Managing Your Debt vs Paying Your Debt

Debt is one of the most challenging and stressful matters we must deal with.  If you don’t have the money to pay your debt when it comes due, it can be even worse.  For people living in low-income situations, people who may be unemployed or anyone living through a financial crisis, debt can be a heavy burden to carry. 

 Paying bills on time and never incurring more debt than we can afford is the ideal goal.  But what if you have experienced a life set-back?  Maybe you’ve been laid-off, maybe there was an emergency life event that has put you behind on paying your bills.  Maybe you have old debt that you haven’t been able to pay yet.  Most of us will avoid the phone calls from the creditors, or we will ignore the notices and letters coming in the mail and we will stress out over it.  But we don’t have to; we can manage our debt even though we don’t have the money to pay it right away.  The key for success when dealing with you bills is contact and communication.

 Creditors and bill collectors want only one thing – they want money.  However, they do recognize that people may not always be able to pay in full on demand and most are willing to work with individuals to get the situation solved.  This is where managing your debt vs paying your debt comes in.

 We will always have the obligation to pay down our debt, but we can manage it in the absence of the ability to completely pay if off.  Simply put – managing debt requires staying in contact with our creditors and bill collectors and be willing to have open and honest communication with them regarding our financial situation.

 Contact your creditor and ask for their help.  Explain your situation and your plan for paying your debt.  Never tell a creditor what you are going to do without their input – rather, work with them to develop a strategy for making your plan work for both of you.

 Other tips for managing your debt:

 Be Realistic:  Offer to make payments you can safely afford and don’t make promises you can’t keep.  If you can’t pay it now, strongly communicate that in a polite but adamant fashion and offer to update the creditor on a regular basis.

 Be Reasonable:  Creditors want their money within a reasonable amount of time.  The longest time frames for most are between 3 and 5 years.  Managing your debt may not immediately mean making payments, but it does mean that you are working on a plan to eventually pay it.  That plan has to be a reasonable and realistic plan – one that you can stick to safely and affordably. 

Be Specific:  Make the details of your repayment plan very clear.  If it’s going to be a long-term plan, be very clear in the time-line.  If it’s going to take a year to start your plan – let them know that.  

A creditor may try to pressure you into making payment arrangements which you may not be able to keep.  However, it is important to remember that this is your debt, your management \ repayment plan and it is your responsibility to ensure that you manage your debt until such time as you can pay your debt.

 So – rather than being afraid of the phone calls or the notices and letters from creditors, manage them with a good plan, open communications and regular contact.  You will find your stress level decreasing and your chances of ultimately being debt free increasing.

 Managing your debt does not necessarily mean paying your debt this instant, it means planning for a time when you can safely and affordably pay your debt.

 For more information on debt services contact the Financial Consumer Agency of Canada.