Haunted by debt, some Canadians say they’d consider selling an organ if it made their liabilities disappear, according to a troubling new poll by financial services firm MNP, which runs Canada’s largest insolvency practice.
Five per cent of some 2,000 survey respondents said they’d be ready to part ways with a non-essential body part if it served to eliminate their debt, according to research conducted by Ipsos on behalf of MNP in December 2017.
The share of Canadians who would go to such extremes may be small, but the report highlighted another troubling trend. Respondents appeared far more willing to give up restaurants and vacations and log enormous amounts of overtime than to seek professional help for their debt woes. Some 21 per cent even said they’d give up on their right to vote for eight years. By comparison, only 18 per cent said they would turn to a licensed insolvency trustee.
The results speak to Canadians’ reluctance to see a trustee, said David Gowling, a licensed insolvency trustee at MNP.
When it comes to debt, waiting too long to seek help is a bit like trying to self-medicate at home when you really should be seeing a doctor, said Gowling. Procrastinating often means bills and interest charges will accumulate to a point when they’re no longer manageable. And just like a health issue, something that may have easily treated early on ends up requiring drastic means, if you let it degenerate.
In the world of licensed insolvency trustees, the last resort is helping a client file for bankruptcy. But Gowling would like to see more people come in before it comes to that.
How much does $1,000 in credit card debt cost if you only make minimum payments?
Signs that you need professional help with your debt
There are two common – and often ignored – signs that you need to see the debt equivalent of a doctor, Gowling said.
The first is getting to the point where you can only afford to make the minimum payment on your credit card debt. Many Canadians delude themselves in thinking that they’re OK as long as they can keep up with the small amounts that credit card companies demand of them every month, Gowling said. But minimum payments make only a tiny dent in the principal, stretching out debt repayment over decades for most people – and that’s assuming they aren’t accumulating new liabilities in the meantime.
The second sign that you need help is “using one kind of debt to pay another,” Gowling said. That means, for example, tapping your line of credit to keep up with your credit card bills.
There’s nothing wrong with consolidating expensive debt into a lower interest loan, which can be an effective strategy to regain control of your finances, Gowling said. But if you’re simply drawing from one source of credit to pay off another with no progress in reducing your overall debt load, it’s time to see someone, he added.
Watch: Got credit card debt? Making only minimum payments is a slippery slope
Bankruptcy isn’t the only option
If you tackle your debt problem in time, bankruptcy won’t be the only option, Gowling said.
If you’re able to pay at least some of the principal, you can opt for a consumer proposal, he noted. And if all you need is a little extra time and to freeze your interest rate, a licensed insolvency trustee will refer you to a non-profit credit counsellor, who will negotiate those conditions with your creditors through a debt management plan at little or no cost.
Still, Gowling says many Canadians resolve to see a trustee only when their wages are being garnished or creditors have started court action to recoup what they’re owed. At that stage, he told Global News, “you’re very low on options.”
WATCH: Here’s how to get out of credit card debt
Don’t worry about your credit score
People often put off seeking help because they don’t want to damage their credit score, said Gowling.
But while a high score may make you feel good, if you’re barely keeping up with your bills, it’s a picture that doesn’t reflect reality, he noted. Eventually, you’ll start getting calls from collection agencies, and the score will catch up.
Besides, “a high score is only good for getting more credit, which at this point has fallen down the list of priorities,” Gowling said.
And while any solution that involves freezing or reducing your debt will damage your score, it won’t tarnish it forever.
People can rebuild a positive credit history relatively quickly, especially if they keep making car loan or mortgage payments while they are restructuring their other debt, Gowling said.
Even after a bankruptcy, he said, “I’ve seen people get back to a good place.”