In our capacity as Licenced Insolvency Trustees, we meet people from every walk of life. Few people call our office in Kamloops or Kelowna as their first step when trying to get out of debt, and that’s a shame. By the time we meet our clients, most of them have already tried several debt solutions that didn’t work; and they may even have done more harm than good.
In the hope of saving you some time and some frustration, we have compiled the worst debt solutions advice we’ve ever heard. Do NOT try these at home!
Closing Overdue Accounts
When you are struggling with debt, some may advise you to close some of your credit accounts. That may sound like a good idea, but even though you can’t get further into debt, you still owe money on closed accounts. If you close overdue accounts your debt stays high, but your credit utilization rate goes up, and now your rating takes a hit. In other words, you can negatively impact your ability to borrow in the future by closing accounts now.
Instead: Try cutting up credit cards or keeping them inaccessible to minimize your ability to spend on impulse.
Using Retirement Savings to Pay off Debt
In some cases, you may have no choice but to use savings earmarked for retirement to pay off debt, but this should be seen as something even more drastic than a last resort option. First, if your savings are in a vehicle like an RRSP, you will have to pay taxes on that money before it can be used for any other purpose.
Instead: Consider a consumer proposal as a manageable way out of debt that won’t jeopardize your future.
Ignoring Calls from Collection Agencies
It feels terrible to get a call from a bill collector, and there are strict rules governing calls from collections agencies, but it’s important to remember they’re not doing anything wrong by calling within the bounds of those guidelines to collect money you owe. By trying to avoid the problem, you could end up making it much worse.
Instead: Avoidance is one of the worst possible debt solutions. If you are afraid to answer the phone, it’s time to get help!
Getting out of debt doesn’t have to be complicated. Before jumping through hoops, trying to solve the problem on your own, speak with the professionals at D. Thode and Associates. With offices in Kelowna and Kamloops, we have been helping residents of the BC Interior get out of debt since 2003. Schedule a confidential, no-obligation consultation to learn how we can help.