Settle that debt

At some point in their lives many Canadians will find themselves without the ability to service all their debts. In this excerpt from The Wolf at the Door, Mark Anthony Silverthorn, who has twelve years of experience as a former collection lawyer and collection industry insider, share which debts you can settle—and how to proceed.

Which types of debts can you settle?

You can usually negotiate lump sum settlements on unsecured consumer debt: credit cards, personal loans, lines of credit, and utilities (telephone bills, cable, Internet, and cellphone). You will find it difficult, if not impossible, to negotiate settlements with your secured creditors and with the government. However, you might be able to negotiate a settlement on a provincial student loan debt. In addition, you will likely be able to negotiate a settlement on a Canada Student Loan obtained between August 1, 1995, and July 31, 2000, in which case your creditor is a financial institution, and not the Government of Canada. Furthermore, you may be able to negotiate settlements with Canada Mortgage and Housing Corporation and 407 ETR, the private company that operates a major toll highway in southern Ontario.

You will find it difficult to negotiate a settlement on certain types of unsecured consumer debts. If you do not pay the rent on your apartment, your landlord can evict you. If you do not pay your landline, cell phone, cable, or Internet bills, these services will be terminated by your service provider.

Settlements require a lump-sum payment

If you are going to settle an account for less than 100 cents on the dollar, you will need to make a lump sum payment.

Generally if you negotiate a settlement, you must make a lump sum payment, but sometimes you can make two or three payments over a 30-day period. You cannot negotiate a settlement for less than 100 cents on the dollar if you are making instalment payments to your creditor.

Next page: Why you shouldn't pay "just a small payment" to your creditor