Archive for Category 'Credit Counselling'

Question: Me and wife have joint about $80,000 of combined unsecured loan,a joint $30,000 of secred loan. I have another $60,000 of unsecured loan on my personal name ,the total equity in my house is around $80,000 and I am leasing a car (don’t own it).  My gross yearly income is $90,000 and my wife gross is $36,000. What are my option for bankruptcy,proposal or credit counselling?

Answer: Personal bankruptcy in Canada is probably not the correct answer for you.  If you have $80,000 in equity in your house, you would lose your house if you declared bankruptcy.  In addition, in bankruptcy the more you earn the more you are required to pay, so you would have significant surplus income in a bankruptcy.  With your family income, you would be bankrupt for 21 months, and the payments you would be required to make would be significant.

A consumer proposal is a possible solution.  The amount of payments required in a proposal would be more than you would be expected to pay in a bankruptcy, or else the creditors would not accept the deal.  So, the cost of a consumer proposal would also be significant.

In a credit counselling debt management plan you keep your house, but you are required to repay your debts in full, over a three to five year period.  That may be prohibitively expensive for you as well.

You can compare the different options using our debt options calculator.

A final solution may be to downsize your lifestyle.  You could sell the house and find a place to rent, and use the $80,000 in equity to either file a lump sum proposal, or repay a significant amount of your debt, which leaves you with much more manageable monthly payments.

The correct answer will depend on your income and expenses each month.  A credit counsellor or trustee can calculate the cost of the different options for you in more detail.

Question: I can’t find anyone who can offer me a unsecured debt consolidation loan. Banks have said NO …. Wells Fargo said NO … Citifinancial said NO. Where do I go now ?

Answer: With the credit crisis it has become increasingly difficult to qualify for a debt consolidation loan.  If everyone is saying no, you have the following choices:

First, you could simply not get a consolidation loan.  Cut your expenses and pay down your debt on your own.  In today’s world that is often the best solution.

Second, you could pay your debts on your own, and then try again in six months.  It may be that six months from now your debts are a bit lower, and your credit score may be a bit higher because you have lived at the same place, and been at the same job, for six more months, so you may qualify.

Third, instead of a debt consolidation loan you could try a debt management plan, which is like a debt consolidation loan, but there is no interest.  A not for profit credit counsellor can negotiate a repayment plan where you pay the debts in full, but at a reduced interest rate.

If you can’t afford to repay your debts in full, the next option is a consumer proposal, where a licensed proposal administrator works out a plan where you repay a portion of your debts.

If all else fails, the final option is personal bankruptcy.

The point here is that just because the bank says no, you don’t have to give up.  There are other options.  To find out more, check out our free Debt Options Calculator to see the cost of the different options.

Question: Does credit counselling affect your credit rating? If so how? I still have a decent rating but does it have to drop before I qualify? I’m looking for solutions before it gets to that but I can’t do it by myself.

Answer: Yes, a debt management plan (credit counselling) does affect your credit rating.   According to Equifax, Canada’s largest credit reporting agency, credit counselling remains on your credit report for three years after all payments are finished.

Your credit rating does not have to drop before you qualify.  You can apply for credit counselling at any time.  We suggest you read our article on how to deal with your money problems for full information.

Question: I own a house that is worth 144k but owe 130 on it. I have gone in debt 91k on credit cards and my personnel line of credit. I have never missed a min payment but have used my overdraft on my checking account. I have a full time job that earns 88 thousand per year but know I am in serious trouble. Currently I pay over 1400 in fees and interest and am only heading backwards with nothing on the principle. I have gone to the bank for a debt consolidation loan but have been declined as a result of my overdraft. I know I need help but am unsure of my alternatives.

