Overwhelming debt creates enormous stress in a household. Collection agencies may be continually harassing you by repeatedly calling your home and place of work. You may be using one credit card to pay the minimum of another card. Perhaps payday loans are just getting you deeper in debt.

Where do you turn? You may be considering asking a family member for a loan. Before borrowing from family or friends, consider the consequences if you struggle to pay them back. This may cause additional stress.

Here are some questions to ask yourself before asking family for financial help:

Will the Loan Help You?  Can you use the family loan to pay off a high interest credit card and then cut up that card so you never use it again? Or will you borrow the money and then just continue to accumulate further debt?

Can your family member or friend afford it?  You don’t want them to go into debt to help you out.

What will it do to your relationship?  Consider if your situation takes a turn for the worse and you are unable to pay back the family loan as arranged. Will it damage your family relationships or potentially destroy a friendship.

What will be the terms to pay back the loan?  It is important to figure out a repayment plan before the money is borrowed. This avoids misunderstandings in the future.

Are you able to pay them back in another way?  If a friend owns a business, perhaps they will let you pay back the loan by working for the business. Or if your parents plan to give you an inheritance, they might consider giving a portion of it to you now.

Borrowing money from friends or relatives can provide a solution to your debt problems, but carefully consider all the relevant facts.

Another option is to discuss your situation with a Trustee in bankruptcy. A trustee will review your situation in detail and provide solutions to help you make the best decision to deal with your debt, in a relatively stress-free way.

By Kathy Lenart – Insolvency Partner, Licensed Insolvency Trustee
CPA, CA, CIRP
Member and Secretary of the Ontario Association of Insolvency and Restructuring Professionals (OAIRP)
Canadian Association of Insolvency and Restructuring Professionals (CAIRP)