See beyond stress
If you have more debt this month than the previous month and the trend is likely to continue next month, you need to take the time to ask yourself some good questions. More than anything, you must no longer dig this hole from which you will be unable to escape.
“Stress makes it very difficult to cope alone,” says Julie Brissette. This budget advisor at ACEF East of Montreal sees “a few red flags” to recognize, to admit that things are no longer going well at all.
“The first is significant financial stress,” she says. Whether it’s because our debts prevent us from sleeping, from functioning at work or because it creates arguments in the relationship. »
Another point to watch out for: accumulating late payments. If a large portion of your income goes toward paying the minimum on credit cards, that’s a bad signal.
“We should not be forced to deprive ourselves of essential needs because we pay too much for our monthly debts, for example the minimum credit card payment,” says Julie Brissette.
Of course, the economic context is not at all favorable for a person who has an accumulation of debt. “And we must not believe that tomorrow morning, the cost of groceries will go down and that we will have plenty of affordable housing,” says Julie Brissette. That’s not reality. »
The solution: the budget
“You need to have an overview of the situation to assess what the most suitable solution will be,” says Julie Brissette. Because there are several solutions to debt. The consumer proposal and the trustee’s bankruptcy are part of them, but there are others. »
We can’t repeat it enough, several tools are available to make a budget easily, including those offered by financial institutions or the Financial Consumer Agency of Canada.
If spending can be stopped immediately or reduced, that’s how we see it. It is also by having all the expenses in hand that it is possible to consolidate debts, that is to say group them together under the same loan with a lower interest rate than most of these individual debts.
Possible actions
Before even continuing the process, it is possible to consider making an agreement with certain creditors.
With the list of your lenders in hand, you have a good idea of the people and institutions with whom it is possible to make a payment agreement, whether it is your brother-in-law or Hydro-Québec.
“We offer our clients flexible payment arrangements where administration fees are suspended as long as the payment arrangement is valid and respected. The agreements, when respected, also ensure that there is no interruption of service,” explains Cendrix Bouchard, spokesperson for Hydro-Québec, who advises customers in difficulty to contact their service. as quickly as possible.
Several institutions, public or private, offer arrangements of this type. In the event that all these efforts have been made, but it is not enough or debt consolidation has been refused, budget advisor Julie Brissette believes that bankruptcy or the proposal must be considered.
166,000
Hydro-Québec has entered into payment agreements with 166,000 customers for the first nine months of 2023, a slight decrease compared to last year.
Source: Hydro-Québec
When it really doesn’t happen anymore
People wait too long before appearing before a trustee, deplores Véronique Vachon, partner, licensed insolvency trustee, at Raymond Chabot.
According to her, there is still some discomfort in consulting a trustee, while several solutions other than bankruptcy can be considered. “The sooner people come to us, the more options we can offer them,” she says. And it is our obligation to look at all possible options. In certain cases, we will direct the person to their financial institution to try to consolidate; in others, it will be a voluntary deposit. »
With this voluntary deposit, the entire debt is repaid, under supervision: payments are proportional to income and salary is protected.
Véronique Vachon admits that, more and more, trustees welcome people whose budget is not balanced due to the current context. In the last 12 months, there has been an increase in insolvency filings of 17%, but it remains behind compared to the pre-pandemic period. “People still have a little cushion in front of them,” says Véronique Vachon.
Trustees are the only professionals authorized to file a consumer proposal or bankruptcy. The proposal allows the repayment of part of the debts, over a specific period.
They also have authority over creditors, which is obviously not the case when taking an individual approach. The trustees make an offer to the mass of creditors rather than contacting each one individually.
“For the proposal to be accepted, half of the creditors must accept it,” specifies Véronique Vachon, who confirms that, once the process has been undertaken, the creditors can no longer take action against their client.
Note: last year, the share of young people aged 18 to 34 who filed for insolvency in Canada increased – in proportion, for all cases. This is the only age group where there has been an increase in insolvency cases.
36%
More than a third of insolvency files filed in 2022 (36%) were filed by consumers aged 35 to 49.
Source: Office of the Superintendent of Bankruptcy of Canada
Be well accompanied
If the trustee is a seasoned professional who can support you in a situation of financial distress, he is not the only one. Home economics cooperative associations (ACEF), which are found throughout Quebec, offer training and budgetary advice that allows you to take the first step.
It should also be noted that, as when shopping for your mortgage lender, you can consult a few trustees before deciding who will support you in this important process. Trustee prices are governed by law, but everyone will present the solution that seems most effective to them. The first meeting is free.
Budget advisor Julie Brissette adds that, regardless of the avenue chosen, work on behavior with money and the budget must be undertaken to prevent a person from perpetuating behaviors that are harmful to their financial health.
“Someone who tends to spend beyond their means,” she says, “who makes impulsive expenses, needs to do work in conjunction with a debt solution. »