Debt Settlement Fredericton, New Brunswick

📅 Last Updated: October 4, 2021

✏️ Written By Bryan Daly

🕵️ Fact-Checked by Caitlin Wood

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Although a healthy amount of debt can actually be good for your financial profile, the opposite effect can occur when you take on more than you can afford. Whether you live in Fredericton or anywhere else in New Brunswick, unmanageable debt can certainly cause you a lot of credit damage, penalties, and stress all around.

If your debt level is getting to that point, it’s prudent to act now and one of the best ways to do that is a debt settlement.

Understanding the Pros and Cons of a Debt Settlement

A debt settlement is an agreement that you can work out with your creditors when you owe them a substantial amount of money but can’t pay it back in full. To start the process in , you’ll need to contact them and propose a deal that, if accepted, will allow you to pay off a large portion of your outstanding balance, rather than the total amount. Generally, this is done through a single lump sum payment.

Read this to know if you would qualify for a debt settlement.

Before you choose a debt settlement, however, there are a few pros and cons associated with the process that can affect your financial situation. Consider them carefully so you’ll have an easier time making your choice.

Pros

Your debt-to-income ratio can be lowered significantly, which is great for both your savings and credit score.
No more late or otherwise defaulted payments will be added to your credit report.
Any penalties or added interest should cease once the deal is complete.
The weight of your debt will be less of an issue the sooner you deal with it.
Most creditors would rather you pay part of what you owe than have to participate in some kind of legal debt collection procedure, such as a consumer proposal or bankruptcy.

Cons

Some creditors won’t accept your settlement if your offer is under 50% of your outstanding balance. If that’s the case, the deal won’t go through and more drastic alternatives may be necessary.
A debt settlement is not a legally binding contract in Fredericton. Creditors can still seek debt collection or wage garnishment against you until the deal is done.
A record of the event will be displayed on your credit report for several years following its conclusion. During that time, your credit rating will fall to an R7, the effect of which can make you look irresponsible if you apply for new credit.
Failing to make your full lump sum payment by its due date will only result in further damage to your financial profile and even worse debt problems.

Check out this article to find out how a debt settlement would affect your credit.

When Debt Settlement is Your Best Alternative in Fredericton

By reading the section above, it can seem like the cons of a debt settlement outweigh the pros. However, everyone’s financial situation is different and debt settlement may be the best alternative when you:

Cannot keep track of all your overdue payments and default penalties
Have such bad credit that no new lenders in Fredericton will approve you
Can afford the lump sum payment
Want to bypass more harmful solutions (consumer proposal, bankruptcy, etc.)
Are able to live without credit products for several months, possibly years following the completion of your settlement

Need to improve your credit score after a debt settlement? Check this out.

Consider the Type of Debt You Owe

Another factor to take into account when researching debt settlements in Fredericton is the type of debt that you owe in the first place. Some people walk into the process without realizing that only unsecured debt will actually be eligible. Any debt that involves collateral, such as your home or car, as well as some legally binding debts, will not qualify. To make sure your debt is the appropriate kind, we’ve listed a few examples below:

Eligible Debt

Non-collateral loans
Unsecured credit cards
Personal lines of credit
Non-credit bills (utilities, cell phone, internet, etc.)
Outstanding income tax bills

Ineligible Debt

Collateralized loans (mortgage, car loan, etc.)
Home equity products (loan or lines of credit)
Student loans granted by the Federal Government
Lawsuits and legal fees
Child support, alimony payments, and other court-appointed debts

For more details about secured and unsecured debt, click here.

DIY Debt Settlement

Decided that a debt settlement is the way to go? If so, there are two paths you can take. The first is the DIY (do-it-yourself) method. This, of course, involves reaching out to your creditors to arrange the settlement on your own. While some creditors may be less inclined to negotiate with you, choosing this route can be beneficial because you won’t have to hire any outside help, which can sometimes be costly.

In this case, you’ll have to provide your own viable evidence that displays your inability to pay your full outstanding balance. Be sure to bring bank statements, pay stubs, and other proof when you meet with your creditors to propose the deal. This will show them exactly what you can afford so that all parties are treated fairly. Remember, your initial settlement may not be accepted, so be prepared to deal with the consequences that may follow. When saving up for your lump sum payment, be sure to set aside some funds in the event that you need to hire a legal counsel.

Debt Settlement Company in Fredericton

The other alternative would be to hire a debt settlement company in Fredericton to arrange the deal for you. This can be helpful if you’re not sure how the process works and would rather an expert ease you through it. Who knows? If the professional assigned to your case is a good enough negotiator, they might even be able to get you a better deal than you would receive by yourself

That being said, hiring one of these companies also comes with a few risks that you must assess. So, there are a few important questions you should be asking them before you sign any papers or hand over any information about yourself, such as:

Can You Stop My Creditors From Suing Me?

Even a legitimate company cannot impose a legally binding debt settlement or free you from any collection efforts against you. If they make such a promise, be careful, they may be trying to take advantage of you in some way.

For more information about dealing with debt collectors in Canada, take a look at this.

Are Your Services Free?

Debt settlement companies are businesses and will charge you a fee once the deal is complete. There may even be additional costs not associated with the service price, for administrative purposes or otherwise. If you can’t afford these costs or the company refuses to detail every one of them, walk in the other direction.

How Can You Prove Your Business is Legitimate?

As we mentioned in the “cons” section, one of the biggest drawbacks to choosing a debt settlement company is that scamming, fraud and identity theft are possibilities if you don’t do extensive research into their background. Unfortunately, scam artists are well aware of the desperation that can come with having a large debt hanging over your head. Skilled manipulators may establish fake companies to coax you into giving away your personal and/or financial information.

You can get an idea of their credibility by visiting their company, examining their facilities, and talking to their staff. If they don’t have a page with the Better Business Bureau, confirmable contact information, or an all-around reputation for success, stay away from them.

Take a look at this infographic to learn how to create a debt repayment plan on your own.

Loans Canada and Your Debt Settlement

Living with a lot of debt in Fredericton is not easy and can put a lot of stress on your financial health. However, a debt settlement, if properly executed, can alleviate a lot of that stress, hopefully for good. If you’re interested in that prospect, there’s no better place to go than Loans Canada. Reach for a helping hand today.

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