Posted On: October 9, 2024

Credit counselling in Toronto is quite popular and widely utilised by many Torontonians facing financial challenges and looking for effective ways to manage and reduce debt.

Debt management is a major concern for many people in Toronto. If you have debt – you’re certainly not alone. As of the second quarter of 2024, the average Canadian household carries a significant amount of debt. According to Equifax Canada’s latest Market Pulse Consumer Credit Trends and Insights Report, consumer debt levels reached $2.5 trillion in the second quarter of 2024, reflecting a 4.2 percent increase from the same period in 2023.

The average Canadian owes at least one of these most common types of debt:

• credit card debt,
• mortgages,
• lines of credit,
• car loans, and
• personal loans.

As the cost of living continues to rise and personal debt levels climb, the need for effective financial management becomes increasingly crucial. Among the many solutions available for debt relief in Canada, credit counselling has emerged as a widely used resource in Toronto for those struggling with debt. Credit counselling provides a structured approach to addressing debt issues and finding long-term, sustainable solutions to manage debt effectively.

Understanding Credit Counseling

Credit counselling in Toronto is also commonly known as debt counselling or financial counselling. The process involves professional guidance for individuals having trouble paying back their debt or keeping up with monthly payments. Trained credit counsellors help clients understand their financial situation, create budget plans, and explore options for managing or eliminating debt. Services typically include:

• One-on-one counselling
• Financial education courses on budgeting advice and using credit wisely
• Negotiating with creditors
• Debt management plans (DMP)

The Growing Demand for Credit Counselling

The popularity of credit counselling services in Toronto can be attributed to several factors:

1. Rising Cost of Living – The cost of living in Toronto has been climbing steadily over the years, with many individuals and families finding themselves struggling with debt due to housing costs, utilities, transportation, and other living expenses. This has contributed to financial strain for many residents, which has led to increased debt levels which eventually pushed them to seek professional help.
2. High Levels of Consumer Debt – Statistics Canada reports that Canadian household debt levels are among the highest in the developed world. In Toronto, this trend is particularly pronounced due to the city’s high-income disparities and expensive lifestyle. Many residents are finding themselves overwhelmed by credit card debt, student loans, and other financial obligations and proactively want to find ways to make their debt more manageable.
3. Economic Uncertainty – Economic fluctuations, job instability, and unexpected financial emergencies can impact individuals’ ability to manage debt effectively. The COVID-19 pandemic, for instance, exposed many individuals and families to unforeseen financial difficulties, leading to a surge in demand for credit counselling services in Toronto.
4. Increased Awareness and Accessibility -There is a growing awareness among Torontonians about the benefits of seeking professional help for debt management. Counselling services are accessible through various channels, including non-profit organisations, private firms, and government-supported agencies.
5. Range of Services Offered – Credit counselling services in Toronto offer a range of services that can be tailored to an individual’s unique financial situation. These services can include one on one evaluation,  debt consolidation, budgeting advice, negotiation with creditors, and education on financial literacy. These comprehensive services appeal to individuals seeking holistic solutions to their financial issues.
6. Regulatory Support – The regulatory framework in Ontario ensures that credit counselling services adhere to ethical standards and consumer protection laws. This gives clients confidence that they are receiving reputable and trustworthy guidance from licensed debt professionals.
7. Community Support – There is a supportive community environment in Toronto that encourages individuals to seek help for financial difficulties without stigma. Local organisations and government initiatives often promote financial literacy and the wide availability of credit counselling services.
8. Alternative to Bankruptcy – Credit counselling offers an alternative to bankruptcy for individuals who may be struggling with debt but wish to avoid the long-term financial consequences of bankruptcy. Trained counsellors negotiate with creditors to develop manageable repayment plans and work with clients to improve financial management skills.

Accessibility of Credit Counseling Services

In Toronto, credit counselling services are easily accessible through various channels, highlighting its growing popularity and the increasing awareness of these resources.

1. Non-Profit Organisations – Many credit counselling services in Toronto are offered by non-profit organisations. These entities provide free or low-cost services, making them an attractive option for individuals who may not be able to afford private counselling. Examples include Credit Canada and the Toronto District School Board’s Financial Literacy Program.
2. Private Counselling Firms – Private debt counselling firms also serve the Toronto market, offering personalised services for a fee. These firms often provide tailored debt management plans and more intensive one-on-one counselling.
3. Online Resources – With the rise of digital platforms, many people turn to online credit counselling services. Online platforms offer virtual consultations, budgeting tools, and educational resources, making it convenient for Toronto residents to access help from their homes.
4. Community Support Programs – Local community centers and social service organisations often partner with debt counselling services to provide support to underserved populations. This network of support enhances accessibility and helps address the diverse needs of Toronto’s residents.

