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Every year, thousands of Canadians find themselves teetering on the brink of personal financial ruin; a situation that can lead to sleepless nights, ulcers and extreme mental stress. But as bad as the stress associated with debt may become, the majority of people are often unwilling to face up to the responsibility of straightening out their debt problems. This is not because they are lazy slobs or amoral charlatans, but because taking positive steps toward resolving a debt crisis involves a considerable amount of effort. It requires not just a sound financial plan, but a change in perspective. You must begin to think and act in an entirely new way.

For many people facing a personal debt crisis, practical solutions seem few and far between. It may seem like the only alternative you have is to declare bankruptcy. While this may indeed be the only option for some people, it is not the only one for the majority. There are a number of options you should explore before going to this extreme.

There are many credit counselling services throughout Canada that can help you tame your debt problem. Counselling agencies can usually be found in the yellow pages or in your local phone directory. Increasingly, credit counsellors can also be found on the World Wide Web. Some, such as Credit Counselling London (in London, Ontario) and Credit Counselling Services of Metropolitan Toronto offer sites with fairly comprehensive frequently asked questions (FAQ) listings, which can help you get an idea of what your situation requires. Another good source is the Credit Counselling Service of Sault Ste. Marie and District. While all three of these sites are based in Ontario, they may be able to direct you to similar services in your home province.

If you are facing a debt load that you do not think you can realistically carry, contacting a credit counselling service is probably the first step you will need to take. Most services operate as non-profit organizations offering free initial consultations. After the first meeting, you may be expected to pay a nominal fee based on what you can afford.

Credit counsellors will probably recommend one of a number of different approaches to resolve your debt crisis. They may suggest that you attempt to begin a debt repayment program, which is meant for people who are unable to afford their regular monthly payments. The counsellor will negotiate with your creditors on your behalf in an attempt to have your payments reduced to a level you can afford. Because counsellors have invested time in building a reputation within the financial industries, they have a much better chance than you do of winning your creditors' confidence. If agreements can be reached, you will pay your counsellor a lump sum each month, which will then be disbursed to your creditors. This plan requires that you are able to pay enough money each month to have your debts cleared within four years.

Counsellors may also act as mediators in helping you to reach a suitable repayment plan with your creditors. Debtors, under this plan, will make their payments directly to the creditor. The counselling agency will only be involved on a short-term basis.

Credit counselling services also offer various workshops that can help you create a personal budget that falls in line with what you can afford. Counsellors can also assist you in setting up a personal plan to put you on the right track, and keep you out of debt in the future.

In some cases, bankruptcy may truly be the only option left, but those cases are rarer than you might think. Before committing yourself to such an extreme course of action, make sure you have investigated every other option. Bankruptcy will stay on your credit record for seven years. Even when it is removed from your record, you will still be faced with the problem of starting a credit rating from scratch.

 

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