Once you mentioned the words "CRA", that gave me shivers down my spine. I deal with CRA every month and they are extremely powerful compared to a collection agency, which is only viewed as a measly peasant.

First thing and foremost,. clear the debt with CRA first. They should be your first priority. Your credit is already damaged with multiple R9s so it can't get any worse then it is now.

Your friend at collections is correct that the amount is too small to do a proposal, but in terms of having it on your credit report, well, let's just say your credit report is already R9 which is the worst. One R9 or 10 R9s is the same: No creditor will look at you for 6 years.

Make attempt to settle the debt at less than 100 cents on the dollar. Consumer proposal can reduce the debt to as lows as 30 cents on the dollar, but add on their commission, which is roughly 15-20%. You can achieve the same on your own with some knowledge.

Do NOT make any incremental payments because all you're doing is resetting the statue of limitations.

I do not condone doing nothing. Everyone should pay their debts as it is their responsibility. Doing nothing and abusing the system is wrong. Establish frequent communication (in writing) and tackle the debt. You can minimize it, but you shouldn't avoid it. But like I said in the first paragraph, take care of the CRA debt first and get that off of your back. They have some serious, serious powers! After CRA is satisfied and is off of your back, negotiate.

Judging by the amounts you owe, no creditor will take you to court. It has to be at least 6K before they even think about suing you. If your Visa has gone into collections already, that probably means that Visa has decided not to sue you and to pass on the matter to a collection agency that will threaten to sue you, but won't.

I would go with debt settlement. Consumer proposal is form of bankruptcy.

The R9 is there for 6 years from date of default regardless wether you pay these debts off or not.
If visa does not sue...you might be able to stall them forever....not so with government debt.

The Visa you can wheel and deal...the government loans they will simply in the end keep any tax refunds or gst checks...and if need be seize any bank accounts you may have. It may be a very rare occurrence....but it has been done.

If Visa is only about a year old....you have no real bargining power at this point. They still have option to sue for full amount plus costs.

They may take a little less to save the aggrevation but not much less at this point.

i wouldn't bother with a consumer proposal the amount is too low. i know it sounds horrible but your credit is already ruined so i would wait it out and then offer them pennies on the dollar. the amount is way too low individually for them to take legal action so at some point they will take an offer to settle from you. send them an offer to settle but do not admit to the debt. how old is the debt? who are the collection agencies? some are a little more stubborn than others. i wouldn't worry to much. this can be solved very easily if you approach it the proper way.

I have about $16000 in debt: $7000 to VISA (with a collection agency); $5000 outstanding housing debt (also with collections); and $3500 for OSAP, now with CRA. At the moment only one of the collection agencies is actively contacting me.

The options as I see them:

1. Should I do a consumer proposal? It seems attractive if I can reduce the amount by two-thirds or so. But a friend who's worked in collections says I shouldn't bother as the overall debt isn't that high and the consumer proposal will look bad on my record.

2. Try to make incremental payments on what's owed. I can maybe afford $200 to $300 monthly. But might this actually hurt me by resetting the statute of limitations on the debt and/or increasing the period which the R9s remain on my record?

3. Do nothing. It might not be the ethical choice but actually making payments on the full amount seems like the worst idea. How bad can my credit get and how long would I have to wait for the debt to clear out? Most of the debt is about 1 year old right now.

Thanks in advance for any suggestions.