Debt Solutions
Free Online Workshop

Debt Solutions Video Transcript

0:02
Hi, everyone, and welcome. Thank you so much for joining me today for the session on Debt Solutions. My name is Catherine Lopez, and I’m a financial education specialist with a Credit Counselling Society.

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Before we get started, I want to go over our mission here at the Credit Counselling Society. Our mission is we help, we educate, and we give hope. And that really frames everything we’re going to talk about today. Whether you’re here because debt is personally stressful for you right now or because you want to be proactive and informed, you’re in the right place. If you’ve never heard of us before, the Credit Counselling Society is a not-for-profit organization, and we’ve been supporting Canadians since 1996. We serve clients all across Canada in both English and French,

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and we help primarily through free and confidential credit counselling appointments. This means any conversations with us remain private. These sessions allow clients to talk through their unique situation and understand their options without pressure or obligation. We also focus heavily on education through webinars like this, workshops, and any of our education blogs that are available on our website nomoredebts.org.

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One thing that we hear again and again is that even just reaching out before even taking action brings a bit of relief, and creating that sense of hope is central to our work.

1:25
Before we jump into solutions, it’s important to normalize how people get into debt. So I’ll often ask people, what do you think are the most common reasons people struggle financially?

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And typically we hear things like people make bad decisions with money or people don’t know how to use money. And the reality is debt doesn’t come from just bad decisions alone. It often comes from life events. Things like unemployment, underemployment, high housing costs, separation, or even trying to cover basic living expenses with credit. We work with people from all walks of life and any of these situations I just mentioned can happen to anyone at any time.

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So on the agenda today, we’re going to focus on four main areas. We’re going to focus in on different types of debt. Also strategies to repay debt, researching outside support, and different debt solution options. So regardless of how you’re handling debt today, I’m hoping by today you can walk away with a vast array of information, one of which is the ability to reflect on your personal situation. Also lists at least three different strategies to deal with that

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and know where to get resources and areas to look for more help.

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Let’s start our conversation today with understanding the impact of how credit and interest rates can influence the decisions that you have or are making when it comes to debt.

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So on the slide here, we have a chart and there are different columns to this chart. One is being the original balance, then moving into interest rate, then looking into monthly payment time to pay that debt, looking at the interest paid and the total repaid over time. So this particular chart is going to talk about a scenario where someone uses their credit card to make a purchase of up to or everything including to $3,000. Now the interest rate on this credit card is sitting at 19.9%, which is pretty typical for your average financial institution credit card.

3:33
The monthly payment that they’re asking for this credit is at 2% of the monthly balance. That puts the monthly payment at $60. Now, over time, if you pay that $60, the next statement balance will ask for another 2%, so the amounts may change, but for this initial payment, they’re asking for $60, which is 2% of the $3,000.

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Now if they were just to stick on that 2% monthly minimum requirement, the time that it would take to pay this first initial debt would be 52 years and 7 months.

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The interest paid overtime would be over $12,700 which puts the total repaid at $15,709.

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Now again, this is just focusing in on that monthly payment of 2%.

4:24
Now let’s move into the second scenario here. Looking at the 2nd row, we’re going to take that same $3,000, same interest rate, but instead of just making that monthly minimum of 2%, we’re now going to put in a figure of $100. Let’s put the monthly minimum plus a consistent amount of $40 every single month.

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Just by putting that extra payment on a consistent payment on

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that slashes that debt payment time down to 3.5 years. The interest paid over those 3.5 years is sitting at $1,184 dollars

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and the total repaid overtime is sitting at $4,184.

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The little chart that I’m showing you today really demonstrates the impact of how putting on a consistent payment of just the $40 can impact your payments and impact that interest over time.

5:24
So one thing that I want everyone to understand is using credit is not a bad thing. Credit exists for a reason. Now, how to pay that credit back, you have to be informed. You have to know what options are available and you want to really choose an option that’s going to help you pay back the debt in a reasonable amount of time with the least amount of interest.

