Debt Settlement Ontario
Essential Information

That depends on your financial goals and circumstance. On average, people who file for bankruptcy repay around 17% of their debts. Those who use a consumer proposal often end up repaying roughly 40%–60%. With debt settlement, Canada has rules that require that both bankruptcy and consumer proposals result in a permanent legal record and poor credit for about 6–7 years after completion.

When a debt settlement is negotiated through a non-profit credit counselling agency, the negative effect on your credit lasts only about two years — rather than the 6 years associated with for-profit settlements or self-negotiated agreements. If a non-profit settlement produces results comparable to a consumer proposal and shortens the time your credit is affected, it can be a worthwhile choice because you’ll avoid a permanent legal record and your credit will recover at least 4 years faster. If your only objective is to minimize the amount of debt you repay regardless of the long-term credit impact, and you don’t mind going bankrupt, then bankruptcy could be the better option (as long as your income isn’t too high and you don’t happen to have assets that are worth a lot).

Negotiating your own settlement is possible — which is why some people search for “free debt settlement Ontario” or “personal debt settlement Ontario” — but it can be challenging; very challenging. A practical approach is to offer your creditors more than they’d expect to receive from your next-best alternative. For instance, if bankruptcy would likely yield about 17% of your debt repaid to your creditors, an offer of 30% could look reasonable. If your next best option would be to file a consumer proposal, then offering closer to 50% could be appropriate. We strongly recommend talking to one of our non-profit credit counsellors before making offers — they can assess your situation and estimate the most likely outcomes. They can let you know what your realistic best debt relief options are. If one of those options is a consumer proposal, they could estimate what one might end up settling for based on your specific creditors and your financial situation. If another of your realistic options is bankruptcy, they’ll let you know so you can consider that as well.

In the end, here’s what we would say are some of the key reasons why we wouldn’t recommend trying to do a settlement on your own and why it’s better to work with an organization like ours instead:

• Some creditors won’t negotiate with individuals or are very tough to work with. We have relationships with over 20,000 creditors across Canada. We have good relationships with major creditors and know how they are most likely to respond to different scenarios. We can come up with the optimal way to approach each of your creditors based on your unique financial situation.
• We’ll be upfront, honest, and transparent with you. If settlement isn’t your best path, we’ll tell you. If through the negotiation process we see that another option is better, we’ll let you now.
• We don’t do this to collect fees. We do this to help people.
• You only pay us if we successfully negotiate a settlement and you receive written confirmation. If you don’t like the settlement amounts we negotiate, you can walk away with no obligation and pursue another debt relief option.
• If you negotiate on your own or work with a for-profit company, your credit will typically be affected for about six years after the settlement takes place. If you work with a non-profit credit counselling organization like ours, the negative credit impact lasts only two years.

If you’re looking for the best approach to debt settlement in Ontario, speaking with one of our experienced credit counsellors is an excellent first step. At minimum you’ll gain clarity and a better idea of how to move forward.