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April 2011 - Don't settle with only one or few of your creditors but all of them.

Don't settle with only one or few of your creditors but all of them.

☳ by Adam Aspilla

There are many ways of solving financial problems. Some of them are debt consolidation, credit counseling, consumer proposal or bankruptcy as a last resort. In addition to the foregoing, there is what we call, "settlement of debts" i.e. to negotiate with your creditors to reduce the amount of your debts.


If you have many creditors, it is not wise to just negotiate one or few of them. Why? For example, if you have six creditors and you settled with one of them. As a result, you only pay half of what you owe, and of course that is a good new! However, the bad news is your other creditors will still pursue to collect 100% of your debts both the principal and the interest. If you could not pay, they would go to court and may obtain judgment against you that would lead to garnishment of your wages and your bank accounts.

On the above case scenario, the settlement you made with one of your creditors did not help you at all solve your financial problem.


This usually happens, when one of your accounts is on collection. A collection agent may offer you to pay only a portion of your debt as full and final settlement. It sounds attractive, however, it would only satisfy one of your creditors and your financial problem remains the same with the other creditors.


If you want to settle your debts, you have to settle with all your creditors with the same settlement percentage. Like: if your offer to pay only 50% of your debts it should be the same offer to all your creditors, otherwise, creditors who receive a lower settlement offer would reject the offer for it would be viewed as discrimination to them.


In the event your settlement offer is rejected by anyone of your creditors and you still wish to offer a settlement instead of credit counseling or bankruptcy, you may consider a consumer proposal which is actually a settlement offer, the only difference is it handled by an administrator.


In a consumer proposal the percentage of success is very high for it is a legal process under the Bankruptcy and Insolvency Act. Although it is under the same Act, consumer proposal however, is not a bankruptcy.


Debt settlement is good if all your creditors would accept, however, if one of them would reject, it is not wise to settle with one or just a few of your creditors. You need to settle with all your creditors, otherwise, your financial problem would continue to hound you.



Adam Aspilla is a Senior Financial Counselor of the Debt Clinic of Canada Inc. and the author of the book, You Can Negotiate All Your Debts. He also writes a biweekly column, “What Matters In Life” in “Taliba Newspaper. For free initial, professional and confidential consultation, please call 905-306-7572.