Archives for January, 2009

On Saturday January 17 Ted Michalos and I appeared on AM 640 in Toronto to talk about how to deal with credit cards. In January and February of each year we get a lot of telephone calls from people with more credit card debt than they can handle, and this Saturday was no exception.

Our first call came from Wayne, who told us he had a secure job in law enforcement, but his wife works for a bank and earns commission. Unfortunately her commissions are not as high as they had hoped, and they have used lines of credit and credit cards to meet some of their living expenses as she has worked to increase her income. They are now faced with $70,000 in unsecured credit.

They own a house, but due to the soft real estate market in Toronto, they do not have enough equity to get a second mortgage, or to refinance. Wayne wanted our advice on how to deal with these debts.

I started by advising him to make a list of all of his debts, and to prepare a simple monthly budget. By making a list of everything you spend each month, it’s easier to see what expenses can be cut, which is the first step to getting back on track financially. Unfortunately for Wayne and his wife, even cutting their expenses will not free up enough cash to repay all of their debts, so we then talked about the next possible solution: credit counselling.

With credit counselling a not-for-profit credit counsellor takes all of your unsecured debts, like credit cards and lines of credit, and works out a plan where you repay them in full over a period of up to five years, often with no further interest. That’s a great solution for some people, but unfortunately for Wayne even a debt management plan through a credit counsellor is more than he can afford.

Wayne and his wifehave good jobs, so they did not want to file personal bankruptcy. They knew that bankruptcy may impact your job if you work in law enforcement or the banking industry, so they wanted other options.

We then talked about a consumer proposal, which may be the perfect solution for Wayne and his wife. A consumer proposal is a deal, or a settlement, that we make with your creditors. If you have $70,000 in debt, it may be possible to negotiate a settlement where the creditors accept 50 cents on the dollar, or $35,000, over up to a five year period. For example, a proposal of $700 per month for 50 months would be accepted in most cases by the creditors. In some cases it’s possible to get proposals accepted for 30 cents on the dollar, or even lower, depending on your ability to make payments.

The point is this: there are options for dealing with debt; you are not alone.

If you have more debt than you can handle and what to understand your options, give us a call at 310-PLAN (310-7526), no area code required, or email us to schedule a free initial consultation. Financial problems won’t go away or get better by themselves; it’s up to you now, so let’s get started.