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Category: Getting Out Of Debt

  • New Year, New Plan – Start by Getting Out of Debt!

    Getting Out Of DebtHappy New Year Everyone! Time to get those resolutions started – and for many of us this means getting out of debt! With holiday shopping out of the way (and the subsequent credit card bills screaming at us from the mailbox), you can actually get down to business and rein in that spending. This year, start with a plan that you will actually be able to stick to, rather than just casting it aside a few weeks in. The only way to get your debt under control is to tackle it head-on.

    Tip #1: Examine. Start by looking over all of your finances – usually not a fun experience – but something that cannot be avoided. In order to start fixing the problem, you have to know what the problem is. Go over all of your bills and make a list of totals owed for each, as well as a grand total (ouch!). This will also help you keep track of monthly bills and can be a great motivator when those totals start to decrease!

    Tip#2: Assess and set priorities. Now that you know how much you owe, and to whom, step 2 is to figure out which items are the most important. We are not saying here that you should pick and choose which bills to pay – far from it – but rather which can receive a larger chunk of your monthly income. For example, if you choose to tackle the highest debt first, this may mean making only the minimum monthly payments on smaller cards but a much larger payment on the one with the highest amount owing. Or perhaps interest is the biggest factor, so make that card the priority.

    Tip #3: Set a budget. Now that you’ve got the worst part (for most of us) out of the way, it is time to establish a realistic budget. This means taking into account all of your monthly spending and income. Doing this should help you eliminate some of those things that are a tad frivolous, or to limit yourself in those areas that see a lot of unnecessary or out-of-your-budget spending.

    Tip #4: Stick to it. Perhaps this may sound easier said than done, but you have to be diligent. Debt isn’t going to go away on its own (chances are pretty high that, if left alone, it will only have the opposite effect). Try to think about ways to keep track every day, and make sure that you are tracking your spending and taking note of decreasing totals.

    Tip #5: Can’t see a light at the end of the tunnel – get some help! If you have done these things but still can’t see a way to continually meet minimum payment requirements, stop stressing and get some help. A debt management firm can offer a number of different options to help you get out of debt, including debt consolidation, consumer proposal, or bankruptcy. These opportunities can often mean significant savings as far as interest, and can help you get the debt relief you need to keep your finances afloat.

    Getting out of debt can be difficult, but it doesn’t need to be a nightmare. This year, try to stay strong and keep to that resolution. DebtCare can help – call us today at 1 (888) 890-0888.

  • Getting Out of Debt Blog Series #4: Debt Settlement

    Getting Out of Debt

    With the average consumer debt load in Canada at an all-time high, it is unfortunately not surprising to see companies popping up everywhere offering solutions to your debt problems through a debt settlement. But be wary; unlike consumer proposals, bankruptcies and debt consolidations, debt settlements, depending on the company, can sometimes come with more negatives than positives. This 4th blog in our ‘getting out of debt blog series’ looks at the debt settlement, giving you the information you need to help you make the right decision about solutions to your debt problems.

    What is a debt settlement? A debt settlement is just that – the settlement of your debts. This settlement involves a negotiation with your creditors to reduce the amount of the debt you are required to pay off.

    A debt settlement will in almost all cases involve paying the settlement amount in a single instance. In most cases the collection agency representing your creditor can accept less money from you than you owe to settle your debt. We have seen collection agencies settle debt for as little as 50% of the amount that was owed. That being said, regardless of whether it is the collection agency or a creditor that is willing to consider a debt settlement, they will want to receive the settlement money in full.

    Often consumers won’t have the money to pay the settlement in full. This has spawned an entire industry of debt reduction companies. These companies will accept monthly installments from you over time with the promise that once you have remitted enough money they will settle your debts. This is a risky proposition. Instead, do your due diligence because if you are remitting to a debt reduction company and they go out of business in the future your money may not be secured.

    There are several reputable companies out there that offer financial consulting and can help you to settle debt with your creditors without risk to you. These companies, experienced with consumer debt solutions, will represent you fairly and help you establish a plan to settle your debts without you giving money to them on a monthly basis.

    Avoid being taken advantage of by doing research and avoiding companies who bill themselves as debt reduction specialists or companies. Look for positive reviews from consumers and see how much of an online image they have established to ensure that you are working with a professional organization that has staying power.

    How will a debt settlement affect your credit? As with any debt solution, a debt settlement is recorded on your credit report and may bring down your score. That being said, if you are considering debt settlement the impact on your credit rating is likely no worse than the damage already done. Once you have settled your past bad debt you can begin the process of rebuilding.

    If you are considering a debt settlement as a way of getting rid of your debt, there are a number of things to consider, but the most important is the company itself. Just because a company promises to settle your debts it doesn’t mean that they will do so the right way. Make sure that you do your research and make inquiries. Working with a trustworthy debt settlement company will make all the difference, keeping you protected throughout the process.

    If you need help getting out of debt or would like to find out more about your debt settlement options, please contact DebtCare Canada today by calling 1-800-890-0888.

