Archive for Category 'Consumer Proposals in Canada'

Question: I heard the ads on the radio for Cambridge Life Solutions. I talked to them on the phone, and they said they can cut my debt, but I have to pay them $700 per month, and I have to stop talking to the credit card companies and not answer my phone.  I have paid them for three months now, and my phone keeps ringing, and no I’m getting letters from lawyers.  Help.  I don’t know what to do.

Answer: Debt consultants can negotiate settlements on your debt, but generally they are most successful when you have debts that are old, and when you have a lump sum of money to offer.  For example, if you owe $20,000 on debts that you have not made any payments on for two years, it is quite possible that a debt consultant can negotiate a settlement for $4,000 or $5,000.  However, for this to work, you need to have the $5,000.  If you have that amount of money, you are probably already making payments on your debts, so you don’t need a debt consultant.

If you don’t have the cash, then they will ask you to start paying them a fee each month, and they will tell you to start saving money to use for the eventual settlement.  Unfortunately while you are saving the money and not paying the credit cards and not answering the phone, you increase the risk of having one of the creditors take you to court and sue you.

In most cases a consumer proposal is a better option, because you get full legal protection.

Question: I have about $50,000 in credit card debts.  I got laid off two years ago, and it took me a year to find another job, which did not pay as well as my old job.  I live in Ontario, so I am wondering if I should file bankruptcy in Ontario, or is there something else I should consider?

Answer: Yes, there are other debt management options you should consider.  Bankruptcy should be your last resort, not your first choice.  Here are some options:

First, now that you are back to work, is it possible to repay your debts on your own?  If you can, that’s your best option, even if it takes a year or two to substantially reduce your debt.

Second, if you have high interest rate credit cards, a second option to consider would be a debt consolidation loan to consolidate your debts and reduce the interest you are paying.

Third, if the bank won’t give you a consolidation loan, another option is a consumer proposal.  In a consumer prop0sal you make a settlement with your creditors.  For example, the credit card companies may be willing to accept payments of $500 per month for 50 months, or $25,000 in total, and then right off the rest.  Whether or not they will accept that deal depends on your personal situation.

If those options are not possible then yes, filing bankruptcy in Ontario may be your final option.  You should consult with an Ontario consumer proposal administrator or an Ontario bankruptcy trustee to arrange for a free initial consultation to fully explore your options before you make a decision.

Question: hi. I had a consumer proposal that i filed in 2005. i had 3 years of payments, which i did, and it is listing on my credit report as discharged in 2008. how long before this disappears completely, or how do i go about getting it taken off, as it is difficult to rebuild our credit, when we cant get any.
thanks for your help

Answer: Each credit reporting agency in Canada will handle this differently.  In general, a consumer proposal will remain on your credit report for three years after the date of discharge.  So, if you completed your payments in 2008, the proposal should drop off your credit report at some point in 2011.

You can start rebuilding your credit by borrowing small amounts of money.  For example, you can get a secured Visa card; you put $500 or more on deposit, and you get a credit card with a $500 limit.  It appears on your credit report as a normal credit card, which is a positive sign for future lenders.

In addition, save money, and keep all of your regular monthly bills current, and you will gradually repair your credit.

Question: I need your advice, I am in some deep financial crisis and don’t know where to turn.  I don’t know if I need a debt consolidation loan, or some other solution.

I have $28,000 in credit card debt and a have a line of credit for my business which is reaching its max of $15,000.00.

I try to make my minimum monthly payments of my credit cards but not getting anywhere! I feel depressed. I am self employed and my wife does not know the mess I am in, if she did it would end our marriage.

I was wondering if any financial institution in Canada would give me a loan to pay off my debts. I don’t have any collateral, the only thing is I can promise to pay! I am looking for a loan of $48,000.00 I would like to pay off my credit cards and close two of them and keep one. I would like to pay down my line of credit and keep it just as a back up. If I were to get a loan at %10 I would be able to pay $1200.00 a month and pay it off in 44 months. At present I am making payments of $1000 on credit cards alone, but am not getting anywhere. PLEASE HELP ME. I KNOW I CAN PAY $1200 a month without any problem….will any one lend me the money?

Thank you for the help, sorry for the long e-mail.

Answer: Whether or not you will qualify for a debt consolidation loan will depend on your credit rating, your income, and any collateral you can provide.  There are ways to increase your chances of getting a debt consolidation loan, so before you apply be sure you have proof of your income, past tax returns, and details on all of your assets and debts.  By being prepared, you can increase your chances of qualifying for a loan.  Once you have all of your information assembled, start by making an appointment at your existing bank.  Since you already bank there, they are already familiar with your situation, so they are more likely to approve your loan request.

What do you do if you are rejected for a debt consolidation loan? You could try another bank, but don’t apply at too many banks, since that will lower your credit score.  You could go to a finance company, but their interest rates are very high, so that’s not recommended.

You could also make a budget and cut your expenses, so in effect you are giving yourself a loan.  Use your savings from cutting expenses to pay off the loan faster.

Another option is to file a consumer proposal.  A consumer proposal is like a loan; you make a fixed payment every month.  In some cases it’s better than a loan, because you can often settle your debts for less than the full amount owing, and get out of debt faster.

For more information, see our article that explains all of your debt management options.

Question: How long does a consumer proposal affect your credit rating after it has been paid off?