Answer: Great question.  With the decline in the real estate market, and with the recession, many people find themselves with houses with minimal equity, and with a lot of debt.  You have a few choices for dealing with your debt:

1. Attempt to pay it off on your own.  That means you will need to prepare a detailed budget,  and determine what you can afford to pay.
2. Decide whether or not it makes sense to keep your house.  If you can’t afford the payments, it may be prudent to sell the house and lower your living costs by renting.
3. Consider a debt consolidation loan to reduce your monthly interest costs.
4. If you can’t afford a debt consolidation loan, consider credit counselling.
5. If that’s not affordable, consider a proposal.
6. If none of those options work, the final option is personal bankruptcy.

To evaluate these options, use our debt options calculator, and then contact an expert for more information.

Question: I do not want to claim bankruptcy. I have about $25,000 debt, credit cards, loans etc. still good credit. been doing all my min payments. Don’t have a job. min payments are about all I can do. Am not getting anywhere with my debt. Will remain in debt forever if i don’t get help. Can anything be done?

Answer:  You have a few options.

First, you could continue doing exactly what you are doing until you find a job.  You make your minimum payments to keep your rating positive, and then when you are back to work you can work on paying down your debt.

Second, you could file a debt management plan with  a not for profit credit counsellor who will work out a repayment plan where you repay your debts in full, but at a low or zero rate of interest.

Third, you could file a consumer proposal where you repay a portion of your debts.

Both a debt management plan and a consumer proposal require you to have enough money each month to make payments on your debts.  If you are not working that may not be possible, so you will need to review your budget to see exactly how much you can afford each month.

Finally, as a last resort bankruptcy is an option.  If you are not working you have no wages, so your wages cannot be garnisheed, so bankruptcy is not necessary to prevent a wage garnishment.  However, you may decide that it is better to deal with your debts now, so that when you return to work you do not have the stress of the debts.

We suggest you consult a licensed bankruptcy trustee to review your options in detail, and help you decide which option is best for your.

Question: I am desperate for help and don’t know where to turn..who to go to. Suddenly on my own. 59-year-old women, own my mobile home outright. Made the mistake of paying cash. Bank gave me a line of credit when I purchased it..but my interest on that was higher than what my $95,000. was earning…so I just paid it off in full. That left me with no savings and just my jobs income to pay bills and up keep etc. I am now $1000. in overdraft, owe $2000. on my Visa.( only card I have, my phone, heat and hydro bill is all coming up and I haven’t been able to pay for two months. Just sending all of them a little bit so they know I’m trying…I’m sinking. Can’t get caught let alone keep up. Now that I don’t have $95,000 plus sitting in account, bank no longer interested in me…not give me a loan to get caught up. I cut back so much on everything..no frills or extra in my life at all. Monitor car usage for fear of not enough money until next pay to put gas in it. Have $16.00 to do me for 6 days so dare not b is all coming up and I haven’t been able to pay for two months.  Want to sell and just get an apartment and have my money for comfort and security. Home owning just is too much stress. But in the meantime what do I do…who do I go to… Should I go to one of those places that loan money to high risk people…? I only work part time…and am going to start cleaning homes to make extra money . I am so embarrassed and humiliated to be in this mess. I can ‘t see a light at the end of the tunnel…each day is just another fear. Afraid to go to the mailbox or answer the phone. Emotionally and physically, this is affecting my health the stress, my stomach in knots. What can I do?

Answer:  We suggest you get professional help immediately.  You should start by talking to a not for profit credit counsellor, who can explain your options in more detail. Credit counselling may be an option.

As for selling your house, yes, that may be an excellent idea.  If you cannot afford the utilities and other monthly expenses, selling and renting is probably the correct answer.  You can then use the money to pay off your debts, and live a much less stressful life, which in this day and age is a good idea.

If you can clean homes or get another job to earn extra income it may be possible to keep your home, but again, a credit counsellor can help you review your budget and decide on the best option for you.

Question: I graduate this coming April…which is great…but also brings on reality where I must begin my debt repayment.

I was as worried before, but with the current state of our economy, I am really beginning to get worried!

My debt is approximately as follows:

Student loan: $20,000
Line of Credit: $15,000
Vehicle: $20,000

Being in the position, currently, not knowing what pay rate I will be getting when I get a job upon graduation….