5:45
Let’s move into the next slide here, just a little more information about credit. Did you know that interest on cash advances starts immediately and at a higher rate? So that’s a feature that most credit cards will allow you to do that. You can actually borrow money against your credit card. You can take cash out right away, but that can actually come at a higher rate and the interest starts right away. Whereas when you make regular purchases through a store with your credit card, that interest actually has a billing cycle

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and that interest may not start until the next payment cycle. So that’s something to keep in mind.

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Credit cards can also allow you to go over your limit but charge you a fee. So you want to make sure you stay within your credit limit

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and if you’re late paying your bill interest accumulates to the start of your billing period. So these are all things that everyone should know before they take out a credit card or if you have a credit card, things to keep in mind.

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Let’s move into the next slide here talking about types of debt. There’s different types of debts that exist out there. First being unsecured. Second being secure debt, and then third is talking about government debts and unsecured debt is something without an asset tied to it. So these could be things like, for example, your credit card, your lines of credit that isn’t attached to your house or isn’t attached to a asset or a car for any reason that would fall under the unsecured,

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get it secured is anything that is a debt that’s guaranteed by collateral. So it’s tied to an asset of some sort. So this means that a home equity line of credit that would be considered a secure debt, a mortgage debt that’s considered a secure debt. So those are things that are tied to some sort of collateral where in the case you don’t pay, the financial institution you borrow money from can actually come after you and the asset that it’s tied to. So if you don’t pay your mortgage payment, they can come after your home,

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either force the sale of your home, they would take what’s owing to them and then of course, you would be owed anything leftover that would be a secure debt. The very last type of debt here is the government debt. That’s debt owed to the government and under the debt owed to the government. It can be things like income taxes, student loans, medical premiums, provincial insurance. There’s different rules around repayment when it comes to government debt. So some of these options, relief options that we’re going to talk about today may not always

8:15
allied to government debt. And I’ll outline what the difference is when we come to the section of talking about debt relief options. Let’s move into the next part of looking into, well, how much debt do I actually have? Before we explore the different options

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on how to consider debt relief, you have to take a snapshot of how much debt you actually have. The first step in this process is to take an inventory of your debts. So you could outline it in a piece of paper or through your computer through a spreadsheet of some sort listing out all the different types of debt. And you want to include your unsecured, secured and government debts because again, your debt relief options may differ depending on the different types of debts you have.

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So take an inventory, you make a list of all the debts, include the balances, minimum payments and interest rates.

9:12
If you don’t know what different types of debts you might have, it’s always a good idea to request your credit report. Keep in mind by requesting your credit report, it can be done through Equifax or TransUnion. OK, I’ll talk a little bit more about that in the next slide

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that if you don’t know what debts you have. Once you have that outline though, of making a list of all the different debts you have, you can then determine your strategy. Again, you want to note your balances, your minimum payments, and your interest rate. If again, you’re not sure, get a report from either Equifax or TransUnion to make sure that you get the full picture. You want to request a credit report from both agencies. That can be done for free online through the websites here listed on the screen,

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equifax.ca and transunion.ca. Once you have a thorough picture or quick, quick snapshot of the different type of debts you’re dealing with, that can help you understand the debt relief options available. So what we’re going to move into now is understanding the options for dealing with debt.

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There are three different options for you to consider.

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Number one is handling the situation yourself, so really a DIY option. I’ll expand in a moment on what these options could look like.

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The second piece is getting help from a not-for-profit credit counselling agency like our agency at the Credit Counselling Society.

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Very lastly, is to utilize legal options. This would include getting assistance from a bankruptcy trustee,

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things like consumer proposals and bankruptcies that fall under the legal option umbrella.

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So in the next piece we’re going to move into is checking for science.

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At what point should you feel like you need to ask for help?

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So sometimes you could be in a situation where you’re not sure whether or not you need that extra assistance. Do I seek help or do I not? Can I handle it on my own? So these questions on the screen are some things to ask yourself.

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Are you regularly in your overdraft? Are you constantly having to go into the negative in your checking account? That could be a big sign to look for help.

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Are you using credit to deal with emergencies?