Answer: According to Equifax, a consumer proposal remains on your credit report for three years after you finish making all payments.

Question: I am considering making a consumer proposal, because the amount of debt that I have is just unmanageable. My home is worth about $350,000, with maybe $20,000 in equity. I have about $35,000 in credit card debt, and a $100,000 unsecured line of credit. I have three children and a non-earning spouse, and I earn $130,000 per year. I am making minimum payments on credit cards and the LOC (which is interest-only) and I am always hugging the line every month. It’s very stressful, and I’m not getting ahead.  Is a consumer proposal an option for me?

Answer: Yes, a consumer proposal is a possible option for you.  A consumer proposal works best when you have a good income, but are unable to repay your debts in full.

We suggest the following approach:

First, make a budget to determine what you can afford to pay each month in your consumer proposal.

Second, use our debt options calculator to determine the approximate cost of a consumer proposal.

If the numbers work, contact a consumer proposal administrator for a free initial consultation to review your options in detail, and to determine the best course of action.

Question: I am considering making a consumer proposal, because the amount of debt that I have is just unmanageable. My home is worth about $350,000, with maybe $20,000 in equity. I have about $35,000 in credit card debt, and a $100,000 unsecured line of credit. I have three children and a non-earning spouse, and I earn $130,000 per year. I am making minimum payments on credit cards and the line of credit (which is interest-only) and I am always hugging the line every month. It’s very stressful, and I’m not getting ahead.  Would a consumer proposal work for me?

Answer: Yes, a consumer proposal is a viable option for you.  The key will be to determine what you can afford to pay each month, and that will be the basis of your proposal.

Your creditors will know that if they don’t accept your proposal and you file bankruptcy, they will be entitled to the equity in your home (say $20,000), and a portion of your surplus income, so your proposal will need to be for more than they would receive in a bankruptcy.

We suggest you make a detailed budget to determine what you can afford to pay each month, and then contact a consumer proposal administrator to help you determine what monthly payment is likely to be accepted by the creditors.

Question: I’m just curious if there is a time frame between getting new credit and filing a proposal. For instance, if you got some furniture on a no interest, no payment deal and then 3 months later the situation changed so that filing a consumer proposal is your best option?

We have an excellent credit score and have had no problem obtaining credit, including the above described furniture financing, however recently our situation has changed. Reviewing the situation our debt has been increasing steadily and just lately we have been relying on overdrafts and credit cards to meet our obligations. This month everything is late except for the mortgage and car payment, and the situation is not getting better, so a consumer proposal may be our option – but how are recent loans viewed?

Answer: Recent loans are not viewed favorably by the creditors.  Obviously if you used your credit card to buy a $5,000 big screen TV on Monday, and then filed a consumer proposal on Tuesday, the credit card company would be very upset.  They would assume you had committed fraud: you knew you were in financial trouble, and you used your credit card anyway, knowing you would never be able to repay it.

The longer the time that passes between the purchase and the filing of the consumer proposal, the less likely the creditor will object.

All purchases within the three months prior to the filing are automatically reviewed by the creditor, since they are required to provide that list to the trustee.  However, even transactions over a longer period can be reviewed.

The real issue is whether or not you were insolvent (unable to pay your bills) when you made the purchase.  If four months ago you were still working, and paying all of your bills on time, and you bought some furniture, it may not be an issue.  If you were unemployed at the time, it may be an issue.

The amount of money involved will also impact your case.  A $50 purchase probably won’t be an issue; a $5,000 purchase, if your total debts are $10,000, could be a serious issue.

Each case is different, so we suggest you contact a consumer proposal administrator to review your situation and advise you on the likely outcome of your filing a consumer proposal.

Question: I am considering making a consumer proposal, because the amount of debt that I have is just unmanageable. My home is worth about $350,000, with maybe $20,000 in equity. I have about $35,000 in credit card debt, and a $100,000 unsecured line of credit. I have three children and a non-income earning spouse, and I earn $130,000 per year. I am making minimum payments on credit cards and the LOC (which is interest-only) and I am always hugging the line every month. It’s very stressful, and I’m not getting ahead.  What should I do?

Answer: Yes, a consumer proposal is a possible solution.  However, the first step is to ensure that the consumer proposal will solve your problems.

You make a good salary, but you have a lot of debt, so in the past you have spent more than your income.  It is therefore necessary to analyze your spending to make sure you can cut your expenses to the point where there is some money left over every month.  Start by making a household budget, and work with your spouse to find areas to reduce spending.

Once your budget is under control, then a consumer proposal may be the correct answer.  Contact a consumer proposal administrator for more information.

Question: I filed a consumer proposal late in 2009. I usually use the T1 Special forms for filing my taxes. I understand that you can’t use the T1 forms for filing if you have declared bankruptcy, but can you use them if you have entered into a Consumer Proposal? (I don’t owe Revenue Canada any money).

Also, do you have to declare a consumer proposal on your income tax return?

Thanks.

Answer: When you file a consumer proposal, you file your taxes in the normal manner, just as if you had not filed a consumer proposal.  You can use the normal tax forms; there is no requirement to indicate that you have filed a consumer proposal on your tax forms.

In fact, being able to keep your tax refund is one of the main reasons that people in debt file a consumer proposal instead of personal bankruptcy.