4 Bad Choices People Make When They Need Debt Relief in Toronto

December 1, 2017

It’s not always easy to ask for help when we need it. Often, when overwhelming debt threatens to take control, our Torontonian pride compels us to try handling it ourselves. But you’re not alone, and there is no shame in getting professional help to resolve your debt issues, through solutions like debt consolidation, credit counselling, a Consumer Proposal, or even Bankruptcy.

In fact, we offer free consultations to help you explore your options and identify what works best for you. However, if you’re not quite ready to take the next step, we caution you in the meantime against some all-too-common ‘Do-It-Yourself’ methods of debt relief:

1. Think Carefully Before Dipping into Your Retirement Savings

As we’ve outlined in a previous post, debt can follow us into retirement, when we’re often less able to handle it. Tapping into an RRSP or pension is easy, but if not replaced, will leave you with less savings that you will likely need for your retirement years.

Before you consider withdrawing money from your retirement savings, be sure that you understand this important fact: Registered pensions and retirement savings plans are protected from creditors in a Bankruptcy or Consumer Proposal. In other words, draining your retirement savings in an attempt to reduce unmanageable debt may just hurt you in the long run.

It’s also important to recognize that early withdrawals or loans against registered pension plans have income tax implications which may cost you far more than you anticipated.

2. Steer Clear of the Whack-A-Mole Approach

Juggling debts, also known as ‘the whack-a-mole approach’, is when you try to avoid excessive interest payments by shifting your debt from one debt source to another, often bouncing it back and forth between credit cards and personal lines of credit.

While this may seem like a clever work-around in the short term, it won’t lower your debt and may result in accumulating even higher interest costs.

3. Is it Worth Borrowing from Friends & Family?

Nothing can cause a rift in a relationship quite like money. Asking a family member of friend for a personal, low- or no-interest loan may seem like a great solution to your debt, but it often results in hard feelings, disgruntlement, and conflict.

Being charged interest by a family member may foster feelings of resentment from the borrower, while an outstanding interest-free loan may foster feelings of resentment from the lender. Even if the loan was taken with the best of intentions, your friends and family may feel offended or angry if you take too long to repay, or if they see you making a purchase for yourself before the debt is repaid.

When it comes to friends and family, the best advice is to keep money out of the equation.

4. Avoid the Head-in-the-Sand Approach

Perhaps the most common mistake we see from people in debt is ignoring or denying their true financial situation. Sometimes, human nature compels us to ignore a situation in the mistaken hope that it will resolve itself on its own. When it comes to debt, a “head in the sand” approach just doesn’t work. On the contrary, it can literally compound the problem, as interest piles up and more debt is added to the balance.


If you’re feeling overwhelmed by debt, please contact us for a free consultation with one of our experienced Licensed Insolvency Trustees. Together, we’ll explore debt solutions including credit counselling, debt consolidation, Consumer Proposals, and Bankruptcy. With offices in Toronto and Hamilton, the Fuller Landau Debt Solutions team can help you get a fresh start and lead a FULLER life. We also invite you to follow us on Facebook, LinkedIn, or Google+ to learn more about debt management solutions.