In debt – how do you know where to get help?

The Alberta Debt Crisis: Making the trusted choice for consumer debt relief

Debt. We’re all in it, and the issue only seems to be getting worse – especially for Albertans. Alberta holds the highest consumer debt in Canada, nearly $50,000 more than the national average.  The oil and gas rich province continues to see growing job losses which only adds to the increasing consumer debt  – so how do you know where to turn to for help?

Credit counseling, debt consolidation, consumer proposals, bankruptcy – these are all terms that have been tossed around and advertised to us, but what do they mean to an indebted consumer? What options are best for your situation?  Who can you trust to handle your finances and bring you out of the red zone?

Consolidation loans

Often times the first method people consider is a consolidation loan, whether from a bank or other lender. The great part about a consolidation loan is the lumping of all of your debt into one new revised payment. On the downside, this revised payment is 100% of the debt owing wit interest. While a new payment is tempting, often times there can be many extra steps in qualifying for a consolidation loan and the new payments may not be all that much more affordable.  More on debt consolidation.

Credit Counselling

Before determining what options are best suited for you, you need to understand the debt relief landscape and who the players are. Credit counsellors have become more prominent over the last decade, mainly fueled by debtors’ desires to avoid the big bad “B” word – bankruptcy. Toted as a non-profit agency, credit counsellors require you to make regular payments to them under a debt repayment plan, and they in turn make payments to your creditors, while holding back a certain percent of your payments for their fees.

Often when consumers are choosing to eliminate their debt by way of credit counseling, they are choosing one of the most expensive methods available.  When choosing credit counseling the consumer must pay 100 percent of the outstanding balance, pay fees to the credit counseling agency, and may have to pay interest on their debts included in credit counseling.

Consumer Proposal

An alternative to credit counsellors is the more trusted and trained option of licensed trustees who are regulated by the Office of the Superintendent of Bankruptcy, typically have their accounting designation, and have been through rigorous training in bankruptcy and law.  Operating under a Code of Ethics, trustees tailor their debt solution approach to each consumer’s situation, and assist debtors into filing a bankruptcy, or the more preferred option – a consumer proposal.

A debt relief method that has become increasingly popular over the last few years (increasing 53% in Alberta from 2013-2014) is consumer proposals. Consumer proposals are attractive to people all across Canada because they allow a debtor to consolidate all of their debts into a fair proposal to their creditors to pay back all, or a portion, of the debt owing under new terms. It allows for debt consolidation, interest free terms, and flexible payback periods and allows the debtor to keep ownership of assets – your home, vehicle, tools of your trade, or potential inheritances are all protected.

Licensed trustees are the only professionals who are able to administer a consumer proposal.

As the debt landscape in Alberta continues to worsen, consumers need to be aware and informed of their options for debt relief.