by admin | Bankruptcy, Consumer Proposal, Uncategorized
Many graduates find themselves with tens of thousands (sometimes hundreds of thousands) of dollars of debt to go with their new educations. It can make graduation a time of anxiety instead of joy — What if I can’t find a job in my field? I won’t be able to afford a car or a home. How will I ever pay it all back?
If you’re struggling with government-secured student loan debts, the only options available to you within seven years of graduating are to contact the lender and try to negotiate a lower payment or to enlist the help of a licensed administrator to prepare a consumer proposal on your behalf, which is also a negotiation between you and your lender, but one you don’t have to undertake alone. (It has the added benefit of taking into account any other unsecured debt as well.) Any time you’re struggling with debt, it’s a good idea to meet with a credit counsellor to discuss your options.
If you’ve been out of school for more than seven years, though, bankruptcy may be an option. Any less, and your government-backed loan won’t be automatically discharged in a bankruptcy situation like your other debts.
(Remember that it’s always a possibility that any creditor may oppose your bankruptcy or your discharge, and that includes the government.)
Of course, if you have other debts increasing the pressure, reliving them through bankruptcy may still be the best option for you, as it will free up your income to pay off your student loans, but bankruptcy is a serious step that should be undertaken only after sufficient discussion with a qualified professional.
The Bankruptcy & Insolvency Act states that at any point from five years after leaving school, if you are believed to have acted in good faith and are in financial hardship (i.e. if it’s determined that continued repayment of the loan would make you experience financial difficulty), your debt may be eligible for discharge in bankruptcy, but will not necessarily be automatically discharged.
Good faith essentially means that you used the loan funds as they were intended, made reasonable efforts to repay them, and that you took reasonable steps to take advantage of lender offers of interest relief. The court may decide to let you take advantage of the five-year rule especially if you unable to work in your field after graduating (i.e. you are not deriving the economic benefit of your education), or if you left school for medical reasons without graduating.
Even if you successfully declare bankruptcy, you may still be required to make regular payments on your student loan as a condition of discharge.
These rules apply to government-backed loans. Private loans from other lenders abide by the same rules as any other unsecured lender, which means you can include them in a bankruptcy proposal at any time.
A bankruptcy that includes student loans can get complicated, especially if you’ve returned to school since graduation, so it’s always a good idea to talk to a qualified professional, like those at GTA Credit Solutions.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
If used responsibly and properly, credit cards are wonderful tools. Prudent use can help you establish such a stellar reputation, you’ll have no trouble obtaining the significant credit required to buy a home, finance a business, get a degree, and all sorts of other wonderful lifestyle options for which borrowing is likely the only option. They can help you over occasional hurdles and take the pressure off during emergencies. Without a credit card, you’ll have trouble reserving a hotel room or an airline ticket. They can take the stress out of your holiday shopping by allowing you to do all your buying online from the comfort of your couch. Many credit cards come with benefits, like points accruals that help you get membership awards or cash back, or they come with travel insurance or provide extended warranties or other perks. They also protect you from the vulnerability of carrying cash.
As positive and useful as they can be, though, they can be equally negative and destructive if they aren’t used properly.
Credit card interest is compounded, which means that if you fail to pay your balance off each month in full, the following month you’ll pay interest on the interest; for example, if you pay off a balance of $10,000 at 17.99% APR (annual percentage rate) by making only a minimum payment of 3% of the balance each month, it would take you more than 17 years and cost $9,487 in interest — that’s almost as much as the principal! (Your minimum payment will typically be anywhere from 1% to 4% of your balance.) To really appreciate the effect of credit card interest, before you charge something you can’t pay off immediately, ask yourself how much more you’d be willing to pay.
for it. A $90 movie night doesn’t seem like such a deal when you realize it’s actually going to cost you $180 by the time you pay for it.
In some cases, banks will let you make interest-only payments on a line of credit, which means you could conceivably carry the debt for years and never even touch the principal! Obviously, this arrangement is beneficial only to the lender.
Make sure you always read the fine print. Sometimes, a reasonable interest rate will jump considerably if you are late on even one payment. Another way lenders attract users to their credit card is to offer an APR that is low initially, but increases considerably after six months or a year.
Stay away from cash advances; while convenience cheques can be handy for transferring balances from higher-interest cards, be wary of them too. While interest on a credit card purchase usually doesn’t start to accrue until after your payment due date, giving you a chance to pay it in full without accruing any interest at all, cash advances are charged interest from the day you take them, and often at a higher rate. Low introductory rates won’t apply to them either.
Using credit cards to meet basic needs, like paying rent or buying groceries, transferring balances around to keep up with payments, failing to open your credit card statements, consistently making late payments or paying only the minimum, and having credit cards that are maxed out to their limits are all signs that you’re headed for financial trouble. If this sounds like you, call a qualified credit counsellor today.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
When you and your credit counsellor discussing whether bankruptcy, is the right solution to your financial problems, you’ll need to know the difference between secured and unsecured debts.
Your repayment of a secured debt is essentially guaranteed by the asset for which you took the loan. A home mortgage is a very common type of secured loan — the loan to pay for the home is secured by the value of the home itself. If you fail to meet the terms of your repayment agreement, the lender can terminate the agreement, and seize and sell the home. For the duration of the mortgage they have a lien on your property that restricts what you can do with it. A car loan is another example. The lender maintains a lien on the vehicle until the debt is repaid.
