Consumer Debt & How To Deal With It

Consumer Debt & How To Deal With It Learn What To Do & Who To Talk To

The average Canadian struggles to make ends meet on a monthly basis, while trying to pay their debts.

A solution is to prepare a detailed personal budget and stick to it to solve your debt problems.

However, there is often a need to seek Professional Assistance and Advice to deal with your financial situation.

Where I can turn for advice? 

Chartered Insolvency and Restructuring Professionals (CIRP) are available for a free consultation to offer suggestions for solving your difficulties.

Some options that may be available to you, depending on your specific personal circumstances, include the following:

  • Proposal
  • Orderly Payment of Debts
  • Informal Arrangements with Creditors/Credit Counselling
  • Debt Consolidation Loans
  • Bankruptcy

Why should I choose a CIRP/Trustee for advice?

Trustees are licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies, to act as receivers and to monitor restructuring under the Companies’ Creditors Arrangement Act. They are governed by the Bankruptcy and Insolvency Act (BIA) and the Code of Ethics for Trustees.

The Office of the Superintendent of Bankruptcy (OSB) is an agency of the Canadian Federal Government under Industry Canada and is responsible for regulating the process and protecting the public interest.

The OSB is also responsible for ensuring that the BIA is administered properly and that all fees charged by the Trustees are in accordance with the BIA.

By choosing a Trustee in Bankruptcy who is also a CIRP you are getting more that a licence holder. A CIRP/Trustee must also comply with the bylaws, Rules of Professional Conduct, Standards of Professional Practice and Mandatory Professional Development requirements of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

The CIRP certification identifies insolvency and restructuring professionals who are the leaders in providing insolvency and business recovery services.


Credit Ratings

What is my Credit Report?

The two largest Credit Reporting Agencies in Canada are Equifax and TransUnion.

These Agencies are repository of Consumer Credit Information. They do not make any credit decisions, rate consumers, or grant credit.

The agencies receive information about you directly from your credit grantor, which is based solely on that grantor’s experience with you. This information is then compiled by the Agency in a Credit Report that is made available to the “members” of the credit granting agency, or to you, the debtor. A copy of your Credit Report is free of charge if it is mailed to you via Canada Post, however, there is a charge of approximately $15 if your credit report is requested over the Internet.

How do I improve my Credit Rating?

The first step is to ensure that the information in your credit report is accurate. After that, the only way to improve your credit report is to use credit wisely.

Wise use of credit includes:

  • Do not apply for a myriad of credit sources; limit yourself to two credit cards with small credit limits
  • Pay your bills on time. Work with your creditors to allow time to pass to show that your payments habits have improved.
  • Be prepared to show the stability of your employment and your residence. Creditors want to know that you have a reliable source of income and that they can easily contact you if necessary.
  • Get a secured credit card and be sure to pay the balance off every month.
  • Keep an emergency store of cash to be used to pay your living expenses if something goes seriously wrong with your income sources.

Communicate with your Creditors…

If you run into temporary problems in paying your debts, it is best to talk to your creditors and inform them of your situation as soon as possible. Let them know that you fully intend to pay your bills, but, due to your current circumstances, you need a bit of leeway for a short period of time. Most creditors are willing to negotiate a short term arrangement that will work for both of you, as long as you are sincere in your efforts to comply and meet the payment schedule as arranged.


Options to Help Solve Your Financial Problems

Proposal to Creditors…

This option allows you to advise your creditors that you are unable to repay all your debts, but are willing and able to pay a portion of your debts over a period of time (usually a maximum of 60 months).

You pay what you can reasonably afford to pay. The exact portion of the debt that you would repay is based on your family income and financial obligations. Any interest charges stop the day the proposal is filed with your creditors.

With the help of a Trustee, you would prepare an offer to your creditors. If the required majority of your creditors agrees, the proposal is binding on all of your creditors.

If you wish to find out more about a proposal you will need to talk to a Trustee/CIRP.

Under this option you compromise or settle your debt generally for a lower amount without interest charges. There is also a fee to the Trustee/CIRP as set out under the Act but this fee usually comes out of your monthly payments.

Orderly Payment of Debts…

This option is not available in every province. You apply for a Consolidation Order setting out the amount and times when payments are due to the Court. Payments are then distributed to your creditors. The interest rate is lowered to a rate set by the Court. In addition to payments to your creditors there is also an administration charge. A Trustee/CIRP in your community will be able to advise you who to contact for this program. Please note this option is not available in Ontario.

Under this option you pay 100% of your debts, judgment interest and administration charges.

Informal Arrangements with Creditors and Credit Counselling…

You negotiate directly with your creditors with the assistance of a CIRP/Trustee or a Credit Counsellor. This option usually calls for the repayment in full of all your debts at a reduced interest rate.

Credit Counsellors/Agencies are not able to compromise Canada Revenue Agency debt. Only a proposal made under the BIA can accomplish this.

You need to exercise caution when you choose a Credit Counsellor, as anyone can call themselves a “credit counselor”. Ask if they are licensed, and if so, by which agency. Before you commit yourself, enquire about their qualifications and the training they have completed, together with a full disclosure of how they are regulated. Ask if they are receiving funding from any of your creditors and how they are paid for assisting you.

Generally under this option you pay 100% of your debts, plus interest and fees

Debt Consolidation Loans…

Banks or financial institutions may “consolidate” your debts into one loan. The lender pays off all your debts to the different creditors and in return, you make monthly payments to the lender.

To qualify, the lender will assess your income, credit rating and your ability to repay.

Interest rates can vary and the lender may request a co-signer or ask you to pledge assets as security for the loan.

Under this option you pay 100% of your debts, plus the interest and any fees charged by the lender.


This option can be taken when you are not in a financial position to repay a reasonable portion of your debt.

The process relieves you of most debts, and legal proceedings by creditors generally stop on the day you sign the papers with the trustee.

A first bankruptcy can be completed in 9 months. Payments to the Trustee/CIRP are based on your family income. The process and procedures will be explained to you during your FREE initial consultation with the Trustee/CIRP.

Most of your personal assets are exempt from seizure, up to a maximum value amount for each type of asset. Business assets may also be exempt from seizure, depending on the type and value of the assets.

Under this option the amount you pay is governed by the Bankruptcy and Insolvency Act, based upon your unique situation.

As a debtor, you have rights…

While laws differ from province to province, here are a few basic rights to which every debtor is entitled.


  • Contact you at an unreasonable hour
  • Exert excessive or undue pressure for payment i.e. cannot use profane language or threaten you
  • Approach your employer without your consent except for verifying your employment
  • Humiliate or abuse you or your family or cause anguish in the process of collecting payment
  • Use forms that are not approved by the Government while collecting dues

An Important Point…

Please be advised…

Chartered Insolvency and Restructuring Professionals who are licensed as Trustees in Bankruptcy by the Superintendent of Bankruptcy have statutory duties, responsibilities and powers.

They are not advocates for the debtor. However…

You can only access the Bankruptcy and Insolvency Act and its cost effective and efficient means of discharging your debts, by employing a Trustee in Bankruptcy.

Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.  

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