Is there anything I could do now to start planning how I can pay off my debt as quick as I can?

Answer:  You ask and excellent question, and it is good to see that you are being pro-active in dealing with your situation.  Ultimately, until you know what pay rate you will earn at your new job, it is difficult to accurately plan your future.  However, there are some steps you can take.

First, you should make a household budget so that you can see exactly where you spend money each month.   By starting the budgeting process now, you will have a head start once you are working. You should also read our budgeting tips article for more information.

Next, you should understand all of your options, including a debt management plan, consumer proposal and bankruptcy.  If you get a good job none of those strategies may be necessary, but you should understand them now in the event that they do become necessary in the future.

Finally, based on this research, you may want to have a meeting with a credit counsellor or bankruptcy trustee to review your options in detail, so that once you are working you already understand your options.

Question: how does credit counselling affect your credit bureau vs 4-5 months late payment or a consumer proposal?

Answer: According to Equifax, a consumer proposal and a credit counselling debt management plan are both reported exactly the same: they appear on your credit report for three years after the proposal or debt management plan is completed, and you are coded as an R7.  You can read more on the Equifax website.  If you are late 5 months with a payment, you will probably be coded as an R6, so that is almost identical to a consumer proposal and a debt management plan.

Question: Hi I am 25 years old and work full time and make 2100.00/month. All my bills add up to $1963.00/month so that does not leave a lot of extra money. I have 7 more months until a big loan will be paid off leaving me with almost 600.00 a month to plow away at my debt.

Over the xmas time I tapped into my overdraft which was 700.00 to pay for everyone’s xmas gifts and had an additional unexpected 700.00 expense. I used a payday loan for the unexpected expense so now I am in the rear’s 1400.00. The way I was living before I know is not ideal but I had a plan worked out. I am managing the min payments and have never been late on anything. I know I wont qualify for a 1400.00 personal loan as I owe so much and that is affecting my credit score. My utilization seems to weigh more heavily then my perfect payment history.

Do I have any options? I don’t know if credit counselling is an option for me as none of my accounts are past due but I am 100% maxed out and feel way over my head now. Before I knew I was overextended but I was handling it. Are there any places that even give out personal high risk loans for less then $2000.00?

Answer:  There are three places to get a $2,000 loan:

1. family or friends; this may be your best alternative;

2. a bank; normally you would need to take a cash advance on a credit card at high interest rates, so this is not a great option; banks generally won’t do a loan for only $2,000;

3. a payday loan company or a finance company; the interest rates are huge, and so this option is not recommended; you will be worse off in the long run.

You could try credit counselling; your other option would be to simply make payments from each paycheque to pay off your debts until they are paid in full.

Question: I have a card that is holding a balance of $7000 and the limit is $6500. The huge mistake that I made was taking out quite a few cash advances while first daughter was being born and the expenses in her first year.

What I did not realize was the extra interest on cash advances.

Steps taken were scissors to the card.

Now we just cant seem to get the balance back to its normal payment. Made a $500 payment (minimum was $190) and the next statement showed a $2 increase in the balance after interest added.

We can only afford $300 payments which will help if we can get back to the $190 minimum.

Our mortgage is up for renewal and we considered trying to consolidate this CC into our mortgage but not sure if that helps.

Any advice?

Answer: You have a few options.  The first option would be to call the credit card company and ask if they can reduce the interest rate, or convert the card into a loan with a reasonable interest rate and payments of $300 per month.  They probably won’t want to trade a high interest credit card for a lower interest loan, but it’s worth a try.

Next, you could do as you suggest and increase your mortgage when you renew by the amount necessary to repay the credit card.  If there is sufficient equity in your mortgage and you can afford the mortgage payments, this option makes sense.

If that isn’t possible, you could try a debt management plan through a credit counsellor. If all else fails, a consumer proposal or a bankruptcy may be necessary to deal with your debts, but because you own a house those options should not be considered until you have discussed your situation with a licensed trustee.