By contrast, unsecured loans are essentially granted on the strength of your work history and credit score, and “guaranteed” by no more than your signature and good reputation. A credit card is the common example of an unsecured loan. The credit card company has no claim on the items for which you used your credit card to pay. Most
of your bills, including taxes and medical bills, are unsecured debts. You will usually pay a higher interest rate on unsecured debt, because the lender is taking a greater risk than if it were secured debt.
It’s only unsecured debt that is discharged in bankruptcy. If you have secured loans for an asset and wish to keep the asset, you’ll have to continue to make your agreed-upon payments. Secured debts are treated differently in a consumer proposal, too. It can get a little complex, so you should definitely talk over all of your debts with your bankruptcy trustee or credit counsellor.
(And remember that if you charge a significant amount just prior to declaring bankruptcy, your credit card lender will likely consider that fraud, and demand payment, although that still doesn’t make it a secured debt, even if you bought something seizable, like furniture.)
If your debts have become unmanageable, call a qualified credit counsellor today.
by admin | Credit Counseling, Uncategorized
Was Shakespeare right when he said, “Neither a borrower nor a lender be?” It often depends on the nature of the relationship. Borrowing and lending makes the world go round when it comes to national economies, corporations, or small business, but it’s a very different story when it comes to your spouse.
Debt can have a devastating effect on a relationship. It’s often cited as the No. 1 reason couples argue, and among the most common causes of divorce.
An American university study last year reported that couples who argue about money early in their relationships are at greater risk of divorce, whatever their income, debt or net worth. The 2012 study, “Examining the Relationship Between Financial Issues and Divorce,” also said that arguments about money were longer and more acrimonious than arguments about other topics. Another university in 2009 found that couples who disagreed about finances once a week were more than 30% more likely to divorce than couples who reported disagreeing about finances less often.
The best way not to join their ranks is to make good choices from the beginning. When you’re contemplating a major relationship commitment, talk to your partner about money.
Talk about your attitudes, your culture, what you think money is and its role in society. Talk about your financial priorities. If one of you wants to save for retirement and the other wants a speed boat, you’ll need all the open communication you can get. Disagreeing doesn’t mean your relationship is doomed, but it will take continued non-judgmental communication and regularly revisiting the issue to keep from developing resentments and creation
financial tensions down the road. Talk specifically about the debts you bring to the relationship, and be absolutely honest.
If you’re in a relationship with someone whose debts far outstrip yours, or who seems to constantly be accruing more, consider waiting before making a long-term commitment. Give him or her the chance to straighten out their financial difficulties, or at least take the right steps towards doing so, before you walk down the aisle.
If you’re already married and you or your spouse is in financial trouble, it doesn’t necessarily mean both partners are in the same boat. A debt that is yours alone (for which they did not co-sign) does not affect your spouse’s credit, and a bankruptcy affects only the insolvent spouse. Joint debts can be a different story, and can even your ex-spouse’s (or one from whom you are legally separated) behaviour can affect you financially.
If you’ve got concerns about your financial future, or that of your prospective spouse, talk to a qualified Credit Counselor today.
by admin | Consumer Proposal, Credit Counseling, Uncategorized
It’s amazing what we can convince ourselves we “need.” When in truth we need to look after our families, sleep indoors, eat nutritious meals and drink clean water, we convince ourselves we need a cell phone, a gym membership — and new furniture. We work hard, and certainly in theory we do deserve to have the things we want, not just the things we need. When the springs start to poke through the couch cushions and the mattress has more lumps than grandma’s gravy, we convince ourselves we need new furniture, even when we can’t afford it. At least furniture, unlike a vacation, is around for a while, but except for your house and your car, you should start working towards habits that let you pay cash for everything else. If you can’t quite bring yourself to do that, at least be very careful not to fall into the rent-to-own furniture trap. The allure of rent-to-own retailers is that you can make small monthly payments — smaller than you would pay if you financed the furniture through your bank. The downside is that payment often stretches over so long a length of time and at such a high interest rate, by the time you actually own the furniture you could have paid off a bank loan twice. In addition to interest rates that are substantially higher than the going bank rate, there is always a lot of fine print. If you decide to return the item early, you’re out whatever you’ve already paid on it. Of course, if you miss a payment, the company will repossess it, and quick. They don’t report timely payments to credit bureaus, but they don’t report missed payments either, because technically it’s not a loan. Rent-to-own prices are much higher than other retailers, often shockingly so. We did a quick check on one rent-to-own website and found a 32” Toshiba LED TV for $10 x 156 months, or $1,560. We found the same TV at an electronics retailer for $275. A certain Acer laptop was $549.99 at the electronics store; it was $1,976 ($19/week for 104 weeks) on the rent-to-own site. If that’s not enough, rent-to-own retailers are often under fire for complaints to the Better Business Bureau and consumer advocate groups. The bottom line is that these companies exist to serve
customers with poor or no credit who can’t get traditional financing. With today’s rampaging consumer debts, rent-to-own furniture, electronics and appliances retailers are more popular than ever, but they’re seldom a good idea.
