Archive for Category 'Credit Counselling', page 3

Questions: 1.How does debt settlement effect my credit?

2.Can this process be done by any company or do they have to be non profit companys.

3. If this were an option for me, who would regulate how these companys get paid and how much I would pay to have to this service completed for me?

Answer: Debt settlement, or a debt management plan, has the same impact on your credit report as does a consumer proposal; you will be rated an R7, and that rating stays for three years after you have completed all payments.

There are no regulations covering debt management plans or debt settlement.  Anyone can do them.  However, in all provinces in Canada the not-for-profit agencies that do debt management plans are members of their provincial association of credit counsellors, and they accredit them and monitor their activities.

If you are planning to do a debt management plan, contact an accredited credit counsellor, and confirm they are a member of their provincial association of credit counsellors.

Question: Me and My wife had a house together. We are now divorced. She left the house but would refuse to sign to sell the house. I had many good offers but was not able to sell it because her name was on the properties. By the time I received judgement to sell the house, it was too late and went to foreclosure.
I receive a letter in the mail from CMHC that I owe $11000. Its basically a judgment against me. I am not sure if my ex-wife received this letter or not. I am trying to figure out what is my best option to resolve this. Am i solely responsible for this? What can I do at this point. Do I take her back to the court?

Answer: It appears that CMHC is pursuing you for $11,000.  If the mortgage was joint with your ex-wife, than they will also be pursuing her for the $11,000.

As for your options:  First, you could contact CMHC and attempt to negotiate payment arrangements.  You could offer to start making monthly payments.

Second, if you have good credit, you could get a loan and then use the money to repay CMHC.

If you have other debts, a consumer proposal or a bankruptcy may also be options.  Without knowing your full situation it is impossible to be more specific.

We recommend that you meet with either a credit counsellor or a bankruptcy trustee for a free initial consultation to review your options in more detail.

Question: When i became ill and could no longer return to work I went on CPP disability. I called each of my creditors and explained the situation. All (4 in total) but one decided to settle for a lump sum for 40% of the balance owing. It has been 9 months now and it is now in the hands of a collection agency. They are demanding the full amount plus the interest it has accumulated. They are threatening to take legal action, place a lien on my house and have the sheriff sell it. They said the papers were going to be sent out this week. I have a first and second mortgage and a few hundred in back taxes owing. After that is paid there still isn’t enough to pay the total amount to the creditor. I even offered 50% and it was refused. I will have to borrow that from a parent. What should I do, take my chances in court?  Will the judge do what they are threatening and sell the home of a disabled person and leave me homeless. Can I still deal with the original credit card company or is it too late? Someone told me to talk to the Ombudsman of the company. What is an Ombudsman? I don’t know what to do.

Answer: You should immediately contact a credit counsellor or a trustee in bankruptcy to review your situation.  There are a number of different options.

First, if your house has no equity (meaning that the value of the house is about the same as the amount owing for mortgages and property taxes) then there is no point in the court ordering your house to be sold, because all of the money would go to the mortgage holders, and the creditor would get nothing.  Therefore, it is unlikely that the court would do that.

Typically if you owe money a creditor can sue you can get a judgement, and the judgement is enforced by either putting a lien on your house (unlikely as discussed above) or garnisheeing your wages (very common, but impossible in your case because you don’t have wages, you get a pension).  It is therefore possible that, other than yelling at you over the phone, there is little that the creditor can do.

Again, I think your best option is to contact a credit counsellor or a trustee in bankruptcy to review your situation.

Question: Can you still get a mortgage eventhough your credit is in r9 or r7? right now i am renting a condo for $1100 a month & pay all utilities. worked fulltime & earn 19 per hour. spouse is earning wsib benefit but eventually will be looking for a job.

Answer: Yes, it is possible to get a mortgage with poor credit.  However, if you are an R7 or an R9 the mortgage will be very expensive, and so may not be a good idea.

In most cases it is best to work on repairing your credit and saving money before you apply for a mortgage.  That may mean talking to a credit counsellor about a debt management plan to pay off your debts, or perhaps even filing a consumer proposal or personal bankruptcy in Canada to discharge your debts and give you a fresh start.

