Chapter 3: Insolvency? Debt relief? What does that even mean? I just need help!

Debt is no joke. Nor is the decision to get help with your growing debt. It’s tough enough deciding to explore your options; you shouldn’t need a diploma in financial literacy to have a basic understanding of what your next steps should be. 

Bromwich+Smith would like to help you better understand the basics you’re likely encountering for the first time.

When you can’t meet your monthly debt payments, you have become insolvent. Insolvent (or insolvency) is simply a financial state in which a person cannot make their debt payments on time. 

When your debt has become too much for you to repay, you need debt relief. This means a formal reorganization of your debts and an arrangement with your creditors that will make your debt repayment more manageable. 

The option that most people are familiar with in the case of insolvency is bankruptcy. This is a formal arrangement between someone who can’t pay their debts and the companies/people to whom they owe money. It does not mean you don’t have to pay anything back. For a much more in-depth exploration of bankruptcy, check out this blog.

An option that a lot of people are unfamiliar with is called a consumer proposal. In this arrangement, a Licensed Insolvency Trustee puts forward a proposal to creditors outlining how much of the total debt can be repaid by the person in debt and creditors vote on whether to accept or deny the proposal. This allows the person to make manageable payments for the life of the agreement (usually 60 months). For a much more in-depth exploration of consumer proposals, check out this blog. 

Both bankruptcies and consumer proposals are regulated by the government and need to be administered by a LIT. 

Sure, there are pay day loans, debt consolidation loans and other short-term, quick fix ‘products’ available out there but they’re not high on our list of viable options. Why take on more debt to pay the debt you already have? Especially when that option is poorly or loosely regulated. 

You need someone you can trust to help you dive deeper. 

Bromwich+Smith recommends that you choose a Licensed Insolvency Trustee to navigate this decision with you. And, as Licensed Insolvency Trustees ourselves, we ask that you consider letting us help you. 

It’s worth it.