Posts Tagged ‘bankruptcy’
Beware the word CONSOLIDATION!
What comes to mind when you hear the word “Consolidation”? Do you envision all of your debts being ‘paid off’ leaving you with the manageable obligation of one monthly payment? If so, you are thinking about a “Consolidation Loan”. A financial institution loans you money by paying off your debt and you pay them back. With interest, of course.
Nowadays, the word “consolidation” is being used in a much more liberal term. Many debt-relief agencies offer to “consolidate your debt”. The process is quite different. Your creditors are approached and offered a settlement. That settlement could be in full or in part (a percentage of what you owe) and could result in an elimination or reduction of interest.
In the Insolvency Restructuring Profession we call this “consolidation” or “settlement” a Consumer Proposal
So, what is the difference between a “consolidation loan” and a “debt consolidation”?
The most important distinction is the effect on your credit rating or score. A consolidation loan will not affect your score in a negative way and may, in fact, improve it. A debt consolidation, on the other hand, WILL impact your score negatively, the extent depends upon your credit score at the time of the ‘consolidation’.
A friend recently asked me if I could recommend a reputable debt consolidation company that will not impact your credit score. My answer was “Nope, they don’t exist!”. If you find one, let me know!!
I know…it seems wrong doesn’t it? You are in a state of having to consider filing for bankruptcy and you find out that you have to pay. Often I get asked, “How can someone pay you if they are bankrupt?” The answer is simple in most cases…the definition of ’being insolvent’ is that ‘you are unable to meet your obligations as they become due’. An insolvent person can often pay something on their debt, just not what their creditors are asking or demanding.
More often than not, the amount you are required to pay into your bankruptcy is a manageable payment, considering what you are required to pay to maintain your current debt (let alone pay it off).
The amount an individual pays varies depending on the level of income and the expenses they have. The best way to determine what you have to pay is to meet with a Trustee in Bankruptcy. This simple Bankruptcy Payment Calculator will help you estimate what that payment might be.
For a more comprehensive look at your personal situation, complete our online assessement
Wonderful, accessible, way-too-easy-to-get, way-too-hard-to-pay-off, credit.
It makes the world go around and sometimes makes our head spin. It can be our best friend or our worst enemy. Using it gives you a temporary high. Owing it gives you a long-lasting headache.
Where am I going with this you ask? I shall tell you.
You sort of fall into credit use much like you fall into those early relationships of our youth. Often it happens by chance (an offer in the mail or you’re walking through the mall), it looks exciting, promising. You focus on how it will enrich your life and enable you to move towards your goals (owning a car, house, travelling, etc.). And for a long time all is good. Its manageable. And because you are managing it, you get offers for more and better credit (ok , not sure if that parallels so much in relationships). And then! One day! You realize! The honeymoon is over and you actually have to work a bit harder, make some sacrifices, actually live on – dare I say it? – a budget.
At some point throughout that process you have what Oprah calls an Aha Moment and you realize just how much credit (or the credit system) has used you versus you using credit. And you settle in – hopefully – to a new relationship with credit. A mature relationship. Sometimes it lasts (you reduce or eliminate your debt and change the way you use credit). Sometimes you redefine your relationship (consolidate or enter into a debt-reduction strategy). And sometimes you break up (bankruptcy).
My wish for you is that you develop a strong, eyes-open, respectful relationship right off the bat. Or at least work through the issues early enough to learn, and grow, and make credit your friend. If your relationship with credit is on rocky terrain, seek help early. I believe marriage counselling should be mandatory before signing the marriage certificate. And financial counselling should be mandatory before signing the credit application.
Feel free to visit our site for guidance on financial issues www.haleyrustee.ca , or contact me and ask me how I can help you maryann@haleytrustee.ca
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