Debt Consolidation – What Are My Options?

Francois Gilbert - Licensed Insolvency Trustee     FRANÇOIS GILBERT – Licensed Insolvency Trustee (LIT)

Debt Consolidation

Debt can come in different shapes and sizes, and from a variety of various sources. Managing multiple debts can be challenging and cause problems from forgotten due dates to missed payments. With time, many outstanding debts can become unmanageable. You either are someone or know someone who has struggled with debt and has dealt with the stress of trying to balance it all. If you find yourself in this situation, do not give up! There are multiple solutions that can help. As Licensed Insolvency Trustees we are here to make sure you know what the options are and have enough information to make an informed decision for your financial future.

There is no “one-size-fits-all” solution, but one option that has helped many Canadians already is debt consolidation. Instead of struggling to manage multiple obligations you now only have one bill to pay to service your debt. There are different forms of debt consolidation and the right solution for you will depend on how much debt you have and how much you are able to repay. In this article, we will explore some of the different forms of debt consolidation and provide some information to help you evaluate your options. If you have further questions, don’t hesitate to reach out via email, phone or live chat. We are happy to provide more information relative to your unique situation. We also invite you to meet with us for a free one-on-one consultation.

What Is Debt Consolidation?    raising hands

The term “debt consolidation” is used to describe a number of personal finance solutions that allows you to combine all your debt obligations into a single monthly payment. The three main methods of debt consolidation include taking out a consolidation loan from a bank or credit union, participating in a debt management plan with a credit counselling agency, or filing a consumer proposal with a Licensed Insolvency Trustee. In some of these cases, consolidation brings interest rates and administration fees, but it can also mean debt forgiveness and reduced payments. It is crucial to properly evaluate your circumstances and choose a debt consolidation solution that makes sense for you. Regardless of which form you choose; debt consolidation will always help with the following:

  • Debt management – Life becomes more comfortable with only one monthly payment to worry about.
  • You will save money – In almost every case debt consolidation will save you money, although the amount will depend on which method you choose.

1. Debt Consolidation with A Consumer Proposal    repay a negotiated percentage

A consumer proposal is an agreement between you and your creditors, administered by a Licensed Insolvency Trustee. You agree to pay back a portion of what is owed, and your creditors agree to forgive the balance. With a consumer proposal, you can include any unsecured debts, combining them all into one repayment plan that can be up to 70% less than the original amount owed. If the plan is accepted by creditors representing 50% of the overall debt, then it becomes binding on all creditors for all the included debts.  This form of debt consolidation ensures that you are only paying back what you can afford.

Can I include income tax debt to the CRA?

Yes. Income tax debt can be included in a consumer proposal.

Can I include student loan debt?

Yes. You could include student loan debt if you completed your studies more than seven years ago.

What other debts can be included?

Most unsecured debts can be included in a consumer proposal. This included credit cards, lines of credit, bank loans, payday loans, phone bills, utility bills, furniture loans, etc.

Consumer proposals are the number one insolvency solution for Canadians that are unable to pay back their full amount of debt. Here are some reasons why:

  • There is no interest
  • You maintain control of your assets
  • Monthly payments are based on what you can afford
  • Debts can be reduced by up to 70%
  • You are protected from collection companies and wage garnishment
  • Your monthly payment is a fixed amount that doesn’t change
  • You can take up to five years to complete the proposal
  • When the proposal is complete, all debts are eliminated

Is a Consumer Proposal Right for Me?    is a consumer proposal right for me

It is crucial to consider the alternatives so you can make an informed decision on how to best approach your financial situation. Often the first step is a free consultation meeting with a Licensed Insolvency Trustee. They are highly trained debt consultants that can review your case and show you what options are available. At Fontaine & Associates, we are committed to helping you understand the options and know your rights. Consumer proposals are regulated by the federal government and offer a unique opportunity to reduce what is owed and be legally protected from your creditors. For many Canadians faced with insolvency, it is the preferred solution. As you evaluate your own financial situation, we can help you determine if a consumer proposal is an appropriate option.

