Overdue payments, calls from collection companies, NSF cheques, bank overdraft. The list goes on and on. You feel stressed out just thinking about your debts. Want some peace of mind? Stop the madness and take control. Start by making a list of your debts showing the name, amount owing, interest rate, and minimum monthly payment that is due. I note that many credit cards now show how long it will take to pay off the balance owing if all you pay is the minimum payment and of course, if you do not make any new charges. Focusing on the 20 or 30 years will just increase your stress, not reduce it. Focus instead on which debts have high interest and which have the lower rates. You should be directing whatever money you have to those debts with a high interest rate.
The next thing you have to do is to track your spending for a few weeks (longer if possible). You will then need to prepare a budget for yourself to determine how much money you have each month to service your debts and allow you to live. Note that the budget is an average for a month (not 4 weeks) and you should allow for emergencies and debts like car insurance that are not necessarily paid on a monthly basis. If you need help, Trustees in Bankruptcy (soon to be called Licensed Insolvency Trustee), credit counselors, financial planners, etc. are usually willing to help you in assessing your budget and putting together a plan of action to pay off your debts. If you spend the time to put together the basic information, their fees will be nominal, their expertise invaluable.
Taking precautions to avoid scams and frauds is another way to protect your assets against financial abuse. Hustlers are constantly coming up with new scams to deceive elderly people. It is important to never respond to e-mail, phone or door-to-door offers from people or groups you do not know. Most often, if an offer seems too good to be true, one can assume it is. Protect your personal information–reputable organizations will not e-mail, write or call and ask you to confirm information about your bank account or financial affairs. Financial abuse is illegal and/or unauthorized use of your money or property, or pressure on you for use of your money or property.
Unfortunately and sadly, abusers are often people in positions of power in your life, such as a family member, caregiver or someone you live with. If you think you may be the victim of financial abuse, a fraud or a scam, do not feel ashamed and you are not at fault–many people are in the same situation and it is important you do not stay silent. Tell someone you trust about what is going on and how you are being treated and take precautions. If you do not feel you can trust anyone or do not feel comfortable talking to someone you know, you can report financial abuse and/or fraud to the police.
What can I do if I cannot make my student loan payments?
Thousands of Canadians cannot afford to pay their student loans. The law in Canada punishes anyone making a consumer proposal or filing for personal bankruptcy if they recently stopped being a full-time student. Student loans are not forgiven unless a person can satisfy the 7-year waiting period or the discretionary 5-year waiting period based on financial hardship.
If you cannot make your monthly student loan payments then you do have a number of options:
Firstly, your lender might offer a number of debt relief options. Secondly, it might be to your advantage to make small token monthly payments. Thirdly, if you have not made a payment on your student loan for a minimum of six months you can explore negotiating a one-time lump sum payment as settlement in full—sourcing funds from family members or the sale of an asset.
Finally, you might want to consider credit counselling as a “bridging strategy”. Credit counselling might help you reduce your monthly payments on your unsecured consumer debt—but not your student loan -which might significantly improve your cash flow situation. Some Canadians seeking personal bankruptcy or a consumer proposal will use credit counselling until they satisfy the all-important 7-year waiting period.
If you want to make a consumer proposal or file for personal bankruptcy and you have ceased attending school a minimum of 5 years—but not 7 years–then you can bring a motion before a judge who has a discretion to grant you a discharge on the grounds of financial hardship.
Well, it happened. You racked up a lot of debt and you now have to deal with it. You have decided that you are capable of making a settlement with your creditors by offering to pay a portion of your total debt over a period of time (usually 60 months with no interest) using a Consumer Proposal. At least, you can avoid bankruptcy.
Setting up the Consumer Proposal is done with the assistance of a Licensed Insolvency Trustee (formally called a Trustee in Bankruptcy) or some other qualified person. They will review your assets, liabilities, income and expenses to come up with a plan that your creditors will be likely to accept. Beware of anyone who advertises that they can reduce your debts by “up to 80%” before they meet with you and review your specific situation. Sometimes, you might be able to make a small down payment using money in an RRSP, cash surrender value of life insurance, etc. Sometimes, your budget is not stable because you only have full time seasonal work. Construction workers, roofers, road pavers, usually only work 8 or 9 months per year and it is common to structure their Consumer Proposals over a 60-calendar month period (the maximum allowed by law) but only require that monthly payments only be made in 8 specific months each calendar year. You might also have a steady job and be able to make payments for all 12 months each year. You might want to pay off the Consumer Proposal faster than the 60 months in order to assist you in rebuilding your credit faster and cleaning up your credit report. No problem – simply put a clause into your proposal that allows you to do this at your option at any time with no advance notice or penalty of any kind. The creditor will always agree as they may get their money sooner than they expected.
A Consumer Proposal is not for everyone. But if you wish to customize it to meet your specific situation, if can be done.