Credit card debt can happen to anyone. You might have relied on credit cards in the case of a financial emergency, or to cover costs when you were in university. You might now be at the point where you can only make minimum payments, and are concerned about interest charges adding up.
You will eventually have to pay back what you owe with interest—often as much as 20 per cent annually making repayment more difficult. This makes credit card debt one of the most expensive forms of consumer debt and the source of debt problems for many families.
But thankfully, there are a few different ways you can get better control of credit card debt. Whether you opt to do it yourself, seek help from a credit counsellor, or turn to a Licensed Insolvency Trustee to file a consumer proposal or bankruptcy, these methods will help you solve your credit card debt and get a fresh financial start.
Depending on your financial situation, it may be possible to pay off credit card debt on your own by putting together a repayment plan. First, you’ll want to find out how much you owe and how long it will take you to pay it back. By using a debt calculator you can determine the amount of interest you’ll pay as well as how many months it will take you to become debt free.
There are several strategies that can help you pay off credit card debt. Two of the most popular are the debt snowball and the debt avalanche. With the debt snowball, you would focus on paying off your smallest debt first, while making the minimum payment on your other debts. The debt avalanche makes paying down your highest-interest-rate debt the top priority. Although the debt avalanche will save you money on interest payments, many people prefer the debt snowball, since paying off your first debt sooner can be a great motivator.
In this case, you would seek help from a credit counsellor or another third party organization that can set up a repayment plan with your credit card companies. When it comes to debt repayment options, this is often not the most affordable solution. While a credit counsellor or debt settlement company can arrange a repayment plan with your creditors, they also charge fees for their services. And because debt settlement companies are unregulated, the fees might be more than you expect. That’s why you should always do your research before deciding on a debt settlement plan.
Rather than seeking a solution from an unlicensed firm or organization, it would be a good idea to speak to a Licensed Insolvency Trustee (LIT) about filing a consumer proposal. An LIT will negotiate with your creditors on your behalf to consolidate your debt and set up one equal monthly payment for you to make over three to five years. A consumer proposal also stops any interest from being added to your debts, and allows you to repay only a portion of what you owe while protecting you from any legal action.
We know that choosing to declare bankruptcy is an emotional decision, so we will explore all of your other options first to see if they can solve your debt situation. In situations where those solutions are not the best option for you, we will explain how a bankruptcy might be the most effective way to improve your financial situation and get you out of debt. When your credit card debt reaches the point where you’re unable to make monthly payments and are being threatened with wage garnishments or legal action, then bankruptcy might be the best solution for you.