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In Canada, there is no formal “breathing space” program that allows consumers to temporarily pause or reduce their debt payments however there are a number of options available to consumers who are struggling to meet their debt obligations. 

One option is to contact your creditors and try to negotiate a temporary payment plan or a deferral of payments. This can provide you with some breathing room and may require you to complete a form of financial assessment.

Another option is to seek the services of a credit counselling agency who will work with you to develop a debt management plan that consolidates your debts and provides a structured repayment plan.

In some cases, you may need to consider more formal debt relief options, such as a consumer proposal or bankruptcy. These options should only be considered as a last resort, as they can have significant long-term impacts on the consumer’s credit score and financial future.

BREATHE is a platform that enables you and your creditors to decide the best route is for your personal situation. There is no obligation to choose one path or another but what BREATHE will provide you is an accurate understanding of your ‘True’ affordability based on your current situation today.

TRUE affordability is a term I coined which looks at your situation today to meet your current and future financial and life obligations based on your current income or income from others. Remember, no one creditor nor any credit bureau will ever know your True affordability position as they do not know all the facts that contribute to your situation. With BREATHE you are in control of the conversation as you will have all the facts that relate to you as an individual.

BREATHE puts you back in control and allows you to reflect, gather your information accurately. It allows you to understand your disposal income figure which should be the amount left in your budget less your essential bills and before you pay down any debt. Once you know your disposable income you are able to understand what you can afford to pay each debtor to sustain a repayment plan.

The psychological impact of being aware of your situation and taking back control cannot be underestimated on our mental health . There is countless research to suggest that paying down debt can have a positive psychological effect on individuals, particularly in terms of feeling more in control of their finances and reducing stress levels.

Using BREATHE you only need to do this budgeting exercise once and then you can share this with your creditor’s or professional debt advice.   More often then not, we never complete a financial assessment unless we are asked too and then we are often under stress to complete this. Having BREATHE puts you back in control and having the knowledge of your True financial position means you will not set up a repayment plan that is sustainable.

Once your BREATHE is completed and you start to make repayments it will start to update your position each month and show your progress towards your goals. If your circumstances change then you can adjust BREATHE to suit your TRUE affordability position.

As BREATHE is your true position of affordability you can use it how you want even if this is just to reflect on your current position or to use it as a budget tool to keep you on track.

BREATHE does not require you to speak with anyone as it can all be done online and it will reduce any anxiety that can come from receiving or making multiple phone calls. However if you decide to speak with anyone having completed BREATHE will give you confidence and the insight you need to be in control of the conversation.

Through BREATHE you can also set goals to reduce debt or what is part of the breathing space and process in the UK is to set a goal to save a little too.

BREATHE can automates the payments for you to remove the fears of missing payments and sends you a simple reminder before each payment to ensure funds are available.

BREATHE can help you improve your situation by introducing special rates with utility providers and helping you understand your entitled government benefits which can increase your disposable income figure.

BREATHE will help you build your credit score unlike a consumer proposal which will impact your score for 3 to 6 years. By making payments on time under the payment plan, this can have a positive impact on your credit score, as it shows that you are making an effort to pay down your debt. However, if you miss payments or default on the payment plan, this can have a negative impact on your credit score, similar to missing payments on any other type of debt.

If more people join BREATHE it will force social change and legislation in Canada to help not just more people today but for our children and generations beyond. 

BREAKING DEBT SPIRALS IMPROVES YOUR MENTAL HEALTH

The psychological impact of being aware of your situation and taking back control cannot be underestimated on our mental health . There is countless research to suggest that paying down debt can have a positive psychological effect on individuals, particularly in terms of feeling more in control of their finances and reducing stress levels.

One study published in the Journal of Consumer Research found that paying down debt can lead to a sense of psychological empowerment, as individuals feel that they are taking steps to regain control over their finances. The study also found that this feeling of empowerment can be particularly strong when individuals make progress towards paying off their debts, such as by paying off a significant portion of the balance.

Another study published in the Journal of Economic Psychology found that individuals who paid off their credit card debt had lower levels of perceived financial stress compared to those who carried a balance. This suggests that paying down debt can lead to a reduction in psychological distress related to financial concerns.