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Are you using credit often to supplement your living expenses?

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And are you moderately stressed about money either often or more often than you’d like?

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If any of these questions trigger an emotion within you or trigger a thought process,

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This is why we’re here today for you to discover what options are available. And of course, at the end of this session, if you’re still not sure which path would be best for you, you can always give us a call at the Credit Counselling Society to book a free and confidential appointment with one of our credit counsellors. And all of that information can be will be provided at the end.

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So the first piece we’ll look into, well, how do I manage my own debt? Then maybe I don’t need that extra assistance from a third party yet. So let’s talk about these options right now. If you’re thinking about it, doing it yourself method, the first thing that you need to consider is budgeting. Taking a look at your budget and seeing what parts of your budget you can modify, you can adjust in order to free up more room. So you can take that extra income, whatever you make each month and apply it towards your debt and then create a plan to pay it down.

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If you haven’t done your budget before, going to our website, nomoredebts.org, is a great way to get a spreadsheet and download a free spreadsheet to help you create a budget.

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Once you have your budget down, then you have some guidelines on how where your money should be spent each month. The next step is to track those expenses. So as much as it is great to have a budget, you also want to assess and record how you’re using money throughout the course of the month. Tracking your expenses is the way to do that, to find out where your money is really going.

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If you can cut your expenses, that can free up some money as well to help be applied towards your debt,

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increasing your income. Basically, any way that you can increase or free up money within your budget or through your expenses or through your income, that surplus can be used to pay off debt.

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Now a question you might be asking is, well, now that I have the surplus, what do I do with it? Do I just throw it on all my debts or should I? Is there a process I can apply? And again, hang on to that thought because we’re going to talk about that in a moment.

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So once you’re considered budgeting, then you can also think about is there assets that I can sell? So what are other practical means that I can possibly consider to help pay down my debt? Number one is downsizing. Do you have a home where you can downsize, sell your home, and then move into a smaller place? Can you generate some income there or some surplus in money to help apply that towards your debt?

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Can you sell a vehicle? Can you sell recreation property? Can you sell art, antiques, jewellery, really anything that you own? Can you sell it to use the proceeds to pay off those debts?

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The next piece to think about when it comes to options you can do on your own is conventional financing. If you’re having trouble with paying back your banks and you feel like you either may be late on payments or you’re struggling payments, communicating with your creditors is something that you can do.

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If you communicate to your creditors early, that puts more options on the table. Things like asking for a lowered interest product, getting lowered interest products, looking to conventional financing either through a consolidation loan, a line of credit, or refinancing the mortgage. So again, the earlier that you ask for help, the more options you could have. Speaking with your creditors is a way to figure that out.

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Now let’s bring back the conversation to creating that surplus. So earlier on I had mentioned that if you’re able to create a surplus within your monthly budget, you can use that surplus to pay off debt. So what does that look like?

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So in the case here, that would look like considering a payback method of either a debt village method or a debt snowball method. I’m talk about debt snowball method in just a moment.

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In a debt avalanche method, this is where that snapshot of your debts comes handy.

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And in a debt avalanche method, what you would do is apply a method where you pay debts in the order of the highest interest rate.

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So you would take that snapshot and take a look at which debt of yours has a highest interest rate. You would take as much as you can of that surplus and put it on to the debt with the highest interest rate and maintain monthly minimums on the rest of the other debts. So again, you don’t forget about the other debts. So you make minimum payments on all of the other ones. But whichever debt has the highest interest rate, you throw as much surplus as you can onto that debt. The benefit of this method is that you pay debts faster

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and with less interest. OK, once you have that debt paid off, you use shift that payment, whatever you were putting onto that debt, onto the next debt with the next highest interest rate. You focus on paying that down and you continue following this pattern until all the debts are paid off. That’s the debt avalanche method.

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The other method that you can consider is a debt snowball method. And how the debt snowball method works is instead of looking at that debt with the highest interest rate, you’re now looking at the debt with the lowest balance. So forget about the interest rate now, we’re now looking at the balance. You pay minimums on the other on most of the debts except for the one with the lowest balance. You throw as much surplus as you can on the debt with the lowest balance and you focus on paying off 1 balance at a time from smallest to largest.

