Expert Interview with J. Douglas Hoyes on Tackling Your Debt for Mint

If you're overwhelmed by debt and financial problems and you don't know how to begin tackling them, bankruptcy trustee J. Douglas Hoyes has one piece of advice he likes to repeat over and over: Make a plan.

"Start by making a list of what you owe and looking at your budget," he says. "If you don't think you can do this on your own, even with helpful resources, get professional help."

Even if you don't think you can afford professional help, Doug says to keep in mind that any reputable debt advisor will sit with you for a free consultation to help you know whether or not you can pay off your debt on your own or if you need formal debt relief.

Your best source for free, objective advices is from accredited credit counseling agencies and licensed bankruptcy trustees.

Doug, who serves as the advisor for, a website offering financial advice to anyone struggling with money, recently checked in with us to offer his take on how to manage your debt responsibly. Here's what he had to say:

Tell us about ... what services do you offer? Who should be using them? was started in 1999 by a network of qualified debt management experts across Canada to provide free information and resources for individuals struggling with money problems. At that time, there was little credible information available on the internet to explain how different debt relief options worked and, more importantly, to help people make an informed choice.

Today we offer free resources including our popular e-books and supporting worksheets about how to get out of debt, whether on your own through budgeting or with the help of a debt advisor. Our debt solutions blog provides expert advice from a range of experts across Canada, all of who have a different perspective on how to get out of debt. Our site is useful to anyone looking to pay off debt.

For those needing formal debt management help, our network of qualified, licensed debt professionals offer free consultations.

What seems to be the most common frustrations or misconceptions your readers have about managing their debt?

One of the biggest frustrations facing anyone who is struggling with debt is how to get started. Budgeting is something that the average person finds very intimidating. We try to provide step-by-step resources to help relieve this stress.

The same applies when someone needs professional debt management or debt relief services. They don't know where to turn. We can help by explaining both the positive and negative aspects of different alternatives.

I'd say the most concerning misconception about debt management in Canada surrounds the concept of "government programs." Despite the many consumer warnings that have been issued, there are still providers in the marketplace who take advantage of the fear and uncertainty many have about how to get out of debt. The debt relief industry has co-opted so many terms, from debt management to credit counseling to debt consolidation to debt settlement, that these terms no longer have any distinct meaning.

What are some signs that your debt might be becoming unmanageable?

There are obvious signs like regularly missing debt payments, receiving calls from collection agencies or being threatened with a wage garnishment. But the No. 1 most ignored sign that your debt has become unmanageable would be making only the minimum payment on credit cards. You might think that you are staying ahead of your debt because you never miss a payment, but paying only the minimum means you will never eliminate that debt in your lifetime.

Other signs would include relying on credit to pay regular living expenses like gas and groceries, being unsure of how much you owe (perhaps because you are afraid to look) and constantly bumping up against, or exceeding, your debt limit or running an overdraft.

What's the worst thing an individual or family can do in regards to large amounts of debt?

I'd have to say there are two common mistakes people make. The first is to ignore the problem, hoping it will go away. A sudden increase in income or short-term drop in expenses is not going to solve the problem.

The second mistake would be piling more debt on top of old debt. I see so many individuals turn to payday loans and bank overdrafts to help make ends meet because their budget is so unbalanced. Next thing you know, they come in to see me with $45,000 in unsecured debts they can't pay off.

What are the most common steps you recommend to people for managing their debt? Where do you start?

Again, it goes back to making a plan to deal with your debt.

1. First, take stock. Make a list of who you owe and how much.

2. Make a budget. You need to know how much money you will have available to pay off your debt on your own or offer your creditors if you want to negotiate a payment plan with them.

3. Research your options. Can you cut back enough to pay back your debts on your own in a reasonable period of time? Would you qualify for a debt consolidation loan? If not, consider more formal debt relief options like a consumer proposal, debt management plan or, if necessary, personal bankruptcy.

4. Talk to a qualified expert. I can't say it often enough: reputable licensed debt management experts, whether qualified credit counselors or licensed bankruptcy trustees, will offer a free consultation to anyone struggling with debt. They can often point you in the right direction without the need of more formal services. In fact, in our practice, four of five people we meet can often be helped on the road to living debt free without having to file bankruptcy or a consumer proposal.

What advice do you have on creating a household budget that we'll actually stick to?

