A Debt Doctor rushes to the rescue

Sergey, you call yourself A Debt Doctor. Is this a kind of financial emergency service?

- Yes, exactly. I am a Debt Doctor — a specialist in debts that cannot simply be ignored. Many people hope that if they do not look at the problem, it will somehow resolve itself. But debts do not heal on their own. It is similar to a health problem: first a person feels unwell, then postpones a visit to the doctor, then gets used to living with pain — and finally asks for help only when the condition has reached a critical stage. The same thing happens with debt. While a person makes minimum payments, shifts balances from one credit card to another, borrows to cover old debt and lives under constant stress, the situation does not improve. It simply becomes more expensive, more painful and more dangerous. The sooner a person asks for professional help, the more options remain available.

- How can someone understand that it is time to urgently see a financial doctor?

- The first warning sign is the feeling that the person no longer controls the debt situation. They take on one credit card after another, pay high interest, but the debt does not decrease. A large part of their income goes not toward living and not toward actually repaying debt, but toward servicing interest. That is a clear sign that the situation will not fix itself.

Paying $800 or $1,000 a month only for the debt to remain almost unchanged is financial absurdity. The money disappears, exhaustion grows, and the credit history often does not improve. At that point, it is important not to feel ashamed and not to wait, but to calmly review the situation with someone who understands what legal programs exist and which one may fit your specific case.

I work mostly with Russian-speaking clients, so I can explain all the nuances in clear language: what a Consumer Proposal is, how it differs from Bankruptcy, which debts can be included, what happens to credit history, property, a vehicle, real estate and income. Most importantly, I act as an independent consultant in the debtor’s interests. My role is to help a person find the best path, prepare for the process and go through it calmly, properly and without unnecessary stress.

- What symptoms should push an individual or business owner to seek your help?

- I deal with both personal and business-related debts. If a person realizes they are paying too much on loans or credit, it is time to at least come for a consultation. Credit itself is not evil. Used wisely, it helps people buy real estate, finance a vehicle, grow a business, handle major expenses and maintain a reserve for emergencies. But there is useful credit, and there is bad debt.

Bad debts are primarily expensive debts: credit cards, payday loans, unsecured lines of credit with high interest, and debts that do not decrease despite regular payments. If you are paying but not moving forward, it is no longer a financial tool. It is a trap.

- How do you distinguish useful credit from bad debt?

- Useful credit usually has a reasonable interest rate, a clear purpose and a realistic repayment plan. A mortgage, car loan or business financing can be normal tools if the payments fit the income and do not destroy the budget. But when a person is paying 15–20% or more on a credit card and the balance barely goes down, that is bad debt.

Sometimes people pay $800 or $1,000 a month for years on a debt of about $20,000 and simply get used to it. They think, “I am paying, so everything is under control.” In reality, the only thing under control is the constant loss of money. If most of the payment goes to interest rather than principal, the strategy must change urgently.

Many people are terrified of the word Bankruptcy. They fear damaged credit, official procedures, the Trustee, documents, conversations and stress. But doing nothing can be even more dangerous. If every month you hand over hard-earned money and the debt does not decrease, you are already in a stressful process. It simply is not called bankruptcy — it is called financial agony.

- What size of debt do you work with?

- Different sizes. What matters is not only how much a person owes, but what kind of debts they are, what income they have, whether there is real estate, a vehicle, a business, tax obligations, personal guarantees, secured debts and other factors. For a Consumer Proposal, the unsecured debt limit for an individual is $250,000, excluding the mortgage on a principal residence. If the amount is higher, other options may be considered, including a Division I Proposal.

CRA debt deserves separate attention. In most cases, tax debt can be included in Bankruptcy or a Consumer Proposal. However, if personal income tax debt exceeds $200,000 and represents 75% or more of total unsecured debt, the person may be considered a high-tax debtor. In that situation, an automatic bankruptcy discharge is generally not available, and a court hearing may be required to determine the terms of discharge. This can become a longer, more stressful and less predictable process, so such cases must be prepared especially carefully.

- How does preparation for debt relief work, and where are your clients located?

- Everything begins with a consultation. We review the situation in detail: income, debts, assets, family circumstances, tax issues, creditors, collection risks, lawsuits and garnishment. After that, the client prepares documents according to a list, and we help organize the file so that it is clear and strong.

