Finding your way through the ins and outs of consumer debt can feel understandably overwhelming for the average person, and many people are unsure what to ask, or where to turn to get the facts about debt.
President of Sands & Associates and BC Licensed Insolvency Trustee Blair Mantin joined Global News BC to address some frequently asked questions about managing debt and share information consumers should know when dealing with some common types of personal debt.
Watch the clip here, and read on to learn the answers to some common personal debt questions, with debt expert insights to help you meet your debt-free goals:
Frequently Asked Questions About Personal Debt
Every day Licensed Insolvency Trustees connect with people seeking information about debt who may be facing a variety of financial challenges and concerns – from urgent situations with wage garnishments, to looking for ways to streamline debts and make monthly payments more affordable. Here are answers to questions that are among the most common:
“Am I responsible for my spouse’s debt?”
The short answer is – no! You’re not personally responsible for repaying the debts of your spouse or partner simply by being related, married, living together or even their death. It is a common misconception, but rather than through marriage, responsibility for ‘spousal debt’ may be triggered by:
- Debts being deemed as ‘family debt’ under BC’s Family Law Act following separation or divorce, or
- Co-signing or co-borrowing on debts together.
This conversation often leads to an insight that many Licensed Insolvency Trustees wish was better understood by people: Co-signing debt with anyone is usually riskier than you think – so much so that we almost never recommend it.
- Besides adding layers of emotional stress to your finances, by co-signing or co-borrowing with someone (related or not), you become equally responsible for paying back 100% – not half, of the full balance due if the other party does not pay.
“Do unpaid debts expire eventually?”
In BC there is a Limitation Act, under which the length of time a creditor has to sue you for a debt owing is capped with a two-year basic liability limitation period. You technically will owe the debt, and creditors can continue to call you or report delinquent accounts to credit bureaus for some years to come, but the creditor cannot take legal action against you if it’s been two years since:
- The date the unsecured debt was incurred; or
- The date of your last payment on the debt; or
- The last written acknowledgement of the debt by the person who owes the money (yes, emails count).
It’s important to know certain things can ‘reset’ the clock, and there are exceptions; judgments, child support and debts owed to government bodies are examples of debts not covered.
But – there is another fact people often don’t (but should!) know about debt: There are options to restructure and get forgiveness for government debts – including Canada Revenue Agency balances for taxes, business GST, federal and provincial student loans, CERB overpayment, ICBC debts and more.
- Canada has two solutions for relief and even 100% forgiveness of consumer and government debts: a Consumer Proposal (a legal non-borrowing debt consolidation option) or personal bankruptcy.
- These also stop Canada Revenue Agency from wage garnishments, account freezes and putting a lien on your property.
“What can I do deal with my debt without impacting my credit score?”
Virtually every debt strategy can have some effect to your credit history and score, but simply carrying a bunch of debt can affect your credit score too. Any time you don’t pay your debts off in full in a timely way and according to the original lending agreement, your credit history may be impacted. For example:
- Making only minimum monthly payments on your credit card will keep it up to date (good of course), but it takes a long time to clear debt this way and depending on your balance this could cause you to have a score continually impacted by a high credit utilization rate.
- New credit applications (such as from seeking consolidation financing) result in a ‘hard hit’ that temporarily affect your credit score.
- If you pay off any debts using a credit counselling plan this will be reflected on your credit history for two years; three if you consolidated and cut your debt with a Consumer Proposal; six if you file for bankruptcy (which can result in full debt forgiveness for all your debts).
The anxiety of credit score VS paying down your debt is real. For people concerned both about how to maintain your credit score and pay down debt, it’s helpful to understand that:
- Even if you maintain a ‘good’ credit score, without a major asset, high income, and/or a co-signer, it can be difficult (if not impossible) to get more credit such as a consolidation loan at a ‘best rate’.
- By addressing your debt, you will be doing more for your credit score and yourself; scores are always changing, and you can productively change your score in a relatively short period.
- The sooner your debts are paid off, the faster you can benefit from (often dramatic) improvements to finances. Imagine how different things would be in your household without the burden of debt!
What the Experts Want You to Know About Dealing with Debt
There’s a lot to know about debt and debt strategies, but two things many debt experts (and certainly Sands & Associates’ Licensed Insolvency Trustees) would agree we wish people knew are:
- You do not have to pay to get honest professional debt advice
Bring your questions to a Licensed Insolvency Trustee and get advice before you make moves in dealing with your debt. You want to be certain you get complete and accurate information from a qualified professional. At Sands & Associates consultations are confidential, without judgment – and always free.
- A debt problem can happen to anyone at any time, despite “doing all the right things”
You do deserve support, and to be treated with dignity and respect. You are not alone, we are here to help you move forward with your life.
As Licensed Insolvency Trustees one of the main services we provide to people is helping them better understand their personal debt situation, and all their options for dealing with debt. We’ve outlined just a few common questions here, but everyone’s situation is unique and you should never be afraid to seek support from a Licensed Insolvency Trustee so you can make informed decisions about how to move forward.
Sands & Associates is here for you with support and solutions. Get advice from experts who care, and a plan to be debt-free – book your free confidential debt consultation today.