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The benefits with this particular method is it gives you quick satisfaction and motivation. So again, there’s two different methods here today that we talked about one being avalanche, which focuses on paying the most towards the highest interest debt and then the debt snowball method, which is the one that focuses in on paying the debts with the lowest balance. Either method works. It just depends on what you’re trying to achieve by moving forward with one of these two options. Quick satisfaction: debt snowball. Want to pay the least

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amount of interest? Probably going to be the one with the debt avalanche. Another way to consider about paying off debts is applying a 40/40/20 rule. And this really is only for applicable for people if they’re get an influx of money. So what you want to consider is putting

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the influx of money in a 40/40/20 situation. So where it’s 40% of that influx goes towards paying debt, 40% goes towards savings, and 20% is just for kind of like a spending account that you might have. And the reason why we do this is really puts into perspective any money that you get has a past, present and future application. Your past is for debt, your future is for savings, and then your present is for your current spending. And this helps you apply that money

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so that you can really be prepared for any future situations or circumstances that may arise. By applying a 40/40/20 rule, you now are taking care of your debts. That’s great, but you also take care of your future. If an emergency arises, you don’t have to rely on credit because you put a bit of a buffer towards your emergency fund and they started saving up for that with this influx of money. So that’s all of those under the self administered and doing it yourself method.

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Now let’s move into the next piece here.

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What if you go and speak and done all of these things and even speak with your financial institution,

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but these other signs are coming up. They declined you there’s they cannot help. Maybe you’re late on payments and there aren’t able to to get your payments all caught up. What if you’re receiving collection calls already? Are you considering payday loans? Is the stress level so heavy where it’s impacting your health and sleep?

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So if you’re experiencing any of these signs even after you’ve considered doing it all on your own, the next step would be to consider seeing a credit counsellor. And there’s many different organizations that exist out there, ours at the Credit Counselling Society being one of them. So if you’re considering

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doing your research in this area, make sure that you’re seeking the assistance from an organization that is not-for-profit. They are accredited and if they are accredited, who are they accredited through?

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What kind of training do the credit counsellors go through?

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Are there fees? If so, what are their fees for? Are there any complaints or the Better Business Bureau? You can look at Google reviews online. So all of these are areas where you can do your research and know that whoever you’re working with is going to be accredited and reputable. Once you find out who you want to work with, seeing a credit counsellor is more or less kind of the similar process through these different organizations. Appointments can be done either in person or through telephone. They’re going to go through a full financial analysis with you now if they don’t do this.

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When you talk with them, then that’s obviously going to be a red flag. You’ll want somebody to go through a full financial analysis with you so that they can give you the right amount of options and discuss with you the pros and cons for each method. They’re going to talk with you about your income, your assets, your liabilities, monthly expenses, and your debts. So as you can see, some of these things are things that we’ve also gone through if you’ve taken that snapshot for yourself. So coming into an appointment bringing this information can actually be extremely helpful.

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Your counsellor will review your options with you. So at the Credit Counselling Society, we offer a couple different options when it comes to debt relief, one of which is the DMP, also known as the Debt Management Program. This is a voluntary repayment agreement between you as the credit borrower and then your creditors, which is your credit lender. Under a debt management program, your interest is reduced or eliminated and secure debts are consolidated into a single monthly payment and it impacts your credit

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temporarily. So what it means is it could impact your credit while you’re on the program as well as for a couple years after the program is finished. The second type of program that we offer when it comes to debt relief is called the debt settlement program.

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This is a situation where an offer is made to your creditors and a percentage

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of your debt is repaid in the form of a lump sum. There’s actually a couple different ways that you can consider this. You could potentially do it yourself, or you can get the assistance of an organization like the Credit Counselling Society to help you.

