Despite our best efforts at financial planning, unexpected financial hardships may arise that make loans or credit that we expected to be able to pay back regularly and on-time simply unmanageable – be it for a short period or a longer one incurred due to significant interruption in your or a family member’s ability to work.
Managing debt can be an organizational task even when your financial plan is on track: what happens when you find yourself in the unfortunate situation of having taken on debt that you are momentarily or more seriously unable to pay back?
Act in Good Faith
It’s a natural response on the part of many debtors to want to retreat from those to whom they owe money. Inquiries about collections will start to invade your personal space fairly quickly, and this can be stressful and disruptive – increasing anxiety and making it even less likely that you will be able to get back on track with your finances. However, being up front with the organizations to whom you owe money may be a good initial strategy. Reach out and explain the situation you are in as soon as you can. If they see you acting in good faith, your lender may be willing to negotiate revised terms that will help you get back on your feet without the pressure of mounting debt.
Find Assistance and Advice
There are non-profit groups across Canada that offer free or low-cost credit counseling to consumers. However, be sure to avoid any group that wants a large upfront payment in exchange for negotiating your debt. If you have an existing financial advisor, talk to them right away to build a plan for your finances as you address outstanding debts.
Consult an Ombudsman or Regulator
If you feel as though a lender has treated you unfairly or maliciously, you may be able to report them to watchdogs such as ombudsmen or regulatory bodies in your province. Organizations like the Canadian Payday Loan Association and OBSI can help in such situations.
No matter what part of the process you’re currently involved in, there are mechanisms available for working with creditors when you can’t pay back your debt. . There may be ways around paying back every cent you owe if your situation has changed, but it’s very difficult to get around being marked as a potential liability in the eyes of credit bureaus. Your ability to borrow money may be challenged in the wake of an unexpected financial challenge, but you can get back on your feet and start rebuilding.