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 | 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.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
We live in a society where it’s considered “normal” to be in debt, but how did past generations avoid debt? They spent only what they had on hand, and they acquired that cash-in-hand by saving what they earned.
In this day of instant gratification, it IS “normal” to carry personal loan and credit card debt but if it’s starting to be a burden or you just want to get out of it, you have to go back to the tried and true principles of saving and spending within your means. That is also the best way to deal with current debt in order to get out of it more quickly—save for it and spend on the debt, not on new purchases.
Saving money, even when you’re trying to pay off your debts, will allow you to dip into savings when emergencies arise (such as car repairs or replacing an appliance that has given up the ghost), rather than borrowing the money needed to handle those emergencies.
In most cases, the secret to getting out of debt is to change habits—spending habits. The more radically and quickly you change those habits, the more quickly you get out of debt.
One of the first steps is to take stock of your spending and alter your behaviour. One strategy is to not give up completely on your spending (going cold-turkey, in essence) but to alter it. For example, say you spend $100 a month going out for dinners with friends. Instead of cutting those friends out of your life completely, you might want to cut that spending down to $50 per month or only go with them half the time or have dinner at home and join them after the meal in order to avoid costly menu items.
Having an idea of how much you spend will give you an idea of how much you can divert toward paying off your debts, since dealing with your accrued debt is often a matter of tackling what seems impossible but really isn’t.
Many financial experts recommend you tackle your most expensive debt first — try to pay off the high-interest items as quickly as you can before moving on to the others, using the cost of borrowing as your priority. Those same experts will tell you to pay more than the minimum on credit cards … except when it comes to paying off your debt quickly. One of the better strategies to getting out of debt is to pay the minimum on most of your credit cards and divert everything else you have to paying off the one with the highest interest. Once that’s taken care of, divert the “extra” toward the second-highest (continuing to pay off the minimums on the others), and so on down the list.
Consolidation loans or mortgage refinancing may give you the money to quickly eliminate your debts, but the key to maintaining that level of indebtedness is still to change spending into saving—don’t buy your desire item on credit right now because you figure you can afford to pay for it later, but rather save for it to buy it later when you can afford to pay cash.
One of the best tool that can help on your road to becoming debt-free is a repayment calculator. There are several available free on the internet, which means you don’t have to enter any personal information, and they will show you how much money you’re saving and how quickly you can realistically get rid of that debt based on what you can afford.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
he word bankruptcy does not have good connotations and many people dread even the consideration of it. While it doesn’t have to mean financial ruin, there are other options that can help eliminate your debt and let you get back to living your life, without worrying about insolvency.
If you’re looking at the possibility of declaring bankruptcy, your first action should be to talk to a credit consultant or a trustee in bankruptcy. That person will be able to advise you on the course of action best suited to your individual situation. If it does come time to declare bankruptcy, only a licensed trustee can file for you.
But in many cases, restructuring is the answer to avoiding bankruptcy. A consolidation loan or renegotiating your mortgage to pay off your debts may be a possibility; both will likely result in monthly payments that are lower than your current mortgage + servicing your debts. If that option is not available, you might be able to negotiate with your creditors to take less in repayment than the amount you currently owe them. In this scenario, your debts are considered paid off in full when the negotiated amount is paid. It’s called a consumer proposal, and a credit counsellor can help you.
A consumer proposal is a negotiated payment plan to pay off a fraction of your debt. Say you owe $30,000 on credit cards (or personal loans or any other unsecured debt). If you negotiate to pay $12,000, the company may accept your proposal and write off the rest of the debt (because it would be likely to receive less than that if you were to declare bankruptcy). Structured properly and negotiated professionally, few consumer proposals are declined.
A consumer proposal is a legally binding agreement with your creditors, governed by the Bankruptcy & Insolvency Act of 1985. In a proposal, both parties agree to resolve their debt issues in a prescribed manner over a set period of time. In many cases, interest payments stop and the consumer is left with a manageable monthly payment over a number of years, at which time the remainder of the debt is written off by the c
If a secured debt, such as a mortgage, is your biggest financial burden, a consumer proposal won’t help, and not even a bankruptcy will immediately solve your financial problems. Usually a secured debt can be repaid by selling the item (such as a home) and using the proceeds to repay the debt. If you’re at the point where making such a hard choice seems like your only option, talk to a credit counsellor to
by admin | Bankruptcy, Uncategorized
The emotional ramifications of bringing debt into a relationship can be the source of a lot of friction – a difference in the way partners handle money is particularly hard for many couples to weather. As with any fraught situation, part of making it through is to be as well-informed as possible. Seeking the right kind of counselling never hurts, either! While we’re not in the business of relationship counselling, we can offer some insight on the financial counselling side.
The biggest news you should know is that unless you have guaranteed your partner’s debt, you’re not liable for it. Even if you’ve been using a secondary credit card, say, on your partner’s account, your partner is still solely responsible for its repayment. This is true even if your partner dies. His or her creditors will be paid out of the estate before any assets make their way to you, but your assets will never be touched.
As a result, if you and your partner have significantly different levels of debt, it may make sense to consider keeping assets in the name of the partner with the least debt. You’ll also want to have a thorough discussion about what assets – and liabilities – you’ll hold jointly. If you have co-signed for a debt your partner takes on, or if the debt is part of a joint account, you are equally responsible.
If you choose to have a joint bank account or joint credit, it can be a source of friction if your spending habits and philosophy of what money is and how to manage it aren’t the same. If a debt is solely your partner’s, it may still make sense to help pay it off if it’s what’s standing between you and your shared goals, such as home ownership.
Should the amount of your partner’s debt prove insurmountable and bankruptcy start to look like the most desirable option, rest assured that you are no more responsible for your partner’s bankruptcy than you are for his debts. Whether you are married or living common law, you are only responsible for those debts for which you cosigned or obtained jointly. You are only ever responsible for debts with your name on them.
Your partner’s bankruptcy will not affect your credit, but of course it may affect your ability to obtain joint credit in the future.
If you do have joint debts, or have cosigned for your partner’s debts, you will still be obligated to repay those debts in full should your partner choose to declare bankruptcy. It’s always important to fully disclose your financial situation to your credit counsellor / bankruptcy trustee; if your joint debts are significant, filing jointly or both filing for bankruptcy may make sense.
In the event of divorce or separation, you remain responsible only for those debts held jointly or for which you cosigned – a divorce will not remove your obligation to repay those, though. If your estranged spouse files for bankruptcy, you may find yourself responsible for repaying jointly held debts, even if you did not personally incur them.
Whatever your circumstances, it’s vital to discuss your particular situation with an expert. Call us to find out what your options are.