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There may be fees that could be applied, and if you are doing it on your own, you want to make sure that you get agreement in writing, which means that before you make any payments to them, you want to have something written out from your creditor that dictates the terms of your payment. If you’re nervous about navigating this process yourself, then getting assistance through an Offer Profit organization is probably going to be the recommendation for you.

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The next set of options to consider is under the umbrella of legal options. Before we move forward with explaining the legal options, I want to clarify that the Credit Counselling Society does not offer either of the legal options as a service through our organization. However, the benefit of speaking with a not-for-profit credit counseling organization is to explore all the options, one of which could be a legal option like a consumer proposal or a bankruptcy. So let’s start with first

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discussing consumer proposal. In the umbrella of consumer proposal, it is a legal process in which you pay back a portion of your total debt. So when you go and speak with an Insolvency Trustee, they would assess your entire situation and consider how much would be reasonable for you to pay back. Can looking at the total amount of debt that you owe.

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When you are approved for a consumer proposal, you would make fixed monthly payments for ASAP period of time. It can also include some government debts.

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It will impact your credit negatively and leave a permanent record, and there are fees that do apply.

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In a situation where you aren’t able to explore consumer proposal as an option and you are unable to pay back a portion of your total debt, you may consider an option like bankruptcy. A bankruptcy is also done through an insolvency trustee and is a legal process in which you receive relief from your debts.

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Under a bankruptcy, you are required to surrender certain assets,

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you may be required to make payments and it does impact your credit negatively for a longer period of time and also leaves a permanent record.

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And very lastly, fees do apply within a bankruptcy.

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So now considering all the options we’ve talked about quite a bit to this point, we’ve considered do-it-yourself options, We’ve considered options offered through a not-for-profit credit counselling organization. And very lastly, we explored legal options falling under the

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umbrella of consumer proposals and bankruptcy.

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It may be overwhelming at this point to really know which path would be the best for you. And this is again where I emphasize speaking with a credit counsellor from the Credit Counselling Society for a free and confidential appointment would truly benefit your situation so that we can assess the specifics of your money situation and discuss with you the pros and cons for each of these avenues.

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If you’ve decided to move forward in the path for some things that you may want to keep in mind as you start paying off your debt, you want to stop using credit and use cash or debit. Again, you don’t want to continue building your debt load while you’re trying to pay it off because that would make that end goal of paying off your debt very difficult. If you’re still in a position where you have difficulty paying, make sure number one is to communicate with your creditors. Consider secured assets that may be at risk if you can’t pay your home. Can they come after your home or force

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the sale of your home? Be aware of the right of offset. Right of offset dictates that if you also have assets within a bank and you also owe them money, the bank actually has the capability to go into your different accounts and take money without needing your consent in advance. That is considered a right of offset and you want to know about your provincial statute of limitations.

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So let’s discuss next steps. As I mentioned, it may be overwhelming to consider all the options today, but taking action today will put you back into control. If you’re not sure which action to take, please give us a call at 1-855-232-2888. When you get in touch with us at that number, you can book a free and confidential appointment today to speak with a credit counsellor to assess your money situation.

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This brings us to our conclusion. So as we close off the webinar today, I’m hoping now you’re able to reflect on your own personal situation, list at least three different strategies to deal with debt, and know where to look for more help. If you need more tools and resources, please visit us at our education website, mymoneycoach.ca. Through that website, you’ll have a vast array of information including different blogs and articles and tools available at your disposal to learn more about your money and how to put good habits into place to help you better your money situation.

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This is our contact information. If you wanted to get in touch with us to book that free and confidential appointment, you can see our telephone number at the top left hand side. If you wanted to get in touch with our community engagement and education team, you can always e-mail us at education @ nomoredebts.org and you can always DMS via an online chat through our website nomoredebts.org and sign up for our newsletter at nomoredebts.org. I’ll leave the slide at the very end so that you have something to take away with you. If you scan the QR code,

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it will lead you to our website where there’s calculators for budgeting, debt repayment, savings and more.

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Thank you so much for joining me today for a Debt Solutions webinar. If you have any questions, again, don’t ever hesitate to reach out. Have a fantastic day.