You know when you have too much debt to reasonably manage. You can’t make minimum payments, your bills are going into collection, you’re getting calls from debt collectors, and you may even have legal actions taken against you. Going into debt is a stressful experience, but there are several ways you can handle the situation. Many people discharge their debts through bankruptcies or have their debt reduced by going into a consumer proposal in Ontario. These are great options for those who are insolvent (i.e., do not make enough money to repay their debts). A third option is credit counselling alone.
When Do You Need Credit Counselling?
The government requires people who have entered into a consumer proposal in Ontario or a bankruptcy in Ontario to take credit counselling. You don’t need to enter into legal insolvency proceedings to speak with a local credit counsellor, but if you qualify, a consumer proposal in Ontario is often the most effective and affordable way to get out of debt. A consumer proposal in Ontario includes reducing your debt to a fraction of what you originally owe. If you don’t qualify for a consumer proposal because you aren’t technically insolvent, or you owe a relatively small amount of money that you struggle to pay because of budgeting, credit counselling may be worthwhile and available from a bankruptcy trustee, also known as a Licensed Insolvency Trustee. Bankruptcy trustees in Ontario such as David Sklar & Associates provide credit counselling as well as help with bankruptcies and consumer proposals in Ontario.
Because different people get credit counselling for different reasons and have very different financial situations, counselling should be tailored to your individual needs. Tailored counselling is one benefit to getting credit counselling from bankruptcy trustees in Ontario like David Sklar & Associates. These are the basics you will learn in credit counselling:
Surprise expenses or reduced income can hurt your financial situation all of a sudden, but poor budgeting skills can be just as harmful in the long term. You may not notice the issue as quickly as you would after a car accident or losing your job, but poor budgeting can land you in trouble too. Credit counselling will teach you the basics of balancing your income and your expenses.
- Debt Management
Managing your debt is also an important skill. You may be able to make ends meet now, but what happens when interest rates go up? Debt management is all about creating a strategy to repay debts before they become burdensome.
- Rebuilding Your Credit Rating
One reason to consider credit counselling if you owe a small amount of money is that it won’t go on your credit report. However, if your debt is simply unmanageable, a consumer proposal in Ontario is one of the most effective ways to reduce your debt according to David Sklar & Associates. If you’re seeking help, your credit rating is probably struggling already. Credit counselling will teach you how to use credit productively so that you can rebuild your credit rating. A better credit rating makes it easier to qualify for a mortgage or car loans. Banks and lenders offer lower rates to people with higher credit ratings, because they’re considered lower risk.
If you want to turn your debt around, start talking to a credit counsellor today.
Ryan Yarbrough is a small business consultant, speaker, and the manager at Davis Financial Services, a small business consulting firm.