Summer is a season people look forward to all year. Families take vacations, children are out of school, patios fill up, weddings are scheduled, cottages are rented, and long weekends seem to arrive one after another. It is a time for making memories, but it can also become one of the most expensive times of the year.
This is happening at a time of economic upheaval related to tariffs – including rising costs of living, job insecurity, higher interest rates and an end to the era of “bank of house.”
For some Canadians, those extra costs are manageable. For others, especially those who were already stretched financially before the summer began, the season can become the tipping point. Credit cards that were already carrying balances are used a little more often. A line of credit covers an unexpected expense. A family trip that seemed affordable in May suddenly becomes much more expensive by August.
By the time autumn arrives, many people are left asking themselves how they accumulated so much debt in such a short period of time. Often it just creeps up on you – one trip to a friend’s cottage (you brought food and drink, and used a full tank of gas), one pleasant day on a restaurant patio (have those prices ever gone up!), a wedding (bachelorette party, gifts, new shoes) – you get the picture.
Summer spending often exposes an existing problem
It is easy to blame summer for financial difficulties, but the reality is that the season often exposes problems that were already there.
If your budget was already tight, additional expenses such as vacations, children’s activities, higher grocery bills, fuel costs, home repairs, weddings, or back-to-school shopping can quickly push things beyond what your income can comfortably support.
Many people begin making only minimum payments on their credit cards. Others move balances between accounts, borrow from a line of credit, or delay paying one bill in order to keep another current.
At first, those decisions may seem temporary. The problem is that interest continues to accumulate long after summer is over.
When summer debt follows you into the fall
Many people convince themselves that they will deal with the debt later. The thinking is understandable. Summer ends, work becomes busier, and there is hope that a few extra paycheques will be enough to get everything back under control.
Unfortunately, debt rarely stands still.
Interest continues to accumulate every month, even if you are making minimum payments. Before long, the expenses of September and October arrive. Back-to-school costs, children’s activities, higher utility bills, insurance payments, and preparations for the holiday season all compete for the same income that was already stretched during the summer.
What began as a few thousand dollars on a credit card can quickly become several different balances spread across multiple lenders. Many people find themselves using one credit card to make payments on another or relying on a line of credit simply to keep up with everyday expenses. At that point, the debt is no longer the result of a family vacation. It has become part of the monthly household budget.
The longer that cycle continues, the more difficult it becomes to break.
Consider a family that spends an additional $5,000 over the summer on a vacation, children’s camps, home repairs, and higher fuel costs. They expect to pay it off over the next few months, but then the car needs repairs, school expenses arrive, and the cost of living continues to increase.
Instead of reducing the balance, they begin making only minimum payments. Interest continues to build while the principal barely changes. Within a few months, the family is receiving collection calls on one account while using another credit card to cover groceries or utility bills.
This is exactly the point where many people begin searching for debt solutions. They are not irresponsible people. They are simply trying to keep their household running while costs continue to rise faster than their ability to pay.
Taking action before the situation reaches lawsuits, wage garnishments, or CRA enforcement usually provides more options and significantly reduces the stress that comes with trying to solve a problem after it has already escalated.
A debt consolidation loan is not always the answer
When debt begins to feel overwhelming, many people immediately look for another loan.
Sometimes a debt consolidation loan works.
Sometimes it simply moves the debt from one place to another.
If your income comfortably supports repaying everything you owe, consolidation may be a reasonable solution. However, if you are already relying on credit to pay everyday expenses or making minimum payments that barely reduce the balances, another loan may, at best, simply postpone the problem. Procrastination about debt is never a good answer. It may feel better in the immediate moment but will bite harder with fewer options to resolve later on.
Before taking on additional debt, it is worth understanding all your options such as the consumer proposal.
A Canadian consumer proposal addresses the debt itself
One of the biggest differences between a loan and a consumer proposal is that a loan assumes you can repay all your debt.
A Canadian consumer proposal recognizes that, in most situations, repaying every dollar simply is not realistic.
A consumer proposal allows you to make a settlement offer to your unsecured creditors based on what you can actually afford. Rather than continuing to struggle with growing balances and mounting interest, you work toward resolving the debt through affordable monthly payments over a defined period.
The creditors accept these consumer proposals because it provides them with a higher return than that what they will receive if they force you into bankruptcy. They are administered only by licensed insolvency trustees who are highly educated and skilled professionals who look after the interests of all parties in a fair and responsible manner.
For many people, a consumer proposal creates immediate breathing room and a realistic path back to financial stability.
What changes when you file a consumer proposal?
People are often surprised by how much changes once a consumer proposal is filed.
Interest stops on the unsecured debts included in the proposal, most collection calls stop, and many wage garnishments can be stopped. Instead of juggling multiple creditors, you make one affordable monthly payment through the licensed insolvency trustee’s trust account.
Perhaps most importantly, the total amount you repay is often significantly less than the amount originally owed.
That allows people to focus on moving forward instead of simply trying to survive from one paycheque to the next.
Why speaking with a Licensed Insolvency Trustee matters
Many Canadians begin searching online for debt solutions and quickly encounter debt consultants and debt advisors promising to solve their financial problems.
What many people do not realize is that debt advisors are largely unregulated and therefore come with a wide range of experience and professionalism. Some charge substantial upfront fees before referring clients to someone else. While it is your right to seek advice from any person you trust, ask why you should be paying a fee for information you can receive for free from the licensed insolvency trustee.
Licensed Insolvency Trustees are different.
They are federally licensed and regulated professionals and the only people authorized to administer consumer proposals and Canadian bankruptcy. They are also required by law to explain all available options, even if one of those options does not involve filing a proposal or bankruptcy.
Most importantly, initial consultations with a Licensed Insolvency Trustee are free. That means you can understand exactly where you stand before making any decisions.
Is now the right time?
Many people wait until after the holidays before seeking help because they hope things will improve on their own.
Unfortunately, debt rarely becomes easier by waiting.
Interest continues to accumulate. Collection activity may become more aggressive. Financial stress often increases as new expenses arrive. The miracle of the lottery winning or unexpected inheritance rarely fails to arrive.
If summer spending has left you feeling overwhelmed and your debt is becoming harder to manage, now may be the right time to review your options before the situation becomes more difficult.
Speak with Baigel Corp.
If summer debt has followed you into the rest of the year and you are finding it difficult to get ahead, you do not have to figure it out alone.
Baigel Corp. provides confidential, no-charge consultations with federally licensed and regulated Licensed Insolvency Trustees. We will review what you owe, explain all your options, and help you determine whether a Canadian consumer proposal, Canadian bankruptcy, or another solution is the best fit for your circumstances.
The sooner you understand your options; the sooner you can stop worrying about debt and start planning for the future instead.
*Baigel Corporation is a federally regulated Licensed Insolvency Trustee