Don’t worry, there is another option: don’t budget.  That’s right, don’t budget.

It is possible to manage your money without making a detailed budget.  You can find out more in our article on how to NOT make a budget, but here’s the quick summary: pay your bills as often as you get paid.

If you get paid weekly, divide up your monthly bills into quarters, and pay that amount, automatically, with internet banking, from your bank account on payday.  If your home heating bill is $200 per month, and you get paid weekly, pay $50 per week, every payday.  You never get behind, and your bills are always paid.

Savings work the same way.  Set aside a set amount each payday for savings, and automatically transfer it to your savings account every payday.

There are lots of articles that explain this concept, including Why Budgeting is a Bad Idea, and Budgeting, Another New Year’s Resolution Broken, Did you Resolve to Make a Budget,

Or, for a quick summary, here are two videos:

The Secret to Budgeting #1

The Secret to Budgeting #2

Answer: A recent report stated that:

the chances of you becoming “debt free” from using one of these American style debt settlement programs is less than 10%, and 65% leave the program having paid for a service they never received.

Many large credit card companies don’t deal with these debt settlement companies.

So, before you part with your hard earned money, be sure to investigate them thoroughly, to ensure that you are dealing with a company that can actually solve your debt problems.  Some of them might be able to, some of them can’t, so do your research first.

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.

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.

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.

Anyways, the collection agency said they are sending a letter in the mail, and that if it isn’t him (mistaken identity) he has to get a signed affidavit claiming that the debt is not his and send it back to them all within 20 days. Does he really need to take a day off of work and pay someone for a signed affidavit? His credit report is clear, but they said they can “add it back on, reopening the debt” – is this true?

The collection agency also said that if they do not have a response within 20 days, than they will be calling us 3 times a week until the debt is paid. What can we do here? It wasn’t him, so what are our rights? please help!

Answer: Sadly, these are not uncommon collection agency tactics.  Collection agencies have been known to call about a debt that isn’t real, or that isn’t your debt.  It’s easy for them to make a phone call; it’s much more difficult for them to actually create phony paperwork to send you, so it’s quite possible that you will not hear from them again.

Also, various locations have Statutes of Limitations.  For example, in Ontario a creditor is required to commence legal action within two years, so it’s highly unlikely they will take him to court for a 16 year old debt.

If they do contact you again, you could discuss it with a lawyer experienced in collection matters.

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.

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

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.

Can the collection agency still come to me after this many years?

Can they put a judgement against me after all this time, and will this affect my current credit score?

If this turns out to be an old unpaid debt, can I settle for a lesser amount?

Thank you

Answer: You have a number of options.  First, you can do nothing.  It is highly unlikely that a collection agency will take you to court for a 12 year old debt.  In fact, it is possible that the Statute of Limitations has expired on the debt, although you would need to consult a lawyer for more information.  (Here’s a book that may help: The Wolf at the Door: What to Do When Collection Agencies Come Calling).

You can also negotiate a settlement with them, if you so choose.  However, to start, you should request proof that you owe the money.  Given the age of the debt, they may not have the original paperwork, and in fact you may not even owe the money, so getting proof of the debt is your first step.