LIFE HACKS: Dealing with crippling debt doesn’t mean filing for bankruptcy

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Unfortunately, getting into financial hardship isn’t difficult. Sometimes reversing simply means getting help with budgeting or restructuring payments. However, in other cases more help is needed.

Then professionals like Dawn Golding come into play.

Golding is a licensed bankruptcy administrator with Golding & Associates Limited, based in Kentville and Halifax. It helps debtors understand their rights and options.

“Unfortunately, people are often afraid to call us because they think that otherwise they will have to file for bankruptcy, which is not the case at all,” explains Golding.

What bankruptcy means

Filing for bankruptcy has long-term consequences.

The deadlines for reporting bankruptcies are set by state law, explains Golding. Bankruptcy will be reported for six years from your release or seven years from the filing of an initial bankruptcy. However, a second bankruptcy has been reported for 14 years.

The bankruptcy is automatically deleted from the credit report after the deadline. It can’t appear any longer, she says.

It’s important to make it clear that there’s a difference between when a bankruptcy appears on your credit report and when a person can begin credit recovery, Golding says. There is no need to wait for the bankruptcy to clear from the notification to begin credit recovery. You can start starting up after you have been exempted from your bankruptcy, which is the case for a first-time bankruptcy in nine or 21 months depending on your situation.

Tips on Dealing With Debt and Avoiding Bankruptcies

In order not to have to file for bankruptcy in the first place, Golding gives some important tips for dealing with debts.

1. Budget.

Not only will a budget help you pay off your debts faster, but most importantly, it will add to your overall financial security, Golding says.

People often make a plan for their money every month and yet the plan doesn’t work, Golding says. Then they get frustrated and stop trying to get it to work. The problem, Golding says, is that they missed the first step in creating a budget.

It’s like trying to build a house without laying a foundation first – the house will just collapse without a solid foundation, she says.

The first thing you need to do before creating a plan is to find out where your money is going each month. You need to keep track of your expenses, not just the big things, because it’s the really little things that add up and are easy to forget, Golding says. This step is a big eye opener for most people.

“There are a lot of different ways to track expenses, so find out what works for you,” she says. “After you’ve tracked your expenses for a few months, you can plan with actual numbers.”

Compare your plans with actual events, and then adjust your plan or expenses accordingly, suggests Golding.

“It may sound like a lot of work, but once you get it done and have a system, it becomes second nature and not nearly as difficult or time-consuming as it sounds,” says Golding.

2. Pay off the highest interest rates first

Keep track of your debts and the interest rates on your debts. If you settle your debts first with the highest interest rates, your debts will be paid off sooner, Golding says. The snowball debt repayment system uses this method. You can find snowball debt calculators online that can help you with a plan, she says.

3. Get a consolidation loan.

A consolidation loan can be a great option to collect debts at a lower interest rate. A single payment and a set deadline to pay off the debt can be a solid solution in some situations, Golding says. The most important thing in taking out a consolidation loan is to get rid of the credit cards that need to be consolidated so that they are not used again and you are in a worse situation.

4. Avoid payday loans.

Payday loans are imperative to avoid, warns Golding. The interest rate for them is extremely high and once someone starts it is almost impossible to break free and they are in a cycle of picking up every payday and spending hundreds of dollars a month on interest for it.

5. Call around for savings.

If you’re looking for services like insurance, Golding recommends calling and checking online for deals as often as their insurance comes up for renewal. A couple of calls can save a lot, she says.

6. Don’t automatically think of bankruptcy.

Bankruptcy isn’t the only legal way to deal with debt. A consumer proposition is a compromise between a debtor and their unsecured creditors, where all debts are combined into one payment, usually with no interest and for a percentage of the remaining debt. A consumer proposal is tailored to the individual’s situation and can be a great option for solving debt problems and avoiding bankruptcy, Golding says.

7. Ask for help.

“Debt can be very stressful. Don’t be afraid to seek professional debt help if you feel overwhelmed, “says Golding.

Sometimes your creditors can help. If the situation is beyond that, you can speak to a licensed liquidator.

“As a debt professional, we can help you review all of the options available to you to resolve debt problems,” Golding says. “Unfortunately, there is a misconception that a licensed liquidator will only go bankrupt.”

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