Debt Free in Canada: How Debt Restructuring Can Help You Escape Debtors Forever

Debt Free in Canada: How Debt Restructuring Can Help You Escape Debtors Forever

Canada has one of the best tax systems in the world, at least, that’s according to Canadians (a reputable source, arguably). The Canadian tax system allows every Canadian access to universal healthcare and world-class infrastructure. But even then, some people might still find themselves buried in debt, whether it’s because of unforeseen circumstances, slow business, or failed investments.

Debt in Canada

In Canada, Ontario has the second-highest debt load per person, which is why debt counselling in places like Sudbury, Parry Sound, and North Bay (among others) is so popular. A debt load describes the tax responsibilities of each citizen, but on top of this debt are private and business obligations, personal loans, and other types of debt.

But even though Ontario has the second-highest debt-load in all of Canada, it’s also one of the richest: at the close of the decade, most of Ontario’s GDP was fueled by a strong export industry, smart investments in residential structures, and healthy consumer spending. However, that hasn’t stopped people and businesses going into debt.

Fortunately, though, there’s a way to escape the debtors, and even debt, forever.

What is Debt Restructuring?

Debt restructuring happens when companies or private individuals want to avoid the risk of bankruptcy or default. They accomplish this in several ways: they work with creditors to avail of lower interest rates or extend the deadlines of all due liabilities. Sometimes they do a combination of both.

Debt restructuring can also include debt consolidation when all of a company or individual’s liabilities are collated into one loan. In this way, debtors will have an easier time with payments, while renegotiating friendlier interest rates.

By restructuring the way the debt is paid, both debtor and creditor avoid the hassle of dealing with bankruptcies or defaults. It’s one of the most effective ways to keep afloat both companies facing bankruptcy and individuals facing insolvency, all while making sure that a portion of their debt is still being paid off.

How It Works

Financial advisor and couple in discussion

Debt restructuring is usually carried out by a third-party arbitrator (like a Bankruptcy Trustee or a Credit Counselling Service) that helps both creditors and debtors find a compromise that works for all parties involved. The third-party arbitrator will usually look through the debtor’s books and figure out whether they can pay their debts on the given deadline with the given interest rates.

Other than deadline extensions and lower interest rates, debt restructuring can also involve debt-for-equity swaps, when creditors agree to cancel a portion of the debt; or, in some cases, all of it in exchange for an equity stake. In some rare instances, a third-party credit counselling service can even convince creditors to take a ‘haircut’; that is, write off a portion of a debtor’s outstanding interest payments. Asking a creditor to take a loss is rare, but it might be better than taking an even bigger loss should the debtor declare bankruptcy or insolvency.

Whether it’s because of bad investments or just simple bad luck, some people will find themselves in the red. But don’t lose hope, there are solutions available. You have to know where to look!