LIFE HACKS: Dealing with crippling debt doesn’t mean declaring bankruptcy
Unfortunately, it is not difficult to find yourself in financial difficulty. Sometimes getting back on its feet just means getting help with budgeting or restructuring payments. Other times, however, more help is needed.
That’s when professionals like Dawn Golding step in.
Golding is a Licensed Insolvency Trustee with Golding & Associates Limited based in Kentville and Halifax. It helps debtors understand their rights and options.
“Unfortunately, people are often afraid to call us because they think if they do, they have to file for bankruptcy, which they don’t at all,” Golding explains.
What bankruptcy means
If you go bankrupt, there are long-term consequences.
Bankruptcy filing deadlines are determined by provincial laws, Golding explains. Bankruptcy is declared for six years from your discharge, or seven years from the filing of a first bankruptcy. A second bankruptcy, however, has been reported for 14 years.
Bankruptcy is automatically removed from the credit report after the time limit has passed. It can’t appear any longer than that, she says.
It’s important to clarify that there is a difference between when bankruptcy shows up on your credit report and when a person can begin to rebuild their credit, Golding says. You don’t have to wait until bankruptcy is gone to start rebuilding credit. You can begin to recover after your discharge from bankruptcy, either in nine months or 21 months for a first bankruptcy, depending on your situation.
Tips for managing your debt and avoiding bankruptcy
To avoid having to file for bankruptcy in the first place, Golding offers several important tips for dealing with debt.
Budgeting will not only help you pay off your debt faster, but more importantly, it will add to your overall financial security, Golding says.
People often make a plan for their money each month and yet the plan doesn’t work, Golding says. Then they get frustrated and stop trying to make it work. The problem, Golding says, is that they missed the first step in budgeting.
It’s like trying to build a house without putting a foundation first – the house will just fall without a solid foundation, she says.
The first thing you need to do before making a plan is to figure out where your money is going each month. You need to track your spending, not just the big things, because it’s the very small things that add up and are easy to forget, Golding explains. This step is a big eye-opener for most people.
“There are a lot of different ways to track spending, so find what’s best for you,” she says. “After tracking your spending for a few months, you can then plan with real numbers. “
Compare what you planned with what actually happened, then make the appropriate adjustments to your plan or spending, suggests Golding.
“It might seem like a lot of work, but once you get started and have a system it becomes second nature and not as difficult or time consuming as it sounds,” Golding explains.
2. Pay the highest interest rates first
Keep track of who you owe and the interest rates on your debts. By paying off your debt with the highest interest rates first, you’ll pay off your debt sooner, Golding says. The snowball debt repayment system uses this method. You can find snowball debt calculators online that can help you with a plan, she says.
3. Get a consolidation loan.
A consolidation loan can be a good option for taking on debt at a lower interest rate. Having one payment and a fixed term to pay off debt can be a solid solution in some situations, Golding says. The most important thing when obtaining a consolidation loan is to get rid of the credit cards that you consolidate so that they are no longer used and you end up in a worse situation.
4. Avoid payday loans.
Payday loans are something to be avoided at all costs, Golding cautions. The interest rate on them is extremely high and once someone starts with one it is almost impossible to get rid of them and they end up in a cycle of re-borrowing every payday and spending hundreds of dollars per payday. months in interest to do so.
5. Call to save money.
If you’re looking for services like insurance, Golding recommends calling and checking quotes online when their insurance is due for renewal, as they may get better deals with a new business. A few calls can mean big savings, she says.
6. Don’t automatically think of bankruptcy.
Bankruptcy is not the only legal option for dealing with debt. A consumer proposal is a compromise between a debtor and his unsecured creditors where all debts are consolidated into one payment, usually without interest and for a percentage of the balance owed. A consumer proposal is unique to an individual’s situation and can be a good option for resolving debt issues and avoiding bankruptcy, Golding says.
7. Ask for help.
“Debt can be very stressful. Don’t be afraid to seek professional help with settling your debt if you feel overwhelmed, ”Golding says.
Sometimes your creditors can help. If the situation goes beyond that, you can speak to a Licensed Insolvency Trustee.
“As a debt professional, we can help you consider all of your options for resolving debt issues,” Golding says. “Unfortunately, there is a misconception that all a Licensed Insolvency Trustee does is bankruptcy. “