What are the Risks to Debt Relief Options in Ontario?

What are the Risks to Debt Relief Options in Ontario?

Many Canadians are faced with unpaid debt that ends up accumulating over time. Upon seeing themselves in this situation, they should contact a licensed insolvency trustee to present them with alternatives suitable for their problems.

This article will review the risks of such debt relief options people could face in Ontario.

What is Debt Relief?

Debt relief is any method used to allow someone to pay off their debts and be debt-free – either paying it in whole or paying what you can while the rest is discharged or forgiven. Canadians can settle their debts by talking to a professional assisting them, negotiating directly with the creditor, or enrolling in a settlement program.

Here are some more details on debt relief options:

Filling Out a Consumer Proposal

Upon talking to a professional – a licensed insolvency trustee –Canadians in debt can file for a consumer proposal. A consumer proposal is an agreement between the debtor and the creditor, in which it is decided that, for a set period, the debtor will pay their debt as much as possible. After that set time passes, the rest of the debt that was not paid is forgiven.

Our licensed insolvency trustees at Risman Zysman prepare consumer proposals according to your lifestyle. We will assess your financial situation before preparing a proposal suitable for your case. 

Declaring Personal Bankruptcy

By declaring bankruptcy, a debtor has its assets sold by licensed insolvency trustees so the debt can be paid to creditors. Some assets that are protected by federal or provincial laws are exempt from sale.

Although a standard method many uses, personal bankruptcy can harm someone’s credit score and remain on their credit report for years. Still, it does not affect someone’s ability to build credit again.

Settling the Payment Directly With the Creditor

Outside of a consumer proposal, debtors can negotiate a payment settlement directly with the debt collector and the side with the amount to be paid, the payment method, and the period in which the payment will be made. Sometimes, the creditor can initiate the settlement offer, giving debtors a chance to make a counteroffer.

Enrolling in a Debt Relief Settlement Program

Another option outside of a consumer proposal is to settle a debt in a program offered by a for-profit company. The for-profit company will negotiate settlements with creditors for the lowest percentage possible until the debts are settled. With professional assistance, you can resolve many obligations at once.

The downside of enrolling in a program from a for-profit company is that creditors might want to avoid cooperating with your case or waiting for the company to accumulate enough money for the payment. Creditors can even take you to court since they are not getting any money from you.

All these debt relief options have advantages and will be applied to each situation the person in debt is going through. However, there are many risks a person may face upon following some debt relief options.

Our licensed insolvency trustees at Risman Zysman can advise you on the best debt-relief method for your situation. 

Also Read: How Long Does Bad Credit Stay on Your Credit Report in Canada?

Debt-relief Options’ Risks in Ontario

If you are accumulating debt in Ontario and are looking into some debt relief options, you must be aware of specific risks.

Creditors Can Take Legal Action Against You

As previously mentioned, while some debt relief options might favour those who own money, creditors might see these advantages later. As with for-profit companies, creditors will only receive your payment once the company collects all of your settlement first.

This is one example of a situation where creditors can take legal action against a debtor.

You Might End Up Paying High Fees to the For-profit Debt Relief Company

If the for-profit company ends up not settling your payments with all of your creditors – even when they are required to –they can still charge you high fees. What ends up happening is that, aside from not being free from all of your debts, you now have a new money charge which you will have to pay.

Results From Some Debt Relief Methods Are Not Always Guaranteed

Tying up with the extra charges mentioned above, another risk of debt relief options in Ontario you can face is that there is no guarantee that your settlement will work in its totality. When you settle your debt with private companies, there is no formal agreement with your creditors – like a consumer proposal. With a consumer proposal, creditors must follow the deal.

The debt settlement company will only contact creditors once they have enough of your money to make an offer. Therefore, there is no guarantee that creditors will even agree to the settlement or wait for it to be collected. They can reject your requests, adding more stress and complications for you.

How Risman Zysman Can Assist You – Beware of the Law

With the help of a professional, your debt-free journey will be much easier. Licensed insolvency trustees can assist you with legal protection and improving your finances. At Risman Zysman, we have more than 40 years of experience helping clients on their debt-free journey.

For those looking for debt relief, we offer a debt calculator our clients can use. 

We offer debt relief services for those looking to file for consumer proposals or bankruptcy, looking to pay off tax debts, student loans, credit card debts, or needing debt consolidation. Our team will review your financial situation before proceeding with the alternative that best suits your needs and lifestyle.

Contact us at 416-222-4600 or fill out form for a free consultation with our team. We will explain your options and reduce your debt by up to 80%.