Question: A collection agency  purchased my debt from the bank. This debt is from 1999. I had a Line of Credit and 2 credit cards with them. I fell into bad times and when I tried to get it consolidated to a straight loan with the bank they said no and immediately started to remove my paycheque from my account as soon as my work deposited it. They did this twice until I had my work issue my pay as a cheque. Suffice it to say at the time I did not have a support network. No family or close friends that could help. I therefore just disappeared off the map so to speak. I slowly paid off my smaller debts. In addition at that time if your credit rating was bad a Bank could decline opening a bank account. I spent from 1999 until about 2006 without a bank account. Anyway, my question is what normally does a collection agency pay on the dollar to the bank to buy my debt. I have been told they pay 10 cents on the dollar. If that is the case what are my options when negotiating with this agency?

Thanks,

Hector

Answer: It would be highly unusual for a collection agency to purchase your debt from the bank.   Collection agencies collect debts on behalf of banks, but they don’t use their own money to purchase the debt.  If they manage to collect something, they get a percentage of the amount collected.

You have a number of options for dealing with the collection agency.

First, you can attempt to negotiate payment arrangements.  Since the debt dates back to 1999, the collection agency may be willing to accept payments over a period of time.

Second, you could offer a lump sum settlement.  If you owe $5,000, you could offer to give the collection agency $2,500 in full satisfaction of the debt.  They will often accept this type of settlement.  However, to be able to do this you would need to have $2,500 in cash, which may be difficult to borrow if your credit rating is poor.

Finally, if you cannot reach a settlement with the collection agency yourself, you could get help from other professionals.  A Debt Management Plan filed by a non-profit credit counsellor could be used, or you could file a consumer proposal or personal bankruptcy to deal with your debt. 

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.

Question:  I have found myself in a position with payday loans,etc after filing bankruptcy 9 years ago. I am interested in cleaning up my entire credit bureau and wiping a clean slate. Due to unforseen circumstances a few years ago I found myself borrowing from one payday company to pay another and since got myself into a bid. I am interested in the best way to fix and pay what I can so that this does not destroy my marriage once and for all.

Answer: There are a number of possible ways to deal with your money problems.

The first option will be to cut your expenses and place yourself on a strict budget, and then use the savings to repay the payday loans.  If the amounts are relatively small, this is a good option.

If you need help with this process, you could contact a non-profit credit counsellor for assistance.

If your credit is reasonably good, another option would be to go to the bank and get a debt consolidation loan.  Since your bankruptcy was nine years ago, it may be possible to qualify for a debt consolidation loan.

Question: My husband and I owe $96,500.00 in unsecured debt, and an additional $40,000.00 in secured debt. We do not own our own home, we rent.
We have never missed a payment nor have we ever been late on a payment. But we work to pay our debts. There is no money left over. Only the minimum is paid on our bills each month so we aren’t getting anywhere.
What would you recommend?

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.

Question: I’m about $30,000 in debt with an R9 credit rating. I was OK until last year, but things have gone downhill recently. Some debt is an Ontario and Canada student loan from 10 years ago. Some debt is from Ontario, some from Quebec. I want to take control of this and get back on track as soon as possible. I’ve heard that if I get debt counseling and go on a DMP (Debt Management Program), my credit can be reestablished two years after it’s all paid off – meaning a clean credit record – as if nothing had ever happened.

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.

Question: I am a 78 year old man who owes around $7000 to one of the hospital in Ontario because of OHIP problem, I was out of the country for several years I had a heart attack just a week before I obtain my OHIP. Nevertheless, I could not pay the money owed because my only source of income is from ODSP. Recently I received a letter from the collection agency and it says if I don’t pay the full amount I will run the risk of local Bailiff/Sheriff serving me a Summons and Complaint to appear in court.

First of all can they do that?
What are my rights in that regard?

I appreciate if you can offer me some help.

Answer: Any creditor can take you to court and sue you in an effort to collect the money that you owe.  It appears that you owe the money, so if they do take you to court the judge will presumably grant them a judgement against you.

However, since your only source of income is ODSP, it is unlikely that they will be able to enforce the judgement by garnisheeing your wages, since you don’t have any.

Your options would be to explain the situation to the creditor, or perhaps talk to a credit counsellor to ask them to intervene on your behalf.