For someone on a low income, being debt-free might be extremely difficult. Expected difficulties with work, relationship breakdowns, and health challenges might impair your capacity to buy food, pay your expenses, and service your obligations.
If this sounds like you, you may be wondering how to get help with credit card debt, or other debts you have incurred.
There are several debt relief programs to assist you in making ends meet and getting your debt under control. If you’re trying to keep up with never-ending expenses, credit card payments, and house loan installments, these programs might help you. If you’re wondering how to get debt help on a tight budget, Alpine Credits can assist you in making your debt-free aspirations a reality.
How to Get Help With Debt
Financial troubles can occur for a variety of reasons, and each scenario is unique. The federal government has financial assistance programs that provide debt relief grants to those who qualify. There are also various options available that you may address with a financial adviser or debt relief specialist.
Many low-income families in Canada are eligible for financial support to help them get by. The alternatives accessible to you depend on various criteria, including your income level and the size of your family. Here are the most common debt relief programs in Canada.
A consumer proposal is the sole government debt relief initiative in Canada. Under the Bankruptcy and Insolvency Act, a consumer proposal is a formal, legal debt settlement scheme. It’s a secure and dependable debt relief service that keeps you out of bankruptcy. A qualified insolvency trustee is a single way to file a consumer proposal.
A Licensed Insolvency Trustee (LIT) administers a consumer proposal which is a formal, legally enforceable procedure. The LIT will work with you to prepare a proposal, which is an offer to pay creditors a portion of what is due to them or extend the time you have to pay off the debts, or both, as part of this process. However, this arrangement cannot last longer than five years. Payments are sent to the LIT, which then distributes the funds to your creditors.
The act of merging two or more debts into one is known as debt consolidation. A credit card balance transfer, a debt consolidation loan, or a home equity loan are all excellent options, but they all demand strong credit or a high income.
A Debt Consolidation Program (DCP) is a contract between you and a non-profit credit counseling organization. When you work with a non-profit credit counseling service, a licensed Credit Counsellor will negotiate with your creditors on your behalf to reduce the interest on your unsecured debts. They will consolidate all of your unsecured obligations into a single, reduced monthly payment.
Credit counseling is a service offered by both nonprofit and for-profit organizations to assist you in better managing your debt and finances.
A debt management plan, or DMP, is a strategy offered by a credit counselor that allows you to pay off your obligations over three to five years. Your credit counselor proposes this alternative to your creditors, and if they accept it, you pay the credit counseling organization one monthly payment.
This is not the same as debt forgiveness or debt reduction. You’ll still have to pay off all of your debt, but the interest deduction you’ll get may be enough to help you get out of debt.
A debt settlement solution is a non-binding agreement between you and your creditors to repay a portion of your debt. This agreement, however, is not guaranteed, and costs are necessary to finish the procedure. You can try to arrange a settlement with your creditors on your own if you have a lump sum of money available.
This procedure can put customers in danger of being taken advantage of by businesses who are just interested in collecting up-front fees and leaving them to deal with unhappy creditors.
Due to the insecurities, there are few rules laid down by the government. The Stronger Protection for Ontario Consumers Act, for example, has established the following rules of behavior for debt settlement organizations in Ontario:
- Up-front costs are prohibited. It is no longer possible to pay for services before they are rendered.
- It is required to put a cap on the amount of fees a customer will pay.
When it comes to debt, bankruptcy is usually the final recourse. Bankruptcy is a legal procedure governed by the federal government in Canada. It provides the honest but unfortunate debtor with creditor protection and a discharge of all obligations at the end of the bankruptcy period.
Once you’ve been declared bankrupt, the LIT sells your assets, including those acquired during your bankruptcy. This sale excludes assets as specified by provincial and federal legislation. The money collected by the sale will be held in trust by the LIT for distribution to your creditors.
What You Should Know
Here are a few things to keep in mind before applying for a debt relief program.
- Do your research on any debt reduction company you’re thinking about dealing with. To determine if the firm has any complaints, look online and contact your state’s attorney general and consumer protection agency.
- Understand the debt settlement company’s disclosure obligations. They must disclose all costs and conditions for their services, estimate how long it will take to clear each debt, and outline the consequences of halting payments to creditors, among other things.
- Do not believe promises that a “new government program” or a legal change will decrease, forgive, or cancel school loans, credit card debt, or other obligations.
- Consider alternative debt-reduction options, such as negotiating directly with creditors or seeking help from a nonprofit credit counseling organization. If the costs are framed as “voluntary” donations, don’t pay a debt reduction or credit counseling agency in advance.
- Don’t put your faith in assurances. No firm can guarantee any reductions in your debt by a particular amount.
- Allowing a firm to enroll you in a debt reduction program without discussing your financial position with you is not a good idea.
Getting out of debt is challenging, and paying it off on a low income adds to the hardship. If you have been wondering how to get debt help, following the steps above will set you on the road to financial freedom, and if you stick to them, you’ll be debt-free in no time. It is always beneficial to talk to a financial expert before arriving at any decision.