Answer: First, in most provinces credit counselling agencies are private not-for-profit agencies; they are not run by the government.   Their job is to work out a settlement plan with your creditors, often in the form of a debt management plan.  To do this they will communicate with your creditors, although legal they are not required to disclose anything you don’t want them to disclose.  In your case the settlement plan may involve you paying $200 per month for 50 months, which would pay off the debts in full, and would still allow you to use your savings to move.

Another possible option would be to file a consumer proposal, where you offer to use some of your savings towards a lump sum settlement, with additional payments over time.  For example, you could offer to pay $2,000 upon acceptance of the proposal, and then $200 per month for two more years.  In that example the credit card companies don’t get all of their money, but it may be enough for them to be satisfied.   However, all assets must be disclosed in this process, so the advice of a trustee is necessary before proceeding.l

Answer:  Seek help.

Everyone gets embarrassed by financial problems, but ignoring the problem won’t solve the problem.  Talk to a credit counsellor or a bankruptcy trustee.  They will offer you a free initial consultation, and they can explain all of your options.

One option to consider would be to sell the house, and use the money to live until you are back to work.  Obviously finding a job soon would also help.  A consumer proposal or a personal bankruptcy may also be options, but a consultation is necessary to explore all of the options and then decide which option is best for you and your family.

Answer: You have five choices.

1. Keep working hard, cut your expenses, and use whatever money have to pay off your debts, starting with the highest interest rate debts.  If you can only afford minimum payments, this startegy won’t work.

2. Get a consolidation loan from a bank.  If you have good credit, you may be able to consolidate your unsecured debts at a lower rate of interest, so that more of your payments go towards principal, and you repay your debts faster.  However, it is unlikely a bank will lend you $96,5000 with no collateral.

3. Do a Debt Management Plan through a non-profit credit counsellor.  To repay $96,500 over a 5 year period would cost over $1,600 per month, so credit counselling only works if you can afford it.

4. File a consumer proposal through a licensed trustee in your area.  In most consumer proposals you are able to repay less than the full amount owing, so in your case it may be possible to pay, say, $500 per month for three to five years to eliminate your debt.  Certain rules apply, but if your debts are joint with your husband, this may be a good option.

5. The final option is personal bankruptcy.  Bankruptcy eliminates your debt, but the payment you are required to make each month is based on your income.  The higher your income, the more you pay, so this may or may not be the correct option.  For more information, contact a licensed trustee in your area. 

There are options, so we strongly suggest that you investigate your options, and decide on the solution that’s right for you.

That sounds very appealing to me as I’d like to get a mortgage and a credit card as soon as possible after the debt is taken care of. Although I could pay less using a consumer proposal, or potentially nothing if I file personal bankruptcy, rumour has it that those NEVER leave you. They’ll certainly remain on my credit rating for 6 or 7 years and possibly always be lurking in the background forever. Is this true? What would be the best solution?

Currently I am about to be laid off, but hope to get another job very soon. I rent my living quarters, have no assets (other than furniture – some nice and new, some not) and an older vehicle that’s not worth more than $1000. I am, however, 1 year into a 4 year lease on a new car that I can’t get out of easily. Despite the financial burden (I was much better off financially a year ago when I got it), I’d like to keep the car since it’s reliable transportation and I can also keep making the monthly payments to help my credit rating improve. Is that also a wise idea?

Answer: First, let’s start by dispelling some myths.  You said that you have heard that with a debt management plan “my credit can be reestablished two years after it’s all paid off – meaning a clean credit record – as if nothing had ever happened.”  This is not true.  To quote Equifax, the largest credit reporting agency in Canada, this is how long information remains on your credit file:

VOLUNTARY DEPOSIT – ORDERLY PAYMENT OF DEBTS, CREDIT COUNSELING: When voluntary deposit – OPD – credit counseling is paid, it will automatically purge from the system three (3) years from the date paid.

REGISTERED CONSUMER PROPOSAL: When a registered consumer proposal is paid, it will automatically purge three (3) years from the date paid.

In other words, a debt management plan through a credit counsellor remains on your credit report for exactly the same amount of time after it is paid in full as a consumer proposal.  There may be advantages to choosing credit counselling over a consumer proposal, but time to repair your credit, or the impact on your credit report, is not one of them.

As you correctly point out, in most consumer proposals you pay less than the full amount owing, and in a debt management plan you generally pay the full amount owing, so in fact in most cases a consumer proposal can be paid off faster, and therefore is a quicker way to repair your credit.

As for the car, if the lender will allow you to keep making the payments, and you can afford it, then yes, keeping the car will keep something positive on your credit report, which may help you in the future.

Answer: You have a number of options.  For a loan, you can try your bank; if they have already said no, it will be difficult to qualify at another bank. You could try a finance company, but they generally charge very high rates of interest (up to 30%), so you are better off paying your credit cards at 18% than paying 30% on a finance company loan.

If you don’t qualify for a debt consolidation loan, and you need a fresh start, you should also consider a debt management plan, a consumer proposal or personal bankruptcy (just follow the links for more information).

Debt problems don’t usually get better on their own, so the sooner you take action, the sooner you will be living debt free!

Please advise

Answer: Yes, it is possible to work out settlements with your creditors.  You can contact them and ask them what they are willing to accept as a settlement.  If they will not accept payments, or if you do not have sufficient funds to make settlements with them, you may need to consider filing a debt management plan, a consumer proposal or personal bankruptcy.

Answer: If you have more debt than you can handle, you have a few choices.  We suggest you seek professional advice, either by contacting a credit counsellor or a bankruptcy trustee.  For debts to Revenue Canada, you will either need to make a repayment plan directly with them, or try a consumer proposal or personal bankruptcy. 

As for getting the money to move to a new city, if you have poor credit you will probably not qualify at a bank, and therefore will probably need to rely on family or friends for help, or see if your new employer can provide you with assistance to get you started.

Answer: In virtually all cases it is impossible for a creditor, such as a credit card company, to take your pension, particularly if it’s a government question.  For more information on your specific case, we suggest you contact a credit counsellor or bankruptcy trustee.

Answer: The answer depends on the amount you owe, and how much you can afford to pay each month.  Under a debt management plan, offered by credit counsellors, you are generally required to repay all of your debt in full, over a three to five year period.  Often the creditors will agree to a reduced or zero rate of interest.

Under a consumer proposal you will not necessarily repay all of your debts in full; the creditors will request more than they would receive in a bankruptcy, which is often less than the full amount owed.

Therefore if you can afford to repay all of your debts in full over a three to five year period, a debt management plan may be the correct answer.  If you cannot afford that, a consumer proposal may be a better option.

In either case, a note will appear on your credit report for three years after all of your payments are made, so from a credit report point of view both options are identical.

We suggest you contact a credit counsellor or a proposal administrator to review your options in more detail.

If you have made a household budget to understand where your money goes each month, and if you don’t qualify for a debt consolidation loan, and if you have explored credit counselling and a debt management planand if you have looked into a consumer proposal for Canadians, or for Americans a Chapter 13 Bankruptcy , and none of those options will work, personal bankruptcy may be the correct option for you.

The key is to evaluate all other options, and then meet with a licensed bankruptcy trustee to review your options in deal. A free initial consultation will help you make an informed decision about whether or not bankruptcy is the correct option for you.