What actually happens when you decide to get debt help?

Reading about debt help is probably not the most exciting way you’d like to spend your free time. Most people prefer not to think (let alone talk) about their debts. But the process is actually pretty straightforward. The tough part is facing reality and getting a clear picture of what you owe. This takes courage, but you don’t have to do it alone.

So how do you go from having debt problems to making that first call? What’s the trigger to getting over the fear of facing your debt problem? And when you do decide it’s time to get help, what does that initial step look like?

The debt help journey often starts with a breaking point (but it doesn’t have to)

Think of meeting a Licensed Insolvency Trustee (LIT) as therapy for your finances. People often meet an LIT whey they are at rock bottom. But the initial consultation can be the light at the end of the tunnel. LITs not only have answers, they can empathize with all sorts of money problems.

 “It’s not our job to judge. We have a duty to be caring and compassionate. It’s very rewarding for us to see the relief people feel after the initial consultation. It can be emotional, but also very therapeutic.” Jennifer McCracken, LIT at BDO Debt Solutions in Langley

To illustrate what actually happens, let’s take Anthony. Anthony is not a real person, but we help people like him every day. Anthony has an unhealthy relationship with debt that escalates to a crisis point after years of bad money management. (It’s ok, it gets better.)

Like many people, Anthony knows he has debts, but doesn’t realize he has a debt problem. Then something unexpected happens: Anthony finds out he needs to move because his landlord has decided to sell. An avalanche of new expenditures hits him hard (moving expenses, higher rent, first and last months’ rent upfront, some new furniture).

It’s not until Anthony starts falling behind on his credit card payments, that it finally dawns on him: he has too much debt.

Now we enter a different phase of the story: the period of feeling miserable and stressed out, unable to imagine a life without crippling debts. This feeling is all too common. It’s what most people feel when they realize they have too much debt.

How long does this period last?

It can last awhile. Three months, six months, a year, two years? Like Anthony, many Canadians struggle for too long, trying to keep up before they actually reach out for help.

Anthony finally decides to get help because he is sick of working so hard and having nothing to show for it. He reaches an emotional and financial breaking point.

It’s here, at this low point, where most people first meet an LIT.

What actually happens during the initial consultation?

Anthony is now determined to get debt help. He knows that a consolidation loan won’t be enough to help him. It’s not a matter of simplifying his debt load or lowering his interest payments. He owes more than he owns and in unable to reduce his debts, in other words, he is insolvent.

Anthony makes the decision to speak with a Licensed Insolvency Trustee about his debts. The initial consultation is free and he figures that he has nothing to lose.

Before sitting down with an LIT, they ask him to bring the following information:

  • The value of his assets (car, bank accounts, RRSP)
  • The amount he owes (student loans, lines of credit, car loan, credit cards)
  • His income
  • His monthly responsibilities (rent, car payments, living expenses)

In about an hour, the LIT is able to understand Anthony’s full financial situation and presents all the options that are available to him and the time he would need to see each one through. Because he is still young (early thirties), has few assets and is hoping to be able to get a mortgage in the next five to seven years, his LIT suggests filing a consumer proposal.

What happens in a consumer proposal?

With the consumer proposal, Anthony would only have to pay back a third of what he owes and could spread out his payments over a period of two years. His credit rating would go down about 130 points, but he would be able to build it back by the end of his monthly payments. The consumer proposal would stay on his credit report for three years after completion. This is welcome news to Anthony, who has never heard of a consumer proposal before.

Here’s something else about consumer proposals: they’re not all the same. Anthony’s won’t be the same as someone else’s. Think of them as an agreement that the LIT negotiates with your creditors on your behalf.

Jennifer McCracken says, Consumer proposals are a compromise, a middle ground between you and your creditors. They can be as creative and varied as the people involved.”

Like many people who first visit an LIT, Anthony really didn’t know what to expect. He worried that bankruptcy would be his only way out. When he leaves the BDO office, he can breathe again. He has a plan for resolving his debt. He’s relieved and proud of himself for getting help.

BDO LITs help people like Anthony all the time, all across Canada. If we could offer any advice it would be to go and speak to an LIT as soon as you feel like you are carrying too much debt. Don’t wait until you don’t have the choice. Asking for help is a sign of strength.

Meeting with an LIT to go over your debts isn’t difficult. The hard part is taking that first step, facing your debt reality and reaching out for help. You don’t have to wait until things reach their proverbial breaking point.

Are you having trouble managing your debt? Learn more about your debt relief options by joining the conversation with us on Facebook or Twitter #LeaveDebtBehind