Doug and Sue’s worst fears confirmed
There are different degrees of over-indebtedness, just as there are many reasons for getting into debt. Some people are unable to repay their debts because of COVID-19 and income interruption, unforeseen large expenses, personal difficulties, or poor money management.
Doug and Sue are in debt. Serious debt. The couple owes $74,000 in unsecured debt. They have little in the way of assets, with the exception of an older car, some household goods, and their clothes. Doug and Sue have no savings left; COVID-19 has wiped them out.
Their debt consists mostly of credit cards and a line of credit with their bank. In addition to high-interest rates, several creditors have levied an account surcharge for over-limit and missed monthly payments. One of their creditors has even raised their annual interest rate from 18% to 23% due to missed payments. They did receive some relief from their creditors due to COVID relief. However, those measures have ended.
Debt collectors are now repeatedly calling, escalating their stress, and illuminating the severity of their situation.
Knowledge is power
When a credit counsellor encounters a family or an individual whose debts exceed their current ability to repay, it is the counsellor’s responsibility to discuss all available options.
These options include:
- Negotiating new terms with creditors (always get this in writing).
- A consolidation loan (borrowing money to pay debt). For some consumers, this may option may not be possible.
- Seeking help from a credit counselling service. If you are facing financial difficulty, speak to a qualified credit counsellor. Not all counsellors are created equal, though. You could also consider a Debt Repayment Program.
- For a small fee, you may wish to speak with a bankruptcy lawyer before speaking with a trustee.
- Declaring insolvency and filing a consumer proposal with a trustee.
- Making an assignment in bankruptcy with a trustee.
Going over the monthly budget for this family, it’s evident Doug and Sue have no ability to pay their creditors. Their budget is short $1,250 per month if they were to pay the creditors.
Unfortunately, there is no ability to create a Debt Repayment Program or offer a consumer proposal to their creditors. Doug and Sue are insolvent, and I recommend looking at bankruptcy as a solution.
Doug fights back the tears while Sue cries quietly. Bankruptcy, their worst fear, has just been confirmed. After analyzing all their financial information, we discovered a solution for Doug and Sue: bankruptcy.
Given their current financial situation, Doug and Sue have not been told to go bankrupt but merely suggested as a good option.
Using credit is an economic fact of life for most consumers; in Canada, there are 75 million Visa and MasterCard users. Nearly 34 million cards, or 46%, carry a balance.
In my experience as a debt counsellor, bankruptcy is not about money but rather circumstances in life. These circumstances are like life itself – temporary.
If you are having problems keeping up with your debt payments and don’t know what to do, contact Solutions because knowledge is power. We are pleased to speak with you!