No matter how careful a person is about avoiding consumer debt, 2022-23 has taught many of us that our best efforts may be easily derailed.
If you find yourself in an unmanageable amount of debt, you may need to seek an expert in bankruptcy, debt restructuring, or consumer credit protection.
Tracking is Critical
If you find that your debts are outstripping your income, sit down and track your debt by total amount, interest rate, and monthly payments. Carefully note what you have to have to live on, and what you may be spending to relieve stress or for convenience. You may be able to alter your style of living and the amount you’re spending and put your finances back in order on your own.
While reviewing your debts, carefully study any credit accounts you have open, as well as any auto-draft subscription fees you currently pay on a monthly basis. Could you lower your debts by canceling these subscriptions, or by switching to a lower-cost service?
If you sign up to work with a consumer proposal in British Columbia, for example, be aware that a note will go on your credit report. While these services can be extremely helpful, potential creditors will know that you have had problems with debt in the past.
If you’re able to work with a credit counselor, make certain that you truly dig in and use their advice. You may have to cut up credit cards and go back to cash. You may have to call your lenders and request a lower rate or forgiveness of a portion of your loans.
However, if you can stay the course and follow through with the guidance from your credit counselor, you will gain knowledge of how you got into trouble in the first place, and how to avoid it in the future.
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If your debt level is truly unmanageable, it may be time to consider a consumer proposal in British Columbia that will help you get your debts either dismissed or reduced. Be aware that bankruptcy with your name on it will become part of the public record and may make it hard to borrow for the next several years.
While a credit counseling program will put a note on your credit, bankruptcy will stay on your record for seven years. There are ways you can work your way out of bankruptcy, but the fact that your lenders were put on notice that you couldn’t be contacted or garnished will likely mean that new lenders will not be interested in your business for quite a time to come. Large ticket purchases, such as houses and automobiles, may be out of your reach.
Debt Settlement Options
A debt settlement plan will show up on your credit with a note similar to that of a credit counseling program. Those who owe will be contacted by a third party and a lower payment rate may be negotiated. You should expect a lowering of your credit rating and limited access to funds for a couple of years.
Be aware that debt settlers can only do so much. You owe them money, and you may well have to pay most of it back. However, many debt settlement programs also require you to build up savings, so hopefully, this problem will not occur again.
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Ways to Boost Your Score Post-Debt Negotiation
Get in the habit of paying your bills as soon as the invoice comes. If you had a problem staying on top of your debts via electronic billing, request that your lender allow you to go back to paper invoices. Carefully review your invoices to make sure you’re not paying for expensive subscriptions you no longer use, then write out the check or schedule the electronic payment.
Don’t let a bill sit for more than a week before acting on it. If you can, pay any credit account debts in full, so the credit agency gets a positive report.
Debt for the right reasons can be very rewarding, but easy access to credit can make thoughtless borrowing far too easy. Break up with your credit cards and don’t believe the “no money down, easy payment plan” offers, because they’re generally not good for your budget.
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