  • Getting Out of Debt Blog Series #3: Debt Consolidation

    Debt ConsolidationWhen debt is taking over your life it can be difficult to see the light at the end of the tunnel. Mounting monthly payments that include mostly interest can become difficult to meet and missed payments can lead to collection calls or other enforcement action. You are not alone – many Canadians are dealing with heavy debt loads and don’t know where to turn. This 3rd blog in our ‘getting out of debt blog series’ talks about debt consolidation and provides you with the information necessary to help you determine whether this is the best route to take for getting out of debt.

    What is debt consolidation? It is pretty straightforward – a consolidation of your debt into one monthly payment, saving you thousands of dollars in interest and making the monthly payment far more manageable. It is a loan given by a financial institution which allows you to pay off all of your unsecured debts to creditors at once (secured debts such as car loans or mortgages are typically never included).

    A debt consolidation can be achieved through a secured or unsecured loan or line of credit. Secured consolidation loans often involve a house, vehicle, investment or guarantor as security.

    Obviously if you obtain a debt consolidation, your credit is paid off and the result will be no further collection or enforcement action by your creditors. Debt consolidations will also in some cases lower your interest rates and monthly payment. If you have damaged your credit, or are having enforcement action taken against you by your creditors and have no assets to pledge as security – being approved for a debt consolidation can be challenging.

    Debt consolidation is not for everyone. Often in order to qualify your credit needs to be acceptable since the institution lending the money will want some indication that you will be able to make the required monthly payments. If your credit rating is less than stellar it might be more prudent to consider some other alternatives. The more bruised your credit is, if approved, the higher the interest rate on the debt consolidation will be, which may leave you in no better shape than when you started.

    A smart way to determine how best to approach your ‘getting out of debt’ solution is to speak with a professional debt consultant, one experienced with helping Canadians find effective forms of debt relief. A consultant will be able to go through all of your financial obligations to help determine what means for getting out of debt are best suited to your unique situation. He or she will also be able to get the ball rolling and get you started on a debt-free road as well as help you to budget realistically for the future.

    If you are in debt that you feel is becoming tough to manage it is probably time to consider getting some help. Don’t wait until the debt takes complete control.

    For more information about debt consolidation or getting out of debt please contact DebtCare Canada by calling 1-800-890-0888 or visiting us online at www.debtcare.ca.

  • Getting Out of Debt Blog Series #2: Bankruptcy

    Getting Out of Debt

    There are thousands of Canadians facing a mountain of debt that can seem impossible to overcome. For many individuals, it can often seem as though there is nowhere to turn as far as getting out of debt – but there is hope. It never helps to ignore the problem or let the stress of high debt levels control your life. The second blog in our back-to-basics ‘getting out of debt blog series’ looks at bankruptcy, and can help you better understand if this might be the best solution for your financial woes.

     

    What is bankruptcy?

    Bankruptcy in Canada is a legal process and is governed by federal law under the Bankruptcy and Insolvency Act. Like a consumer proposal, a bankruptcy must be conducted by a licensed trustee in bankruptcy – you cannot negotiate one on your own. The role of a trustee is to ensure that both you and your creditors are protected, so they will negotiate the terms of your bankruptcy and administer it accordingly.

    When you file for bankruptcy all of your assets, which include investments, property and your income, become the property of your trustee while you are “undischarged.” This means that if you have equity in your assets, or your income exceeds what is the allowable minimum, you will be subject to surplus income. Surplus income means that 50% of any income you earn over the prescribed minimum and 50% of any equity in assets will have to be paid to your estate to be distributed to your creditors by your trustee. During the undischarged period you will have reporting obligations to your trustee which includes reporting your income.

    In Canada, and in the case of a first time bankruptcy – if there is no surplus income you will only remain undischarged for 9 months (if you meet any additional terms in your bankruptcy); if you have surplus income you will remain undischarged for at least 21 months. If, at the end of 21 months, you have not re-paid your surplus income into your estate you will remain undischarged until you do.

    While bankrupt, additional terms in your bankruptcy will include not only disclosing income but also reporting on living arrangements, family situation, etc. You will also be required to attend credit counselling sessions and report any monies borrowed (over $500).

    To qualify for bankruptcy in Canada you must meet certain conditions, the foremost of which is that you must be insolvent. To be insolvent means that you owe at least $1000 and that you are unable to pay the debts as they are due.

    Will filing for bankruptcy affect your credit? Yes, since your credit report is the document which contains all of your borrowing activity and credit behaviour. When you file for bankruptcy your credit score will change from being a number to being an “R” reject score until you rebuild your credit. The bankruptcy will show on your credit report for 6 years following discharge. That being said, if you are seriously considering filing for bankruptcy your credit has most likely already suffered, and so cleaning it up will take time.

    Also, you can often qualify for credit within 2 years of being discharged from bankruptcy with up to 2 years of solid re-established credit.

