by admin | Bankruptcy, Consumer Proposal, Uncategorized
Q: I read on one of your other pages where you talk about “secured” and “unsecured” debts. What’s the difference? A: “Secured” debt is backed up by some kind of collateral, which reduces the risk for your lender. Your mortgage, for instance, is a secured debt because the value of the house itself means the lender’s risk is minimized. To oversimplify things a bit, if you fail to pay the loan, the lender takes the house, and they lose nothing. A credit card is an example of “unsecured” debt. There is no “lien” on your property; that is, the lender has no right to take your property if you don’t meet your repayment obligations. Secured debt usually carries a lower interest rate because of the lesser risk for the lender.
Q: Harassment from my creditors is ruining my life! How do I make them stop? A: When you file for bankruptcy or submit a consumer proposal, your creditors are prohibited from contacting you.
Q: My wages have been garnisheed! What can I do about it? A: When you file for bankruptcy or submit a consumer proposal, any further garnishment stops too. It’s part of the “stay of proceedings.
Q: My credit is pretty bad. Can I still get a bank loan? A: If you already know your credit is bad, you shouldn’t even apply. Just applying can make your credit score even worse. Let us help you fix your credit first.
Q: If I come to see you, what are you going to be looking at? A: We’ll look at your assets and liabilities, and figure out your net worth, even if it’s negative. In other words, we’ll take what you own and subtract what you owe. We’ll take what’s coming in and subtract what’s going out. And that way we’ll have a clear picture of your situation. We’ll check out your credit report, too. Then we’ll get you set up with a monthly budget to get you started on the right track. Remember, a trustee represents your creditors, but we work for you!
by admin | Bankruptcy, Credit Counseling, Uncategorized
If you’ve ever been late or defaulted on a payment, you may have found yourself at the mercy of a collection agency — and you know how awful it feels.
Basically, if you fail to pay a lender, that lender may sell your debt to a third-party collection agency. They then use whatever tactics are at their disposal to get you to pay them.
A collection agency’s first move, by law, is to send you written notice through the mail (not by email) advising you of the name of the creditor to whom you supposedly owe money, the amount they say you owe, and the name of the agency and its authority to demand payment.
Just six days after sending the notice, you may find yourself on the receiving end of harassing calls or additional letters, and just trying to avoid them can make you dread opening the mail or answering the phone. The law allows collection agencies to send letters without restriction, and to contact you up to three times in seven days. (Contact means that they speak to you, leave a message, or send an email.)
If you think the agency is in error, advise them by registered letter of the mistake or have your lawyer do so. They must then stop trying to contact you until the matter is resolved.
While they can be intimidating, there are some restrictions placed on them by government regulations. Collection agencies are prohibited from calling on Sundays, except between 1 p.m. and 5 p.m., or any other day between 9 p.m. and 7 a.m. They can’t contact you on stat holidays. The law also prohibits the use of threatening or profane language, as well as undue, excessive or unreasonable pressure.
While the agency can contact your employer once to find out your employment status, they cannot contact your employer again unless your employer has guaranteed the debt, they are making contact with regard to a court order or wage assignment given to a credit union, or you have provided them written consent to make such contact. They can’t contact your spouse or a member of your family or household, relatives, or neighbours except to get your address or phone number unless the person has guaranteed the debt or you have given your permission. They cannot give out false information about you, nor can they recommend to a creditor that they pursue legal action without notifying you first.
They are also prohibited from levying additional charges — they are allowed to attempt to collect only the amount of the original debt (although it may continue to accrue interest).
As unpleasant as those calls and letters can be, avoidance isn’t the answer. Once the debt goes to collections, it no longer belongs to the original lender, and you have little choice but to deal with the collections agency. Of course, the simplest solution is to pay the debt. Once the debt is paid, the harassment stops. If you can’t pay the entire debt, try to make arrangements to pay it off over time.
Failure to make arrangements could result in a negative report to the credit bureau or even legal action that could end up in court, in the seizure of your property, or a claim on your pay cheque.
If you think you’ve been mistreated by a collections agency, send them a letter telling them why and that you expect them to comply with the law. If the behaviour persists, file a complaint with Consumer Protection Ontario.
If you’re feeling the pressure of debt collection, contact a credit counsellor to find out your options.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
At no point in history has credit been more readily available. It’s only a few decades ago that there was no such thing as credit card debt — if you wanted to drive a car, go on vacation, or buy a new shirt, you had to have enough cash. Now it seems like there are a dozen ways to get into serious debt, from don’t pay a cent events on furniture to zero-down car financing. If you find yourself in serious financial trouble, your credit counselor’s job is to help you sort through your options, but the best case scenario is to take steps to avoid getting in too deep in the first place.
Here are some tips to help you avoid debt.
