There is more than one way to get out of debt.
First of all, take the time to fully understand your financial situation
This is already a step in the right direction. To get an accurate portrait of your financial situation, you’ll need to draw up a personal balance sheet and a budget.
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To find out more about alternatives to bankruptcy, visit the Office of the Superintendent of Bankruptcy Canada website.
Next, meet with a financial advisor
Once you’ve taken a good, hard look at your financial situation, you’ll be able to see the extent of the damage. You’ll be in a better position to discuss the situation with a financial advisor at your financial institution.
He or she may recommend a radical solution, such as debt consolidation or other corrective measure. Remember that the worst thing you can do is to try to make your situation look better than it really is. Financial institutions have a lot to lose if you declare bankruptcy, and would rather see you regain your financial health. An advisor will listen carefully and help you find a solution.
Debt consolidation
Consolidating debt involves a financial organization combining some or all of your loans into one.
Financial institutions that do so assume all the risks that were previously shared by several institutions, including credit card companies. That’s why, before agreeing to do it, your financial institution’s financial advisor must be convinced that the debt cycle over and done with. You’ll therefore need to radically change your spending habits.
Corrective measures
If your financial institution agrees to help you, it may demand radical action such as cutting up credit cards and cancelling all your lines of credit. You’ll also need to cut your spending to a minimum. If you have a home, it may recommend you refinance it.
The institution may also request a financially stable family member or friend to co-sign for you. Before you go this route, make sure you understand all the consequences. The person who co-signs for you will be responsible for paying off your debts if you don’t. Are you sure you want to risk ruining your relationship with this person?
Bankruptcy
Bankruptcy can damage your credit rating for many years, making it difficult to get financial institutions to lend you money, even 5 to 7 years after the fact. It may also affect your chances of landing a job. Consequently, this option should only be considered as a last resort. Find out more about bankruptcy.