Archive for Category 'Budgeting'

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 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: is bankrupcy right for everyone ?

Answer:  No.

If you have more debt than you can handle, bankruptcy may be an option, but it is the last option you should consider.  There are many bankruptcy alternatives, and you should consider all of them before deciding to file bankruptcy.

Start by making a personal budget to see if you can cut expenses and use the extra cash to repay your debts.   On this site we offer a free trial of budgeting software to make the job very easy.

Your next option is to consider a debt consolidation loan, where you borrow at a lower interest rate to repay your high interest rate debts (like credit cards and payday loans).

If you don’t qualify for a debt consolidation loan, a credit counsellor may be able to help you file a debt management plan where you get extended time, and lower interest, to repay your debts.

If that’s too expensive, a consumer proposal is a way for many Canadians to make a legal settlement on their debts for less than the full amount owing.  (In the United States, you can consider a Chapter 13 Wage Earner Plan).

Only after you have tried all of these options should you consider personal bankruptcy.

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 just lost his job. he did get another one but he makes half of what he did before. we were already a little strapped as his company he was with for twenty years closed 2yrs ago two years after we bought our home.
we have been managing for the last two years but now he is making even less
we have a 165000 morgage and maxed credit cards and line of credit plus one student line of credit that we have co-signed, also another son going off to school in the fall
we have some rrsp, to top it all off my employment ends next month with my present employer, and I’m not skilled and the work I usually do does not pay well
any suggestions on where to start, as I would love to keep my house and it has not gone up in value we have 17yrs left on the mortgage.

Answer: We recommend that you meet with a credit counsellor or bankruptcy trustee to review your options.  The solution will depend on the value of your house, and what you expect to earn in the future.

If you expect your family income to fall, your best option may be to sell the house now, since it is better to sell and get something than to wait until you are behind on your mortgage payments so that the bank forecloses.

Before calling an expert, try to make a budget so that you know how much it costs you to live each month; this will help you decide on the correct option for you.

Question: I am in debt up to my ears…well that is how it feels anyway. I am currently paying minimum payments on a maxed out credit card of 1000 dollars, a car payment of $250, and a student loan for $95/month…not to mention insurance and monthly bills. We have 3 kids and I only work a part time job, reason being that if I worked full time all of my income would go strait to daycare.

I have about $3000 worth of debt sitting with collectors and never realized the consiqueses of it until just recenly when we were given a notice to vacate our home due to major renovations. I have been frantically searching for a home but have been turned down a few times due to credit. I am afraid we might end up homeless.

Is there a way to have my debts negotiated and just use my part time income to pay off my dormant debts and have my husbands income used to pay the car, insurance and all other household expenses or when I get assesed will my husband income be included.

In other words: Can I just use my personal income to pay off the debts that I have just sitting and leave my up to date debts out of it? (My husbands income is his and mine is mine kind of thing)

Answer: Yes, there are two possible approaches.  The first option is to do exactly what you suggest; you take all of your money and use it to repay your debts.  Start by making a budget so you know where your money will be going.

Your other option would be to get the help of a credit counsellor to help you negotiate or make a plan to deal with each of your debts.  Either way, the sooner you start, the sooner you will be able to work out a plan to deal with your debts.

Question: What are the credit score consequences of a debt management plan or consumer proposal?

I currently work, and net 1600 bi-weekly…

I have 4700,2500 and 1500 in credit card debt and 18000 in a LoC debt.

My bi-weekly mortgage payment is 633 (including property taxes), and have a car lease for 360 month, student loans of 305 a month and car and home insurance at 200 a month.

Prior to this I was also paying back the CRA 67 a month on 700 outstanding balance but I was just reassessed and owe 3200 after tax and penalities which had put me over the edge.

I was getting by by dipping into my line of credit but that has been bloked after a missed payment (I only paid 400 of the 600 minimum) and have been catching up since. Ive made all other payments on time plus my house is worth about $210K and I owe about 175000 on my mortgage…

I was thinking about renegotiating my mortgage and eliminating the debt. Would this be the best solution? Would the missed payment on the LoC hurt my chances of a getting a new mortgage?

Answer: Both a debt management plan and a consumer proposal appear as an R7 on your credit report (R1 being the best; a bankruptcy is an R9).  If you own a house, and want to keep your house, re-financing is probably the best option.  A missed payment should not be a big problem in qualifying for a mortgage, since you have equity in the house.

We suggest you take two steps.

First, make a budget so you know exactly what you can afford to pay each month.

Second, contact your mortgage lender, or contact a mortgage broker to determine how much extra you will be paying if you refinance.  If it’s affordable, refinance.

If refinancing is too expensive, it may be necessary to bankruptcy trustee about filing a consumer proposal.

Question: i am 22 years old. I have a really hard time budgeting my money. Even when i break it all down… i just don’t understand why i never have money. I make $2000.00 a month and i sometimes can’t even come up with money to pay my rent. which doesn’t even make a dent in that. I have a very hard time keeping my checking account balanced. I am always overdrawing and getting slammed with overdraft charges. I am in credit card debt… yet, could easily make small payments every month if i could get back on my feet… but i just can’t seem too. I hardly ever by things for myself. I don’t know where all my money goes.

Answer: Not knowing where your money goes each month is a very common problem.  You need to start by keeping track of every penny you spend for the next month.  Write everything down, so that you can see where your money goes.  It’s also a good idea to make a budget to keep track of your money. More information can be found by listening to our budgeting radio show. Contacting a credit counsellor for assistance is also a good place to start.

The most important thing to remember is this: start now.  Start recording everything you spend NOW.  Don’t wait.  The sooner you start, the sooner you will know where your money is going, and the easier it will be to make a plan to get back on track.

Question: I am 21 years old, I am $16,000 in debt, I am working full time, and I am about to take on a second job. Right now I am having a hard time talking to creditors when they do call me, I am working very hard to pay off my debt one of my debt is almost paid off I have $280.00 to go. I thought I would never get that far.

My problem is with the bigger debt sometimes I get behind sometimes in a paycheck there is not enough money to go around to everyone. I am trying to make it easier on myself before I start back school, but it feels like I am getting no where.

I have no idea how to budget and it feels like there is no help out there.

Answer: I have two suggestions.  First, it is important to make a budget so that you can decide where to spend your money.  (You can even listen to our budgeting radio show for more tips on budgeting).

In your case budgeting may only be part of the problem.  Even if you know where all of your money goes, you may still have more debt than you can handle, and you may need a more formal solution, such as debt consolidation loan, a consumer proposal if you live in Canada, a Chapter 13 Bankruptcy if you live in the United States, or perhaps even personal bankruptcy. For more information, contact a bankruptcy trustee or a credit counsellor to review your situation and help you work through all of the possible solutions to your debt problems.