Use a system that will work for you. If that means a formal spreadsheet like the one that comes with our free budgeting guide, do that. But for many people, numbers and spreadsheets are just too complicated, so they quit. Plus, budgeting is just plain hard - another reason why we quit.

Another approach I like to recommend is to pay your bills as often as you get paid. If you get paid weekly, pay a quarter of your monthly hydro bill every week. That way when the due date comes around, you are not faced with a bill and no money in your bank account because you spent it on something else. Online banking tools make this an incredibly easy approach to set up.

For the bigger items you can't pay weekly like your rent, set up a separate account you won't touch for anything else and automatically transfer a portion of your pay into that account each payday. Again, when the bill comes due, you now have the money to pay it. Use this same account, or even a third account, to transfer money ahead of time for annual expenses like car insurance, holidays, birthdays and even to build a small emergency fund.

And on that topic, make sure you prepare for the unexpected. Build a little wiggle room into your budget for some fun as well as for items you may have missed. As soon as you can, start building an emergency or rainy day fund because no matter how much you plan, things like unexpected house and car repairs and expenses for the kids creep up.

What is debt consolidation, and how does it work? Is this option available to everyone? Who qualifies?

Debt consolidation is one of those words that has been co-opted by so many in the debt management industry. In its simplest form, debt consolidation is when you take out a new loan and use those funds to pay off several smaller loans. The hope is that you are able to pay a lower interest rate and lower your monthly payment so your budget works and you can pay off your debt in a reasonable period of time.

Unfortunately, not everyone has good enough credit, or assets to pledge, to qualify for a traditional debt consolidation loan. If you have poor credit, my advice is don't turn to a debt consolidation company offering loans for people with bad credit. This option is just too expensive.

If you don't qualify for a debt consolidation loan, then you need to consider a repayment plan that offers some debt relief like a debt management plan or consumer proposal. Both still allow you to consolidate your debt into one single payment, and both allow you to pay off your debt sooner. Which you need depends upon how severe your debt problems are.

These days, there seem to be plenty of people and businesses willing to prey on people addled with debt ... what are signs that someone you've turned to for help doesn't have your best interests in mind? How can you spot a scam?

That is one of the main reasons we started So many people are afraid to talk to a bankruptcy trustee or an accredited credit counselor because they desperately want a solution that is not seen so negatively.

The best way to spot a scam is to know whom you are dealing with. Ask if both the company and the individual you will be speaking to are accredited and licensed and with whom. Many companies advertise themselves as credit counseling agencies but their individual advisors are not qualified, but are instead just salespeople.

Don't assume the words not-for-profit or government approved are a symbol of credibility. Again, check out their claims. Are they licensed? What government program? In Canada, the only government programs available are offered through a licensed bankruptcy trustee. Anyone else offering these services is generally just charging a referral fee to send you to a trustee anyway.

Lastly, seek a second opinion. If you talk to a credit-counseling agency about a debt management plan, call a bankruptcy trustee in your area and compare that to a consumer proposal. Always be sure you know all of your options.

If you feel uncomfortable with the advice you were given, or they pressure you to make a decision, take your time and feel free to talk with someone else first. There are very few situations that require you to make a decision that day. Maybe if you are facing a wage garnishment, you might need to take immediate action. But if that is the case, your options are usually limited to legal procedures under bankruptcy law anyway. In almost any other circumstances, you can take time to be sure the decision is right for you.

How can we avoid taking on lots of debt? What are some best practices for managing our money before things get out of hand?

I'll go back to my favorite advice - make a plan. Sit down as a family and talk about what your finances look like. Make a household budget together and decide what you can afford, when you will buy it and how you will pay for it.

Don't take on more credit than you can repay. It may make you feel good to know that your bank offered you a credit limit of $10,000, but if you can't pay it back, you don't need it. It's best to avoid temptation in the first place.

Don't over-extend yourself for the big things either. I see a lot of people who took on a high ratio mortgage because they desperately wanted a bigger home for their family only to find that unexpected expenses, or worse an illness or job loss, put them in financial trouble.

Lastly, avoid bad debt options at all costs. Payday loans, overdrafts and cash advances are an expensive way to make ends meet and are often the beginning of a slippery slope to overwhelming debt problems. If you find yourself using these types of credit regularly, talk to an expert right away to help you get things back in balance before it is too late.

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