If you’re heavily in debt, you know that it’s no fun. You may be receiving harassing phone calls from your creditors – especially your credit card providers – or even from debt collectors.
If you are being hassled by debt collectors, we don’t have to tell you how ugly this can be. They may be calling you all hours of the day and night, at home or even at work. One or more of them may even be threatening to contact your employer, calling you names or intimidating you in some other way.
Fortunately, there are debt relief options that can get you out of debt in 24 to 48 months or even less – depending on how seriously you are in debt. Here are the most popular options.
Credit counseling
There may be a consumer credit counseling agency in your town or city. If not, you can always find one online. In either event, you will be teamed up with a debt counselor who will review your finances and help you develop a payment plan. He or she will also contact your creditors to negotiate reductions in your interest rates and to have them approve your plan.
When all your creditors sign off on your payment plan, you’ll no longer have to pay them. Instead, you will send one payment a month to the credit counseling agency and it will pay your creditors. However, it’s important to understand two things. First, credit counseling services can only negotiate your unsecured debts. And second, if you are deeply in debt it will take you from 5 to 7 years to complete your plan.
A debt consolidation loan
A second option for dealing with your debt is to get a debt consolidation loan. If you owe less than $10,000 you should be able to get an unsecured or signature loan. However, if you owe more than $10,000, you will probably have to get a secured loan – or one where you have to pledge an asset as collateral. In most cases that asset will be your house. This means you would need to have sufficient equity in the house that you could borrow enough to pay off all your debts. In other words, if you owe $15,000, you would have to have at least $15,000 in equity. Your debt consolidation loan would probably take the form of a second mortgage or homeowner’s equity line of credit.
Regardless of which of these you choose you would be putting your house at risk. This is because if you were to ever default on that loan, your lender could repossess your home. Another disadvantage of a debt consolidation loan is that it would probably you 7 to 10 years to pay it off – during which time you would have to be very, very careful about running up any new debts.
Chapter 7 bankruptcy
The third debt relief option is to file for bankruptcy. However, before you file you will need to review your finances in great detail with a licensed trustee. This means you will have to provide him or her with your tax records, bank statements, and even sales receipts for durable goods so that your exact net worth can be determined.
Different provinces have different laws governing the bankruptcy process. However, no matter where you live you can expect that your creditors will take a substantial amount of your assets.
You will be allowed to retain certain exempt assets but others can be seized. If you live in Ontario, you will be allowed to keep your car if it’s worth less than $5,650 and up to $11,300 in work related tools. You will also be able to keep certain home furnishings and clothing items but most of your other possessions can be seized. About the same rules apply in Saskatchewan. However, there you can keep any car worth less than $10,000 and up to $7,500 in clothing items. Plus, filing for bankruptcy can ruin your financial reputation for anywhere from 6 to 14 years.
Debt settlement
The fourth, and we think best, option is to have us settle your debts. This is better than debt consolidation because we can actually get your balances and interest rates reduced. It is also better than filing for bankruptcy as it will not have as serious an affect on your credit.
Debt settlement can probably save you thousands of dollars. The way this works is that we evaluate your debt and create a customized debt program. You save funds for settlement. We then negotiate settlements with all your credit card providers and your debts will be resolved.
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