Credit card debt, given their high interest rates, can quickly become a financial burden if not managed properly. Plus, other debt can pile up and cause your credit score to take a hit. For some, refinancing this situation, if left in arrears, becomes a major hurdle to overcome.
Seeking the help of a licensed insolvency trustee (LIT) is a good idea when you reach a point where managing your debt is impossible or feels impossible. But if you recognize the direction your financial situation is headed, reaching out sooner could be even more beneficial.
A LIT can help you solve your financial situation, but they can also provide you with resources on debt management and preventing insolvency in the first place.
What Is Insolvency?
Insolvency may sound fancy and technical, but it boils down to the inability to pay back your debts as they come due. It is essential to point out that an insolvency situation is not always the result of bad choices. Financial hurdles can happen to anyone for many reasons.
Before a person reaches the point where they are insolvent, there are typically warning signs. If they heed those signs, an individual could take control of their finances before seeking a bankruptcy remedy.
What Is a Licensed Insolvency Trustee?
A LIT is a professional specializing in assisting their clients in solving insolvency, and ensuring they are equipped to prevent it in the future. They can offer solutions, such as bankruptcy or a consumer proposal. But they may also be able to provide other options, such as debt consolidation or debt repayment planning.
When to Ask a Licensed Insolvency Trustee for Help
There is not a one-size-fits-all answer for every situation. Seeking help should be a decision you make when you are ready to take control of your finances.
When you begin seeing the warning signs of financial issues, you should consider reaching out. And certainly, when you reach a point of being unable to pay bills, you should seek help.
How Can an Insolvency Trustee Help You?
LITs are the only professionals in Canada that the federal government licenses to manage debt elimination or restructuring under the Bankruptcy and Insolvency Act (BIA). They can do this in several ways:
Debt Consolidation
Presently, the average Canadian owes more than $8,500—not including their mortgage. That may seem like a small amount to some. Others may find that multiple payments begin piling up and causing problems.
A person may avoid these problems if this financial burden is handled correctly. But debt consolidation may be an option to consider before bankruptcy. All your loans get lumped into one monthly payment for various terms. This can make budgeting easier and staying on top of your finances easier. Lenders, however, are not always willing to grant consolidation loans.
Consumer Proposal
A Division II (Consumer Proposal) may sometimes be an option. There are certain qualifications a person must meet to qualify for a consumer proposal. But if you are insolvent and unable to pay your outstanding, unsecured debts, a LIT can assist you in determining which solution is right for you.
Bankruptcy
When discussing bankruptcy, it is important to remember that it is not always due to things within a person’s control. Sudden changes in income, such as an unexpected job loss or health issues, can render a person in serious financial trouble. A LIT can assist you in the process of filing for bankruptcy. Just like a consumer proposal, certain conditions must be met to qualify for this solution.
Preventing Future Insolvency
The things we have discussed here may all be potential solutions. However, the ideal scenario is preventing insolvency in the first place. If you choose to seek help from a LIT before your financial state becomes hugely overburdened, they will be able to help you.
Credit Counseling
A LIT can provide you with information or resources on things like repayment strategies and available relief options. Credit can lead to problems, so it is important to learn how to avoid relying on credit.
Credit counselling could possibly be one of the most valuable services a LIT may offer some people. It potentially prevents formal procedures and could prevent their need for a repeat.
Ultimately, learning to recognize the signs of financial problems beginning is a valuable tool in staying in control of your money.
Discuss Your Situation With Qualified Professionals
Remember that a LIT is the only professional in Canada the federal government licenses to restructure debt with solutions like a consumer proposal or bankruptcy. The team at A.C. Waring & Associates is here for you.
Please stop by our office or contact us to book a free consultation. A team member can sit down with you and learn about your situation. Together we can come up with a solution.
