What is my best option for dealing with my debts?
Question: I had managed to stay out of debt for nearly 40 years, but in the last 3 years I have accumulated $15,000 in debt. (went back to school) $5000 of that is credit card and $10,000 is a line of credit – both to the same bank. I make the minimum payments, however, it seems that my monthly minimum payments have been slowly increasing each month. I work permanent part time and am not managing to pay off the principle. Before I read this blog and new anything about debt repayment I phoned my bank. I asked if I could have my interest payments lowered. They said no flat out. Then I asked if there was some kind of fixed payment plan where I could consolidate my debt into one payment. I was informed that there was, but in order to qualify I would have to pay $325 monthly for 5 years. (totalling of course $19,500) But, they said that because my income to debt ratio is so high they wouldn’t feel comfortable doing that. My income is about $24,000 a year. I have no assets – no house, no rrsp’s a car worth about $1000, old used furniture and my clothes. What do you think is my best option?
Answer: If your income is $24,000 per year before taxes, it will be difficult to repay your debts in a reasonable period time. We suggest the following approach:
First, make a budget to see exactly what you can afford to repay. If you can afford to repay the debt, a debt management plan through a non-profit credit counsellor may be a viable option.
If you can afford to repay some of the debt, but not all of it, a consumer proposal may be a good option; for a consumer proposal, contact a trustee.
If none of those options work, the final option may be personal bankruptcy. Again, contact a trustee for more information.
Either way, your money problems won’t go away on their own, so the sooner you take action, the sooner you will be able to get a fresh start.