Q: I was laid off for a few months a while back and I’ve been playing catch up with my debts ever since. Now I’ve really gotten behind with my payments and I think I will need help right away. But I’m worried that if I ask for help, it will affect my future. Will anyone find out that I’m in financial trouble and that I asked for help? ~Brian
A: Money is a topic no one likes to talk about, and certainly not once they find themselves in financial difficulty. When dealing with debt, the choice you make about how to resolve your situation will determine who can find out that you asked for help.
Some Things You do Reveal Financial Trouble
First of all, anyone you owe money to likely already knows that you’re struggling. Even if you haven’t started receiving collection calls, if you’ve missed payments, requested a few credit limit increases or have asked a lender for some relief, they likely know you are experiencing some challenges paying your bills.
Your Credit Report Will Reflect What You do with Credit
Since how you make your payments is reported to the credit bureaus, if you’ve fallen behind, it will be reflected on your credit report. The good news is, if you don’t apply for credit, or allow anyone to check your credit report, no one else will know.
Asking Questions amp; Gathering Information from Debt Help Services is Private in Canada
Asking questions and getting information about help with your debts from a service provider in Canada, eg a lender, credit counsellor or bankruptcy trustee, as long as you don’t allow anyone to check your credit report and you don’t enter into any payment arrangements, the fact that you asked for guidance will not be reflected anywhere publically. Someone’s financial circumstances however, typically dictate the best debt relief option or solution.
Reduced Payment Arrangements Are Noted on Your Credit Report
As soon as you enter into a debt repayment program and ask for reduced payments of some sort from a credit counselling organization a notation will be made on your credit report that you are receiving help from a third-party to make your payments. A reduced payment arrangement also typically means living without credit for a period of time, until you can pay off what you owe under the terms of your reduced payment arrangement, and rebuild your credit score.
Establishing a debt repayment program with a credit counselling agency is an arrangement that requires approval by your creditors. Once approved, it will be noted on your credit report and subsequently purged after completing the program according to the statute of limitation. There is no public record following your program once it has been purged. It will typically take 1 – 3 years to rebuild your credit but when you are done and have re-established your credit, no one will ever know you’ve had a problem with money.
Certain Repayment Arrangements Are a Matter of Public Record
If privacy is important, you have to be careful of the path you choose. If you declare bankruptcy or file a consumer proposal, a permanent record is created with the Office of the Superintendent of Bankruptcy. For $8, anyone can search your name and see if at any time in the past you entered into a legal agreement to reduce you debt.
When Can it Matter?
Is this important? It depends. Some employers will want to know your credit history, some landlords do a check before renting to you, and you might have trouble getting a loan or mortgage later on.
The Bottom Line on Getting Help with Your Debts
It can be hard to ask for help with financial hardship, but taking the time to find reliable information to help you make the right choice for your future is worth it. There are advantages and disadvantages to any form of debt relief or service. Just make sure you know the long term impact to your credit, financial situation and privacy before you make your final decision.
6 Things to Help You Find Canada’s Best Debt Help Services
If You Think You Might Need Financial Help Immediately, You Probably Do
12 Ways to Save Big on Groceries
Scott Hannah is president of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Scott by email, check www.nomoredebts.org or call 1-888-527-8999.