What debts can be written off and how

In the previous article, we touched on two main categories of debt: secured debts — debts guaranteed by some form of the debtors property, such as a vehicle, real estate, or other assets.

Many people are familiar with secured debts such as a mortgage, car loan, or car lease. These debts cannot simply be written off because they are secured by the property for which they were issued. If a mortgage is not paid, the bank may put the property up for sale. A vehicle under a lease or financing agreement that is not paid on time may be repossessed and sold at auction by the bank or financial institution that issued the loan secured by that vehicle. These debts cannot be discharged in their original secured form; however, if a vehicle is returned early or repossessed due to non-payment, the secured debt may turn into an unsecured debt. In other words, the vehicle creditor may issue the debtor a bill for the losses incurred: early termination of the contract, missed payments, preparation of the vehicle for sale, and other related costs.

What other debts cannot be discharged under the Bankruptcy and Insolvency Act? Court fines and penalties; debts arising from property or services obtained by fraud; support and alimony obligations; and student loans if less than seven years have passed since the end of studies.

In the previous article, we discussed the main types of unsecured debt: credit cards, lines of credit, loans, bank overdrafts, taxes, sponsorship debts, student loans, and debts owed to developers in pre-construction agreements.

So what are the main ways to deal with and write off these types of debt?
Debt Consolidation Loans;
Informal Proposal, where the debtor tries to negotiate with creditors independently;
Consumer Proposal, a government-regulated debt settlement program;
Bankruptcy, the well-known legal process.

Let us begin with a Debt Consolidation Loan. This is a personal loan, usually obtained through a bank, that allows a debtor to reduce interest payments by combining all debts into one loan with a lower interest rate. However, this program usually cannot solve a debtor’s problem in a fundamental way and often only prolongs the “agony.” Your debt does not decrease; only your monthly payments become lower. In addition, you must meet the bank’s criteria to qualify for this type of loan. You must be employed. Your income must cover all your monthly expenses, with enough money left over to make the loan payments. If your income is low, your credit is poor, or you have missed credit card payments, it will be very difficult to meet the bank’s requirements.

In the following articles, we will look at more effective and practical methods of debt relief. In the meantime, if you have questions or your debt situation is causing you concern, do not postpone action — call A Debt Doctor. We will solve your problems.

Stay healthy and debt-free!