The Five Stages of Dealing With Debt

Posted in Debt Help
Posted by Howard Hayes, Btec, CIRP - LIT

dealing with debt

Dealing with debt follows a pattern, with each step along the way part of the process. Bankruptcy trustee Howard Hayes explains the 5 steps most people face.

Stage One – The Denial

Long before you file a bankruptcy, you spend countless hours wondering what you’re going to do to stay on top of the debt load that’s accumulating.  You know something has to be done to bring the debt load down, but you’re not sure how you’re going to manage everything.  

You start wondering about how you can buy some time.  You think about ways to increase your income or cut your expenses. If your debts increase, you start using your overdraft and you start using the available balance on one credit card to pay off the minimum payment on another.

You make a concerted effort to budget better and pay down your debt somehow.

You don’t need anyone’s help yet because you’re convinced that you’ll get through – you just need a break.

Stage Two – The Research

The break never comes – Bills keep mounting, credit limits get reached. The struggle to make minimum payments becomes overwhelming and things start to get behind.

You start to worry about the longer term effects the debt is causing;

  • Is my credit rating getting worse?
  • Is my spouse and my relationship going to suffer?
  • What am I going to do if I’m hit with a sudden unexpected expense?

You start to look for solutions and you start to notice all the ads on TV and radio from people offering help with debts.

You start researching options on the internet and discover there are more options available than you realized.   What do they all mean?  Some sound too good to be true?  Of all these companies, who’s reputable? How bad is bankruptcy exactly?  It seems like a minefield of information.

You open up and ask a friend or family member for advice.  They tell you to “call someone, call a professional”.

Stage Three – The First Call

As the debt pressure increases, you take the plunge and decide it can’t hurt to ask a few questions.  

You reach out and contact a trustee such as ourselves at Hoyes Michalos & Associates.

You’re skeptical at first because it’s a phone call you never wanted to have to make. But you’re soon reassured and maybe surprised that your Hoyes Michalos bankruptcy trustee is helping you to understand all your options and is helping you to look for a solution that avoids a possible bankruptcy.

Nobody is pressuring you to make a decision, nobody is “selling” you a solution, there’s no obligation and better yet, the consultation and advice are free.

The trustee simply asks you a few questions to better understand your current situation and gives you some practical advice on the best options that are available to you. 

After just 30 minutes, you’re now armed with knowledge you need and a concrete plan to move forward with. 

Stage Four – The Solution

After weighing up your options you make your decision as to what course of action is the most appropriate. 

If that solution is to file either a Bankruptcy or Consumer Proposal, you arrange to meet with the trustee and you go through the necessary paperwork with the trustee in order to put your plan into effect.

You sign the necessary paperwork a few days later and instantly feel the relief of knowing that instead of a step backwards; this is the beginning of a fresh start.

The phone calls and letters from collectors stop.  There are no more debt payments to make.

Stage Five – The Future

Without an overwhelming debt load to worry about, you start to move forward with your financial future.  You now have the freedom to focus on setting goals and financial priorities for your future. 

Without the debt noose around your neck, you now feel like that putting money aside for emergencies, saving up your down payment for a new home, contributing into RRSPs are all possible again.  You can even quickly start to responsibly build up your credit rating again.

Dealing with debt is not easy.  But remember, you’re not alone.  Contact us for a free consultation with a licensed professional.  We’re confident that if you give us 30 minutes of your time, we can find solutions for you to find relief from your debts. 

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