LIFE HACKS: Facing crippling debt doesn’t mean declaring bankruptcy

Unfortunately, it is not difficult to find yourself in financial difficulty. Sometimes turning around just means getting help with budgeting or restructuring payments. Other times, however, additional help is needed.

That’s when professionals like Dawn Golding come into the picture.

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 is not the case at all,” says Golding.

What does bankruptcy mean

If someone goes bankrupt, there are long-term consequences.

Deadlines for filing bankruptcy are determined by provincial law, Golding explains. A 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 once the time period has elapsed. He can’t appear any longer than that, she said.

It’s important to clarify that there’s a difference between when a bankruptcy appears on your credit report and when a person can begin to repair their credit, Golding says. You don’t have to wait until the bankruptcy has passed from report to start restoring credit. You can begin to recover after being discharged from your bankruptcy, either in nine months or 21 months in the case of a first bankruptcy, depending on your situation.

Tips for Dealing with Debt and Avoiding Bankruptcy

To avoid having to declare bankruptcy in the first place, Golding offers several important tips for dealing with debt.

1. Budget.

A budget will not only help you pay off your debt faster, but more importantly, it will strengthen your overall financial security, says Golding.

People often make a plan for their money every month and yet the plan doesn’t work, Golding says. Then they get frustrated and stop trying to make it work. The problem, says Golding, is that they missed the first step in developing a budget.

It’s like trying to build a house without laying a foundation first – the house will collapse without a solid base, she says.

The first thing you need to do before making a plan is figure out where your money is going each month. You need to track your spending, not just the big stuff, because it’s the really small things that add up and are easy to forget, Golding says. This step is a big eye-opener for most people.

“There are lots of ways to track expenses, so find what’s right for you,” she says. “After tracking your expenses for a few months, you can then plan with real numbers.”

Compare what you planned with what actually happened, then make appropriate adjustments to your plan or spending, suggests Golding.

“It may 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 seems,” says Golding.

2. Pay off the highest interest rates first

Keep track of who you owe and the interest rates on your debts. By paying off your debts with the highest interest rates first, your debt will be paid off 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 consolidating debts 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 getting a consolidation loan is to get rid of the credit cards you are consolidating so that they are no longer used and you end up in a worse situation.

4. Avoid payday loans.

Payday loans are something to avoid at all costs, warns Golding. The interest rate on them is extremely high and once someone starts with one it is nearly impossible to get rid of and they find themselves in a cycle of re-borrowing each payday and spending hundreds of dollars a months in interest to do so.

5. Call to save.

If you’re looking for services such as insurance, Golding recommends calling and checking quotes online when their insurance is due for renewal, as they may get better deals with a new company. 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 their unsecured creditors where all debt is consolidated into one payment, usually without interest and for a percentage of the balance owing. A consumer proposal is unique to the 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 your debt if you feel overwhelmed,” says Golding.

Sometimes your creditors can help you. If the situation goes beyond that, you can speak to a Licensed Insolvency Trustee.

“As a debt professional, we can help you explore all options for resolving debt issues,” says Golding. “Unfortunately, there is a misconception that all a Licensed Insolvency Trustee does is bankruptcy.”

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