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.

Answer: Yes, a consumer proposal is a viable option for you.  The key will be to determine what you can afford to pay each month, and that will be the basis of your proposal.

Your creditors will know that if they don’t accept your proposal and you file bankruptcy, they will be entitled to the equity in your home (say $20,000), and a portion of your surplus income, so your proposal will need to be for more than they would receive in a bankruptcy.

We suggest you make a detailed budget to determine what you can afford to pay each month, and then contact a consumer proposal administrator to help you determine what monthly payment is likely to be accepted by the creditors.

We have an excellent credit score and have had no problem obtaining credit, including the above described furniture financing, however recently our situation has changed. Reviewing the situation our debt has been increasing steadily and just lately we have been relying on overdrafts and credit cards to meet our obligations. This month everything is late except for the mortgage and car payment, and the situation is not getting better, so a consumer proposal may be our option – but how are recent loans viewed?

Answer: Recent loans are not viewed favorably by the creditors.  Obviously if you used your credit card to buy a $5,000 big screen TV on Monday, and then filed a consumer proposal on Tuesday, the credit card company would be very upset.  They would assume you had committed fraud: you knew you were in financial trouble, and you used your credit card anyway, knowing you would never be able to repay it.

The longer the time that passes between the purchase and the filing of the consumer proposal, the less likely the creditor will object.

All purchases within the three months prior to the filing are automatically reviewed by the creditor, since they are required to provide that list to the trustee.  However, even transactions over a longer period can be reviewed.

The real issue is whether or not you were insolvent (unable to pay your bills) when you made the purchase.  If four months ago you were still working, and paying all of your bills on time, and you bought some furniture, it may not be an issue.  If you were unemployed at the time, it may be an issue.

The amount of money involved will also impact your case.  A $50 purchase probably won’t be an issue; a $5,000 purchase, if your total debts are $10,000, could be a serious issue.

Each case is different, so we suggest you contact a consumer proposal administrator to review your situation and advise you on the likely outcome of your filing a consumer proposal.

Answer: When the house is sold, the property taxes will automatically get paid first, even before the mortgage.  The city will not let you transfer ownership until the taxes have been paid, so yes, your lawyer will arrange with the city for the property taxes to be paid on closing.

Answer: Yes, a consumer proposal is a possible solution.  However, the first step is to ensure that the consumer proposal will solve your problems.

You make a good salary, but you have a lot of debt, so in the past you have spent more than your income.  It is therefore necessary to analyze your spending to make sure you can cut your expenses to the point where there is some money left over every month.  Start by making a household budget, and work with your spouse to find areas to reduce spending.

Once your budget is under control, then a consumer proposal may be the correct answer.  Contact a consumer proposal administrator for more information.

Also, do you have to declare a consumer proposal on your income tax return?

Thanks.

Answer: When you file a consumer proposal, you file your taxes in the normal manner, just as if you had not filed a consumer proposal.  You can use the normal tax forms; there is no requirement to indicate that you have filed a consumer proposal on your tax forms.

In fact, being able to keep your tax refund is one of the main reasons that people in debt file a consumer proposal instead of personal bankruptcy.

Answer: Yes.  In fact, most people who file a consumer proposal are behind on their payments.  Even if you are so far behind on your payments that the credit card companies have taken you to court and have started to garnishee your wages, you can still file a consumer proposal.

Contact a consumer proposal administrator, licensed by the federal government, for more information.