financially stable, many more Canadians are struggling to keep up with debt payments. The Bank of Canada estimates that roughly 720,000 households are facing a debt crisis.  Numerous studies have been released this past year showing that Canadians are living pay cheque to pay cheque. One study by Manulife found that more than one third of mortgage holders would struggle to keep up with their mortgage payments within three months if a family member lost a job or became ill.

What’s the Cause?

One of the top reasons people file for insolvency is income reduction or job loss. You may be meeting your financial obligations today, keeping up with your mortgage and the minimum payments on your credit card debt, however if you are like many Canadians your entire pay cheque is consumed each month with keeping up with your living costs and debt payments. If you have no savings or wiggle room, you risk defaulting on your debt payments if your hours are cut back, you lose your job, or even if a family member becomes ill.

Typical Timeline

While people file insolvency throughout the year, January through March is typically a busy period for people choosing to contact a licensed insolvency trustee to discuss options to eliminate debt.

There are many reasons insolvencies peak early in the year, some of which have to do with the impact of a bankruptcy on your tax refunds. However, the biggest reason is that people often find themselves facing their problems head on:

• Consumer debt escalates during the holidays. From Black Friday to Cyber Monday, it’s estimated that Canadians will accumulate 3% more consumer debt.
• Bills begin to arrive prompting the typical holiday money hangover.
• A missed or late payment can prompt the decision to call.
• Credit cards may have been cancelled or are maxed out, making it impossible to continue to use credit to buy necessities.
• Winter weather may mean more downtime with less social activities than summer, providing many with more time to consider a game plan to deal with their debts.
• January itself, with its usual bout of resolutions, can be a motivator.

Is now a good time?

The truth is, any time is time to take steps to deal with your debt.  Once you’ve faced the fact that your debt payments are no longer manageable, here’s what you should do:

1. Prepare a budget. Take a look at bank statements and credit card bills for ongoing expenses.
2. Make a list of your debts and monthly debt payments.
3. Reduce unnecessary expenses and spending.
4. After revising your budget projections with your expense savings, assess how much you can put towards debt repayment.
5. If you don’t think this will repay your debts (excluding your mortgage) within five years, it’s time to contact a licensed insolvency trustee about your debt relief options.

Make a commitment to eliminate your debts early. If you need help, don’t be afraid to talk to a licensed insolvency trustee in your area. You may not even need to file bankruptcy.  Consultations are free, so take advantage of this free advice now.