When documents are signed, the official procedure is handled by a Licensed Insolvency Trustee, because only a Trustee can file a Consumer Proposal or Bankruptcy in Canada. I act as the debtor’s representative and consultant, helping the client prepare, explaining each step and protecting the client’s interests within the available legal options.

My clients may be located not only in Ontario, but also in other Canadian provinces, except in situations where special local rules apply, such as in Quebec. I have also helped people who had Canadian debts while physically living abroad — in Europe, Asia, Eastern Europe and other countries. What matters is not where the person is at the moment of consultation, but whether they have Canadian debts and can properly go through the process.

- Based on your years of experience, do you think there are more people now who cannot manage their financial situation?

- I have been dealing with debt procedures since 2008 and have seen many different periods. Paradoxically, the pandemic-restriction years were temporarily calmer for many people: they spent less on travel, restaurants and major purchases, while government support helped cover current payments. After that, the situation changed sharply.

The rising cost of living, higher mortgage payments after renewal, high credit card interest, business debts, CRA tax bills, family obligations and falling prices in some real estate segments created serious pressure on people who, not long ago, considered themselves financially stable. Today, competent debt resolution has become a very necessary service because many people can no longer simply “wait it out.”

- What else would you warn potential clients about?

- If you feel that you cannot manage your debts and there is no realistic hope of a sharp increase in income in the near future, do not waste time and money. Some people spend years paying interest, hoping that “soon it will get easier.” But if the numbers do not work, it will not get easier. The answer is not to prolong the agony, but to look for a legal solution.

I help clients with different programs: Personal Bankruptcy, Consumer Proposal, debt settlement, preparation for working with a Licensed Insolvency Trustee, analysis of tax debts, personal guarantees, credit card debt, business obligations and other complex situations. One category of clients consists of people living paycheque to paycheque who can no longer service their credit. Another category includes owners of real estate, businesses or other assets who may have equity but no free cash flow. In these cases, it is especially important to present the situation correctly and avoid a decision that causes more harm than good.

A separate category involves debts connected with family sponsorship. Sometimes elderly parents apply for social assistance before the sponsorship period has ended, often following advice from friends of the same age, and later their children receive demands to repay significant amounts to the government. Such situations must be reviewed carefully: much depends on the nature of the debt, the documents, the status of the claim and the overall financial picture.

Recently, many people have also come to us after putting a deposit on a new home, only to see the market change. The property value may have dropped, the bank may not approve the needed mortgage, while the builder still demands closing. This is a stressful and shocking situation, but it also needs to be analyzed calmly, legally and financially — not in panic.

Business-owner debts are also highly relevant: HST, source deductions, personal guarantees and corporate obligations that, in certain situations, may move to a personal level. Not all such debts are treated the same way, and not everything can be eliminated automatically. But it is often possible to build a plan that helps the person move out of a dead end and preserve their future.

A Consumer Proposal usually allows a debtor to offer creditors repayment of a portion of unsecured debts over a period of up to five years, with no further interest. The amount of the offer depends on income, assets, equity, types of debt and what creditors would receive in a bankruptcy scenario. It would not be honest to promise everyone the same “25% of the debt,” because every case is individual. But in many situations, a Consumer Proposal can indeed be beneficial for both the debtor and the creditors.

Personal Bankruptcy is a more serious tool. It can give a person a fresh start, but it requires honesty, full disclosure and an understanding of the consequences. In some cases, there may be additional interviews, document requests, discharge conditions or court proceedings. It is important to determine whether the person is an honest debtor who has fallen into difficulty, or whether creditors may be able to prove fraud, misrepresentation or other conduct that prevents a debt from being discharged.

Some debts are not released through Bankruptcy or Consumer Proposal. These include child support and spousal support, court fines and penalties, certain debts arising from fraud or misrepresentation, and student loans if not enough time has passed since the person stopped being a student under the Bankruptcy and Insolvency Act. That is why, before making any decision, it is essential to understand exactly what debts the person has.

Every debt situation is individual. You cannot choose the right path based on rumours, advice from acquaintances or fear of the word Bankruptcy. The numbers, documents, risks and goals must be reviewed calmly. One thing I can say with certainty: the earlier a person asks for help, the more options they have. Do not delay dealing with debt. Come to an experienced Debt Doctor — and together we will find the most reasonable path toward financial recovery.