Additionally, a survey conducted by the National Foundation for Credit Counseling found that individuals who paid down their debt reported feeling more positive about their financial situation, with 81% reporting feeling more optimistic about their financial future after paying off their debts.

Debt has been more easily obtainable over the last decade and both the main stream media and social media push advertising for Credit cards, loans, mortgages, equity release and debt repayment.

A debt spiral typically starts with taking on too much debt, which can be caused by overspending, unexpected expenses, or changes in income or expenses. As the amount of debt increases, the debtor may struggle to make payments on time, which can lead to late fees, penalty interest rates, and other charges. These additional charges can further increase the total amount owed and make it even harder to keep up with payments.

If you continues to struggle with making payments, the debt can spiral out of control, leading to missed payments, defaults, and even bankruptcy. This can have a significant negative impact on your credit score, making it harder to obtain credit in the future and potentially leading to higher interest rates on future debt.

Breaking out of a debt spiral typically requires taking action to reduce expenses, increase income, and pay down debt as quickly as possible. Step one is to stop and reflect on where you are and use BREATHE to create a budget, use BREATHE to negotiate with creditors to lower interest rates or payment amounts, or seeking professional financial advice or credit counseling.

Overall, the research suggests that paying down debt can have a positive impact on individuals’ psychological well-being, particularly in terms of feeling more in control of their finances and reducing stress levels.

CREDIT SCORES

The impact of repaying your debt on your credit score will not only be positive but it will start to unlock better rates and move you away from sub prime lending which is can prolong a debt spiral.

The debt spiral typically starts with taking on too much debt, which can be caused by overspending, unexpected expenses, or changes in income or expenses. As the amount of debt increases, the debtor may struggle to make payments on time, which can lead to late fees, penalty interest rates, and other charges. These additional charges can further increase the total amount owed and make it even harder to keep up with payments.

If you continues to struggle with making payments, the debt can spiral out of control, leading to missed payments, defaults, and even bankruptcy. This can have a significant negative impact on your credit score, making it harder to obtain credit in the future and potentially leading to higher interest rates on future debt.

Breaking out of a debt spiral typically requires taking action to reduce expenses, increase income, and pay down debt as quickly as possible. Step one is to stop and reflect on where you are and use BREATHE to create a budget, use BREATHE to negotiate with creditors to lower interest rates or payment amounts, or seeking professional financial advice or credit counseling.

It’s important to address a debt spiral as soon as possible, as the longer it goes on, the harder it can be to escape and the more damage it can do to your financial health and creditworthiness.

By paying down your debt, you can lower your credit utilization ratio, which can help improve your credit score. Additionally, consistently making payments on time can also have a positive impact on your credit score over time.

Paying down a defaulted debt early may not necessarily result in an immediate increase in your credit score, but it can have a positive impact over time.

When a debt is in default, it means you have missed several payments and the account has been sent to collections. This can have a significant negative impact on your credit score, as it shows that you have a history of not paying your debts on time.

If you pay off a defaulted debt, it will typically show up on your credit report as a “paid” account, which is generally better than having an account in default. However, the late payments and collection status will still be reflected on your credit report and can continue to have a negative impact on your credit score for up to seven years.

That being said, consistently making on-time payments on your other debts and bills can help improve your credit score over time. As you continue to demonstrate responsible credit behavior, such as paying bills on time and keeping credit card balances low, your credit score should gradually improve.

It’s also worth noting that different credit scoring models may weigh the impact of paying off a defaulted debt differently. So while paying off a defaulted debt early may not result in an immediate increase in your credit score, it can still be a positive step towards improving your overall credit history and score over time.

If you have a payment plan in place with a creditor, such as a loan servicer or credit card company, they may report information about the payment plan to the credit bureaus. This information can include the amount of the payments, the due dates, and whether you have been making payments on time.

If the payment plan is reported to the credit bureaus, it will typically show up on your credit report under the account associated with the debt. The payment plan may be listed as a separate account or as a notation on the original account.

It’s important to check your credit report regularly to ensure that the information being reported is accurate and up-to-date, including any information related to payment plans.