case studies,  consumer proposal,  personal bankruptcy

Badly in need of advice to pay debt off please!!

My job had shortage of work at the end of 2022 so I had no work up until June of this year when I finally found a part time job.

This part time job pays scraps, but allows me to buy some groceries, pay my car insurance, and cover rent. Unfortunately, for the 8 months that I wasn’t working, I occurred nearly $10k in debt, which was used to cover rent, insurance and groceries.

I don’t spend money on clothes or luxuries, so as much as I wish this debt was avoidable, it wasn’t ( or not in ways that I was aware of).

I’ve been paying off what I could each month to cover the minimums, however, i feel like it’s barely moving and I can’t afford to pay any more to each card.

I’m at a lost now bc I have no idea how I’m going to pay this off, and I’m currently looking for another evening job to help out some more.

Please don’t tell me to file for bankruptcy bc I don’t think my debt amount is that much to ruin my future.

My last resort is to sell everything I have and move. Selling everything would give me around $7,000. I’d move to my family’s home country where I can pay cheap rent and then hopefully find another way of income.

I need help badly please.

Victor Fong, Licensed Insolvency Trustee responds

Here are your options in order of severity.
The best option for you will depend on how much money you have left over to service your debt payments after you pay for your living costs – i.e., your net income minus rent, groceries, etc.:
  1. Pay it off on your own using the avalanche method of debt repayment. This is where you focus your financial resources on paying off the credit card with the highest interest rate after you’ve made the minimum payments on your other credit cards. Once you pay off the card with the highest interest rate, you repeat the process with the next highest card.
  2. If you’re unable to afford paying off the debts on your own using the avalanche method, you can file a debt management plan with an accredited non-profit credit counselling agency such as Credit Canada (which is based out of Toronto). A DMP will allow you to pay off all your credit cards interest free over 48 months. However, it will negatively impact your credit score.
  3. If you cannot afford a DMP, your next recourse is to file a consumer proposal with the assistance of a Licensed Insolvency Trustee. A CP is a legal settlement with your creditors which can be paid interest free over 60 months. The LIT would determine how much you can afford to pay and what your creditors would find acceptable. A CP will negatively impact your credit score but you’d be settling your debts for far less than what you’d otherwise be paying under Options 1 and 2.
  4. If you cannot even afford a consumer proposal, your final recourse is to file for personal bankruptcy. If you’ve never been bankrupt before, your bankruptcy will be completed either 9 months or 21 months after you file, depending on how much your income is during your bankruptcy. A record of bankruptcy stays on your credit history for 7 years.
Good luck 🤞

Victor is the President of Fong and Partners Inc. He is a Licensed Insolvency Trustee and Chartered Professional Accountant. With many years of experience in the insolvency field, Victor has been involved in both corporate and consumer insolvency engagements. Previously with a large national firm, Victor founded Fong and Partners Inc. so that he could dedicate his professional life to help people from all walks of life to deal with their debt.