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.
by admin | Consumer Proposal, Credit Counseling, Uncategorized
You know all those times you fumed at the nickel-and-diming that takes place this time of year as your children head off to elementary or high school? Well, it’s nothing compared to the hundreds and sometimes thousands college kids have to spend before their school year is even past its first month.
And though you have to tell your 15-year-old that you can’t get that locker organizer just yet because you don’t get paid until next Friday, you can’t very well tell your university freshman you can’t afford that $100 course book until next week because next week may be too late for him to have it read.
There are ways to lessen the impact of those necessary purchases, though, and as with most financial matters, the answer is budgeting.
The base expenses of a college education (tuition, room and board) are natural bank-account killers because there’s no way around them. They have to be paid. The $1,500-$2,000 you paid 15 years ago on tuition has more than quadrupled since, with the average cost in Canada pegged at about $7,000 per semester. Multiply that by two for the full school year. Multiply by the number of years your child will be studying and factor in inflation and you can expect to pay anywhere from $30,000 to over $60,000— that’s possible your annual salary, and then there’s the cost of living away from home (which really is one of the important aspects of continuing education some parents have a hard time accepting), which can often eclipse the cost of tuition.
The ideal is for parents to start thinking about how to come up with that $120,000 as early in a child’s life as possible, and a Registered Education Savings Plan (RESP) is a great way to save while receiving some benefits from the federal government. New plans have no annual contribution limit but have a lifetime limit of $50,000 (plans opened prior to 2006 have a $4,000 annual cap and $42,000 lifetime cap). The government can contribute up to 20 percent on the first $2,500 annual contribution. More information is available athttp://www.canlearn.ca/eng/savings/know_your_resp.shtml and many financial institutions have online RESP calculators to help you maximize your contributions.
And of course, don’t neglect the cost of transportation. Many institutions include transit passes as part of the school ID cost but some don’t, so be prepared to pay for monthly passes if your student lives off campus or needs to commute to a part-time job to supplement his education costs. A car may be a cheaper alternative over the course of obtaining a degree, but there’s the initial outlay and gasoline and maintenance costs along the way.
The cost of course books is outlandish, but many courses use the same reading list year after year. As such, it may be beneficial to foresake new books and buy used. Further cost savings can be realized by reselling them after they are no longer needed. Institutions have used book stores and as with much buying and selling, Kijiji and Craigslist offer a chance to buy and sell course books, but the big chains such as Amazon and Chapters also have used textbook categories at substantial discounts over new.
Getting an education may be expensive for both the child and the parents, but some financial planning can take the anxiety out of the experience.
by admin | Bankruptcy, Consumer Proposal, Debt Management, Uncategorized
You’ve filed for bankruptcy and are on your way to having your debts eliminated. Now what?
If you’re one of the 70,000 Canadians who file for bankruptcy every year, you go to work every day, submit your income statements to your trustee every month, and meet your payment obligations in order to be discharged from bankruptcy and move on with your life. However, you may be one of the 15 percent who file bankruptcy for a second time, or in the 1 percent who are doing it for a third time.
So how can you avoid multiple bankruptcies? Learn the lessons accorded by your first (and hopefully final) bankruptcy.
In bankruptcy (after you’ve liquidated your assets and filed your required forms and statements), you’re basically required to attend two credit counselling sessions, submit monthly income and expense statements to your trustee, and make income surplus payments (if applicable). You are not able to accrue more debt.
That last part is mostly taken care of, as most companies offering credit will not consider you until you have been discharged from bankruptcy. However, when applying for credit, you don’t have to reveal that you’re in bankruptcy if you’re applying for $500 or less, which could be taken advantage of by the bankrupt person’s shopping at various rent-to-own outlets or by merchants who are more interested in making a sale.
After bankruptcy, you can begin building up your credit profile again and 85 percent of people will learn from the experience, live within their means and accrue credit wisely. However, sometimes life gets in the way and people get downsized from their salaried positions, illnesses force the erosion of savings, or children need help with post-secondary educations.
As a means of avoiding a second bankruptcy, it may be beneficial to look at a consumer proposal instead. With the help of a trustee, a person makes a proposal to creditors and, if the consumer proposal is accepted, makes an established monthly payment for dispersal to said creditors. It takes longer to discharge than it might in a bankruptcy where the bankrupt person has to make surplus payments, but the payments may be smaller (allowing the person to live within their means over the course of repayment).
If you want to avoid both those alternatives (both of which can seriously affect your future borrowing needs), live on cash during your bankruptcy (you’re more reticent spending cash), stick to a budget, and find cheaper alternative products and services.
And most importantly, pay your taxes. Tax debt accrues very quickly (due to fines and penalties) and is one of the major reasons for bankruptcy filings.