    Contrary to popular belief you can file for bankruptcy and keep your home and vehicle. Because the trustee represents you and your creditor it is important to have your own representation through the bankruptcy process. Bankruptcy can be complicated and having an expert in your corner will ensure that you are prepared for all eventual outcomes and don’t go to the trustee without already having your plan in place.

    For more information about getting out of debt or to find out if you qualify to file for bankruptcy in Canada, please contact DebtCare Canada at 1-800-890-0888.

  • Getting Out of Debt Blog Series #1: Consumer Proposal

    Getting Out of DebtWith summer winding down and consumer debt levels remaining at all-time highs, we thought it was a good time for a back-to-basics ‘getting out of debt blog’ to help you ease into fall with less worries on your plate. This first blog in the series will talk about the consumer proposal, giving you the ins and outs to help you better understand your options for getting out of debt. Other blogs in this series will focus on debt consolidations, debt settlement and bankruptcy.

    What is a consumer proposal? In a nutshell, a consumer proposal is a proposal that is administered by a trustee where you offer your creditor(s) a sum of money to be repaid over a term of 5 years. This sum could be less than the total debt you owe. Also, a consumer proposal will stop legal action being taken against you by unsecured creditors who are included in the proposal, stop collection agency harassment and freeze the interest accumulating on your debt.

    A consumer proposal has to be conducted by a licensed trustee in bankruptcy – you cannot negotiate one on your own. A financial consultant can consult with you on your financial options and if a consumer proposal is the solution you elect, he or she can co-ordinate a fair deal for you with a trustee.

    Unlike bankruptcy, once a consumer proposal is in place you have no ongoing obligation to the trustee whatsoever – you simply have to make your monthly payment. Consumer proposals can be repaid in full at any time. This is a major plus for folks who want to rebuild their credit quickly. A consumer proposal will be completely removed from your credit report 3 years from the date it has been paid in full. Beginning with a secured credit card or RRSP loan, those who make consumer proposals have many options available to them for rebuilding credit.

    With anything there are caveats. A consumer proposal must be accepted by your majority creditor. Because trustees represent you and your creditors it is important to understand how consumer proposals work and to have your own representation through the process. Negotiating a proposal that is accepted by your creditor(s) and that is the best deal for you is key. Having representation ensures that you have someone who has expertise in this area to ensure that you do get the best deal and that all aspects of your financial situation have been considered.

    Filing a consumer proposal is, for many people, a smart solution for getting out of debt. That being said, it needs to be approached correctly, and you will need the help of a professional to carry it out.

    For more information about consumer proposals or other ways of getting out of debt, please contact DebtCare Canada by calling 1-800-890-0888.

  • Getting Out of Debt in the New Year

    So the holidays are over and no doubt the holiday bills have started rolling in. It is easy to do serious financial damage during the holidays. Debt can take a mere couple of weeks to rack up, but can take months and even years to pay off. Getting out of debt in the New Year is on many families’ ‘to-do’ lists, but getting out of debt is easier said than done.

    Your ability to get out of debt in the New Year will greatly depend on your own personal circumstances. Let’s review some of your options.

    Getting out of debt the good old fashioned way. Getting out of debt the good old fashioned way will take resources because it will involve using your existing assets and cash flow to get out of debt. If you don’t have savings or investments that you can liquidate to pay down debt you will have to take a good hard look at your budget. Think of the time frame in which you would like to be debt free. If it is 24 months for example, then take your total debt, divide it by 24 months and then increase the monthly amount by 30% (to account for interest).  Do you have enough room in your budget to pay off the debt on a monthly basis?

    Getting out of debt through a debt consolidation. Getting out of debt through a debt consolidation is an option for homeowners who have home equity or for those with very good credit. Though traditional debt consolidation can be a good choice for getting out of debt – the debt consolidation interest rate, fees and terms will determine whether it is the best choice for getting out of debt.

    Getting out of debt through a financial program. If you don’t have assets or savings to pay off your debt and you don’t have room in your budget to get out of debt in a reasonable period of time, then an alternate financial program may be the best solution for you. Some financial programs involve freezing the interest on your debt and even reducing your debt. This can result in greatly reduced monthly payments, making the prospect of getting out of debt a reality for an individual who doesn’t have much to put towards getting out of debt.

    It’s a jungle out there and with so many companies promoting different things it can be hard to know what the best financial choice is. Making the wrong financial choices can cause you to pay more in the long run and can even harm your credit. So how do you know a financial friend from a financial foe? By trusting your instincts and doing lots of research. Do they have a website? Do they have a bricks and mortar location? Do they have people following them on social media? Have you heard of them before? If you are dealing with a debt company or mortgage brokerage, is the company’s management accessible to you?

    Doing your due diligence and then partnering with a financial service provider who can help you come up with a meaningful solution to deal with your debt will be your first step towards getting out of debt and enjoying financial freedom in 2013.

    For more information about getting out of debt in 2013 or if you need help with your 2013 financial planning please contact DebtCare at 416-907-2582 or visit www.debtcare.ca.