Life After Debt: 4 Ways to Survive and Recover From Your Financial Ruin

It can be surprisingly easy to fall in to debt, and some experts in Canada suggest that many Canadians are only one pay cheque away from slipping into the debt pit. In part, that’s because most people make only modest incomes and use credit and monthly payment plans to stretch their income. When misfortune causes an income to drop—divorce, loss of work, illness and many other factors—a person can quickly become overwhelmed and fall behind in their payments.

Embarrassment, confusion, or hope that changing fortune is just around the corner can keep someone from seeking out professional help and support for their problem. But there is help, and a wide variety of options that a person facing money challenges can use to get them out of debt and on the road to financial recovery.

1. Signs of financial mismanagement

There are many indicators that someone might be heading towards financial difficulty. The first indicator might just be lack of a financial plan. Without a plan of saving, monitoring credit cards and credit purchases, ensuring that mortgages, rents and other spending are within reasonable financial limits can lead to financial misfortune.

If a person is hiding their spending from their partner, uses credit cards and other forms of credit to make most of their purchases, they may be heading for trouble. As well, if payments are not made on time, missed altogether, or if a person is receiving calls from agencies attempting to collect on missed payments, there’s a financial problem in the works. But there’s lots of help, and it does not always been filing for bankruptcy.

2. Financial counsellors can help make a recovery plan

Many financial counsellors offer their services to people facing money troubles for free. The financial counsellor works as an independent advisor and mediator between the person who is struggling and their debtors. Often a repayment plan can be reached, sometimes at a reduced amount of the total debt, for the person.

These debt counselling services and plans can be only a few months long or they can be spread out over several years, depending on the amount of money that is outstanding and the person’s current financial situation.

3. Managing credit in the future

Often, an individual who has credit challenges can begin to recover in quick order, once a repayment plan is in place. The trick is to stick to the financial recover plan and to keep it in place even once the debt is repaid. It can be all too easy to fall back in to ways that lead once again to financial hot water.

4. Checking your credit rating

A credit rating is a score out of 800 that measures an individual’s capacity to carry and repay debt. It is an important number that influences just how much money one person can borrow and even whether or not a bank will float a mortgage for a home, business or other purpose. It is easy today to get this number, and many times, a person can get it free via online services. Any number above 700 reflects good credit. A range of credit types such as lines of credit, mortgages, vehicle loans, credit cards and other forms of credit combine to give a person their number.

This number and the accompanying information that credit reporting agencies collect should be checked at least once a year. It is not at all unusual for mistakes to be made. These errors should be corrected immediately to ensure an accurate credit number.

Getting in to financial trouble can happen quickly. So, too, though, can recovering from it.

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