Watch for the warning signs
Pay attention to signs that you’re in imminent danger of becoming a slave to your credit card debts. If you transfer balances from one card to another to keep from having to make a payment, make only minimum payments, are charging necessities like groceries or utilities, or have stopped even looking at your credit card statements, you may be in danger.
Stay away from cash advances
When you put a purchase on your credit card and don’t pay off the balance in full before the due date, you start to incur interest. When you use your credit card for a cash advance, you start paying interest the moment you take it. This usually extends to the cheques many financial institutions issue with their credit cards as well. Cash advances are a danger sign that can lead to a cycle of borrowing and repaying it can be difficult to escape.
Be prepared
Make it a priority to save up enough to see you through an emergency. Whether it’s a car repair or a major health crisis that prevents you from working, life’s twists and turns can lead to financial hardship when you have to use a credit card to bail yourself out. Experts recommend you have enough aside to take care of three months’ worth of expenses.
Avoid temptation
The more credit you have, the more you may be tempted. If you know you have trouble handling credit, help yourself stay out of trouble by limiting the number of cards you have, and their credit limits.
If you’re starting to suspect you’re in over your head, call a credit counselling professional and start taking the steps necessary to free yourself from the burden of debt.
by admin | Credit Counseling, Credit Repair, Uncategorized
Store credit cards can be useful — and they can also be a trap.
On the downside, they generally charge greater interest (sometimes far greater) than a non-store-specific card such Visa or American Express. They’re relatively easy to get, and a store will often entice prospective borrowers with promises of discounts — “Apply for credit today and take 15% off your purchase right now!” People who don’t handle credit well can end up with a card that doesn’t allow them to shop around for the best prices (because it can be used only at one store, or at a couple of stores owned by the same company) and if they can’t pay it off right away, they’re stuck with exorbitant interest charges.
If you’re good with credit, you may think it’s harmless to apply for every card that’s offered to you, just to get the discount on that day’s shopping. But not only will open accounts you don’t really use take a potential toll on your future credit (if you’re spread too thin with too much available credit — even if you don’t use it — you may have trouble obtaining credit you really want, like for a house or a car), but also every time you apply for credit, an inquiry appears on your credit history; too many inquiries in too short a period of time can also make it hard to get the credit you really want.
And let’s face it — there’s irony in forcing you to shop at their store while repaying your loyalty with higher interest. Doesn’t sound like a fair way to treat a good customer!
The upside is that because they are relatively easy to get, store cards can play a useful role in re-establishing credit for those who have declared bankruptcy or made a consumer proposal.
If you can stick to them, a few guidelines can help you get the most out of store cards without paying too high a price.
If you do decide to take advantage of discounts for applying, wait until you’re buying something substantial, like appliances or furniture, to make the potential impact on your credit worthwhile. If the store has special card-holder appreciation nights or similar promotions, take advantage of them too, but don’t let the card become an excuse to buy things you don’t need.
If you can’t pay off the balance before you start to accrue interest, consider transferring your balance to a card with a lower interest rate, or paying it off with a line of credit.
Remember that once the interest starts piling up, the cost can far outweigh the discount you wanted in the first place.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
The term “vicious cycle” could have been coined to describe payday loans.
A payday loan is designed to bridge a short-term cash shortage with an unsecured, high-interest, low-amount loan. If payday is still a week away, and you’re already strapped, you go into a payday loan establishment — often a storefront in a strip mall – with the required paperwork (such as a pay stub, T4, or other proof of earnings) and obtain a quick fix. These days, you can even do it on the phone or online without leaving the house. Amounts don’t usually exceed $1,500, and you’ll have the money in your hands or in your account in about 15 minutes.
The problem, of course, is that come pay day the loan company wants its money back. You just got paid and you’re already short. By the time a week goes by, you’re stuck again, and it’s back to the loan store. Interest rates, of course, exceed what you would pay from a traditional lender.
Although there have been numerous lawsuits (including a class action suit in B.C. whose awards are expected to be in the millions) for violations, there are laws in place to protect consumers. In Ontario, borrowers have a two-day grace period in which they can cancel the loan without incurring a penalty, and all costs of borrowing (including interest and fees) is capped at 21% of the amount borrowed. So-called rollover loans, in which borrowers will take additional loans from the same company before they pay off the original debt, are prohibited. Payday lenders must be licensed by the Ministry of Consumer Services and comply with all provisions in the Payday Loans Act of 2008.
It should be well clear by now that payday loans are a bad idea.
Strive now to get off the merry-go-round of payday loans. Cut your spending to an absolute minimum. Keep up with rent or mortgage, insurance payments, car loan payments, credit card debts, etc., but cut absolutely everything else including dinners out, take-out coffees on the way to work, gym memberships and whatever else you have to.
As an unsecured debt, a payday loan can be included in a consumer proposal or bankruptcy. If your finances have become unmanageable, talk to a credit counsellor today about how you can break the vicious cycle of payday loans.