2. Debt Consolidation with a Debt Management Program (DMP)    debt management plan

Many credit counselling agencies, including several not-for-profits, offer debt management programs to help you consolidate your debt and practice healthy spending. These programs are often geared towards people experiencing financial distress due to multiple debts and accumulating interest. A debt management plan will combine as many unsecured debts as possible into one consolidated monthly payment with interest often being eliminated or significantly reduced. You are still responsible for paying the full amount of debt plus an administrative fee to the credit counselling agency, but it can be spread out in payments over up to five years. Here are the main benefits of a debt management program:

  • One consolidated monthly payment
  • Covers the most common forms of unsecured debt
  • You can choose which debts to include or exclude
  • A possibility for reduced interest
  • Debt repayment in five years or less
  • Additional support and counselling

If you are able to pay back the full amount of your debt and unable to qualify for a consolidation loan, then this may be the option for you. Here are a few additional points to consider:

  • Income tax debt cannot be included
  • Student loan debt cannot be included
  • Some creditors refuse to accept debt management plans
  • You can expect an administrative charge from the agency (sometimes 10%)
  • You will be required to pay the full amount of your debts over the course of the plan

The effectiveness of a debt management plan will be case-specific, depending on who the creditors are, how much is owed and what you are able to afford monthly.

3. Debt Consolidation Loans    debt consolidation loan

The concept of a debt consolidation loan is simple… you take out a loan that covers the total amount of your debts to pay all your creditors. The loan will carry a smaller interest rate than what is offered by your creditors, and you can make monthly payments until the loan is paid off in full. You save money with the lower interest rate, and you only have to make one payment each month. Many banks and financial institutions have debt consolidation loans as part of their product offering for qualified customers. In most cases, to be eligible for this type of loan, you must be currently employed with a steady stream of income, you must have an acceptable credit history, and you must provide the bank with a monthly budget. In some cases, they may even require a co-signer or some collateral. Consolidation loans are often used for credit card balances, overdraft, outstanding bills, payday loans, and any other interest-bearing debts. You are basically refinancing your debt, but with more favourable terms, making it less expensive and easier to manage. The main advantages of a debt consolidation loan are:

  • Lower interest rates than what your current creditors are offering
  • You can immediately pay off existing creditors
  • A single monthly payment to service the new debt

This type of refinancing is not for everyone. In fact, if you don’t meet the criteria, you will be denied the loan. Here are some other points to consider as you evaluate this option:

  • You must pay back the full amount of debt plus interest
  • The interest rate may increase with lower credit scores
  • Most of your early payments go towards interest
  • Payment amounts may change with fluctuations in interest rates
  • There is no support or counselling included to promote smart spending


Talk to a Licensed Insolvency Trustee in Ontario    Free Debt Consultation

debt consolidation free consultation meeting

When you are facing financial uncertainty, we believe it is essential to know all your options. Licensed Insolvency Trustees are highly trained debt consultants. We will sit with you to review your situation in a free consultation meeting. Once we understand your unique circumstances, we will review all of the available debt solutions and provide you with the information you need to make an informed decision. Our team is here to answer any questions, and we are always available via phone, email or live chat. Take the first step towards getting out of debt by connecting with us and setting up that free consultation meeting. You will not regret it!


Francois Gilbert - Licensed Insolvency TrusteeFRANÇOIS GILBERT

Licensed Insolvency Trustee (LIT)


Francois obtained his CPA accounting designation in 1995, his CIRP insolvency designation in 1998 and became a Licensed Insolvency Trustee (LIT) in 1999. He has been working in the field of insolvency since graduating from University of Ottawa in 1991 and has been with Fontaine & Associates since 2002. Prior to that, Francois was working in the Ottawa office of PwC.

Francois has been helping individuals solve their debt problems now for over 20 years by providing advice on credit counselling, consumer proposals and personal bankruptcies. He also has extensive experience in business restructuring.

When he is not at work, Francois spends most of his time with his wife and kids doing outdoor activities and he also volunteers with local non-for-profit organizations in the Ottawa area from time to time. He is an avid musician and plays the keyboard, mainly for his own enjoyment.

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