For some types of debt, it can be possible to arrange for a “debt settlement”. This often involves coming to an agreed upon compromise with a particular creditor to pay them a reduced lump sum amount as a final settlement of the debt owed. The settlement amount is often between 50% and 80% of the total amount owed. While this may seem appealing, there a number of disadvantages associated with this approach to a debt problem:
- It is often impossible to come up with the funds necessary to make the lump sum payment unless you have a friend or relative that can assist with such a payment.
- Each creditor is different and must be dealt with separately. An agreement with one creditor does not bind other creditors who may or may not be willing to make any compromise at all.
- This solution is often promoted by “debt settlement advisors” or “debt managers’ that can charge significant fees and make many grand promises, but in the end, provide little or no effective service.
A more effective method of settling debts can be to file a proposal with a licensed Trustee. Filing a proposal is a very common and effective method that Canadians have been using for many years to deal with problem debts. Some advantages of settling debts through a proposal are:
- The settlement arrangement can be structured to meet your individual situation including your ability to make payments. It can involve making a lump sum payment, a series of affordable monthly payments, or a combination of the two.
- It legally binds all your creditors to the same agreement and gives you immediate protection from garnishees and other legal actions.
- It stops all continuing interest charges on the debts.
G. Slocombe & Associates Inc. can provide you with a professional assessment of your individual situation and advise you of all the options available to you in dealing with your debts.