You may have missed one or more payments on an account such as a credit card, personal loan, student loan, or a line of credit. Consequently, you will likely be receiving collection calls. But who are these people who are calling you?
Most creditors—particularly large creditors—will have their employees call you if your account is less than six months overdue. Many big creditors operate massive call centres, employing hundreds of collectors, calling people who have unpaid accounts. If your account has not been paid for over six months then there is a good chance that your account has been forwarded by your creditor to a collection agency. Under these circumstances, the collection agency is working on a commission or contingency basis. This means that the collection agency does earn a penny in fees unless it recovers monies from you. This might help explain why collectors at collection agencies are often aggressive.
There is also a chance that at some point your original creditor might sell your account to another firm and this firm steps into the shoes of your original creditor. There are two distinct categories of debt buyers. There are traditional collection agencies whose primary source of revenue is collecting unpaid accounts on behalf of others. The second category of debt purchasers are dedicated debt buyers. A dedicated debt buyer is a firm that might employ its own in-house collectors or it may forward its inventory of unpaid accounts to collection agencies.
All debts are either secured or unsecured. In the case of a secured debt, if the debt is not paid, the creditor has some type of collateral it can look to for payment. The best examples are mortgages and liens arising from the purchase or lease of a car. Any debt that is not a secured debt is unsecured debt.
When a debtor has an unsecured debt the creditor has no collateral it can look to if the debt is not paid. Most credit cards are unsecured debt. There are three different categories of unsecured debt: debt owed to the government, debt arising from a consumer transaction, and non-dischargeable debt. Eliminating debt owed to the government can be challenging. Settling government debt is not available nor is credit counselling. Government debt, however, can often be eliminated when the consumer makes a consumer proposal or files for personal bankruptcy.
Eliminating unsecured consumer debt is less daunting. A consumer might be able to take advantage of a limitation period, make a one-time lump sum payment, do credit counselling, make a consumer proposal, or file for personal bankruptcy. Non-dischargeable debts are those debts which cannot be eliminated by making a consumer proposal or filing for personal bankruptcy. These include the following:
Spousal support and child support obligations
Student loans where a person ceased to be a student less than seven years ago
Our children and grandchildren are our future and what better gift can we give them than the gift of financial literacy. We need to teach the next generations about money: how to save, how to think about spending, how to budget, how to think about their financial future and who to go to for extra financial advice—when the time comes. Children need to understand the practical basics of money and develop a positive relationship with money in order to help them achieve what they want.
Here are a few tips to help parents get started:
First, know that parental involvement is key in children’s financial success
Teach children the value of money, how to earn money and how to budget
Do not spoil your children regardless of your income
Do not pay for whining or crying children
Do not always say no!
Discuss your family budget openly and often
Open a bank account for your child
Develop the idea of quality over quantity
Develop the notion that you can’t always get what you want
Teach young children how to count change and introduce and explain tax
Have a family discussion about allowance: Is it necessity?
Teach the “Pay yourself First” lesson or let them read: The Wealthy Barber
Introduce the idea of Good vs. Bad spending
Discuss the true nature of Credit Cards: Pros and Cons
Introduce the idea of charity and why people give to others—if possible
Can a Senior File a Consumer Proposal or go Bankrupt?
There are no rules that prevent anyone from filing a Consumer Proposal just because you are 65 years of age. With today’s average of $69,000 in unsecured debt for those 60 years and over, the need to take action is important. The advantage that a senior has is that their pension income is a constant cash flow which can be used to finance the payment required for the Consumer Proposal. As well, creditors seem willing to accept a more reasonable (i.e. lower) settlement than they would if the offer to settle comes from a younger person. When every dollar counts, it pays to take advantage of anything you can.