Credit Counselling Canada (CCC) has received funding from the Office of Consumer Affairs under the Contributions Program for Non-Profit Consumer and Voluntary Organizations to perform a research project entitled: Debt Relief Options in Canada – Long Term Outcome Comparison.

When consumers are struggling with debt, they have few options: continue to struggle with the debt payments without seeking help; file for bankruptcy; chose a consumer proposal, or enter into a debt repayment program (DRP). In deciding which path to choose many consumers lack clear understanding of the differences and long-term implications of debt relief options.

“When in a financial crisis, the focus is usually on eliminating the problem and reducing stress as quickly as possible. A consumer may know they need help managing their debt, but they do not know which option will best set them up for financial success in the long-term. Currently, no entity can provide that information,’’ explains Patricia White, Executive Director of CCC.

debt relief options

With this study, CCC will evaluate the financial behaviours of consumers once they exit their chosen program by comparing otherwise similar individuals who have successfully completed a DRP, consumer proposal or who were discharged from bankruptcy.

A study of this kind has never been undertaken in Canada. While studies have been conducted in the U.S with promising results, the scope of this study – comparing debt repayment programs with consumer proposals and bankruptcies using a Canadian sample – is truly unique. The study will provide understanding of debt relief options specifically for Canadian consumers.

“The study will not only provide CCC information on the effectiveness of our debt repayment program, but also inform additional industry stakeholders, such as the Office of the Superintendent of Bankruptcy and help inform and advance best practices within the industry,” says White.

Dr. Jodi Letkiewicz of York University will lead the research team as the key methodologist. Her specialization is in consumer sciences, with an emphasis on statistical methods and extensive experience in research. Dr. Letkiewicz is independent from CCC.

The sample will consist of DRP participants who completed the program between January 2013 and March 2014.  A similar size sample will be provided by TransUnion for the bankruptcy and consumer proposal groups.  A control, or baseline, group for each control cohort will be created for each scenario for a total sample size of approximately 27,000. During the analysis phase, researchers will construct multiple models to answer each of the key research questions to be explored:

  • What are the demographic profiles of each of the participants in each of the debt relief programs and how do they differ from each other?
  •  What is the impact of consumer participation in debt repayment plans, consumer proposals, and bankruptcies on subsequent financial outcomes?
  • How do the financial outcomes differ from these three groups to a similar sample of consumers who didn’t choose one of the three options?
  • How do the financial outcomes compare between consumers who participate in a debt repayment plan versus those who participate in a consumer proposal or a bankruptcy?
  • Can we use past patterns of behaviours to predict credit problems? If so, what are the patterns that predict either use of a debt repayment plan, consumer proposal or bankruptcy?

The research is scheduled to be completed by March 2019, at which time the results will be made public.

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