Effectiveness of Credit Counselling

Evaluating the effectiveness of credit counselling can be done through several key indicators. These measures help gauge whether the counselling services are achieving their intended outcomes and providing value to clients. Some important indicators to consider include:

1. Debt Reduction – Tracking the amount of debt reduced or eliminated by clients during or after participating in a credit counselling program is a key indicator of effectiveness. Many individuals who engage in credit counselling see a significant reduction in their debt levels over time. Debt management plans, which are a common feature of counselling services, allow clients to consolidate their debts and make manageable monthly payments, often at reduced interest rates.
2. Completion Rates – The percentage of clients who complete their credit counselling or debt management programs as planned can be a good indicator of program effectiveness. High completion rates suggest that clients find the programs valuable and are able to follow through.
3. Budgeting and Financial Management Skills – Credit counselling in Toronto also emphasises financial education, helping clients develop better money management skills. This education can lead to improved budgeting, saving habits, and a better understanding of credit management. Assessing clients’ ability to manage their budgets, track expenses, and follow financial plans can indicate how well the credit counselling program has helped improve their financial literacy and management skills.
4. Client Satisfaction – Feedback from clients often highlights the positive impact of debt counselling. Many report feeling more in control of their finances and more confident in their ability to manage money effectively. Assessing personal goals such as obtaining a loan or improving their financial stability, can reflect the tangible benefits of these services.
5. Financial Stability – Improvements in overall financial stability, such as consistent income, better savings habits, and reduced reliance on credit, can signal the effectiveness of the counselling services.
6. Credit Score Improvement – Monitoring changes in credit scores before and after credit counselling can provide a clear measure of the program’s impact on clients’ financial health. Compare the credit score at different stages of the program to measure improvement. Significant positive changes,  such as an increase in credit score over time,  can be a good indicator that the client is managing their finances more effectively.

Challenges and Considerations

Credit counselling can be highly beneficial for many people struggling with debt, but it also comes with its own set of challenges. Here are some important factors to consider:

1. Cost of Services – While non-profit organisations provide many free or low-cost services, private debt counselling firms often charge fees. For individuals already struggling financially, these costs can be a barrier to getting the help they need. It’s important to understand the cost structure and ensure that the fees are transparent and reasonable.
2. Quality and Consistency of Service – It is important to choose reputable counsellors and organisations that are in good standing with a provincial or national association to ensure you receive effective and ethical support. Provincial or national associations always require members to maintain specific standards of practice.
3. Potential for Scams – As demand for credit counselling services grows, so does the opportunity for fraudulent schemes and scammers looking to exploit individuals seeking financial help. These fraudsters might pose as legitimate credit counsellors or debt relief agencies, promising quick fixes or debt settlements in exchange for upfront fees or personal information. Look carefully into the credentials and reputation of any credit counselling service. Verify if they are accredited by a recognized body, such as the Canadian Association of Credit Counselling Services (CACCS) or the Credit Counselling Canada (CCC).  Ensure that the contact information of the credit counselling service is legitimate and matches what is listed on their official website. Be wary of organisations that require large upfront payments or fees before providing any services. Legitimate services usually offer free initial consultations. Check reviews and feedback from other clients. Be cautious if there are many negative reviews.

What Can You Do if Your Debt is Too High?

If your level of debt is higher than the average and you’re having difficulty managing it, consider seeking professional help through a trained credit counsellor who can help you:

• Evaluate your current financial situation,
• Identify strategies to reduce debt and increase savings,
• Prioritise repayment if you have multiple debts through debt consolidation,
• Create a plan that aligns with both your short- and long-term goals, and
• Negotiate with your credit providers on your behalf to get lower interest rates and reduced monthly instalments.

As financial challenges continue to evolve, credit counselling in Toronto will likely remain a popular and vital service in supporting many individuals and families to overcome financial difficulties and build a more secure financial future.

Our licensed insolvency trustees at Richard Killen and Associates can give expert advice on all your options to a debt-free life and ensure you will not be making your financial situation any worse. Contact us today.

Posted On: August 15, 2024

When struggling to manage multiple debts and faced with a choice between debt consolidation vs consumer proposal, which option is the best way to get out of debt?

In today’s economic landscape, many Canadians find themselves facing overwhelming debt burdens. In fact, according to the latest statistics, about 45 percent of Canadians are just $200 away from failing to meet their financial obligations.

If debts are becoming overwhelming, it becomes crucial to find an effective way to regain financial control. Two common options that Canadian borrowers consider are debt consolidation and consumer proposals. Both offer pathways to debt relief, but they operate differently and suit different financial situations. Understanding the nuances between these options is essential for making informed decisions about managing your finances.

What is Debt Consolidation?

Debt consolidation involves combining multiple debts into a single, larger debt. This is typically achieved by taking out a new loan, often at a lower interest rate than the existing debts, and using it to pay off all outstanding balances. The main goal of debt consolidation is to simplify and lower the monthly payments, and potentially lower the overall interest rate, making it easier for the debtor to pay his or her way out of debt.

Pros of Debt Consolidation:

• Simplified Payments – Instead of managing multiple types of debts, with multiple creditors, due dates, repayment terms and interest rates, debt consolidation combines everything into one loan. You’ll only be making a single monthly payment, which makes it easier to manage the debt and make payments on time.
• Lower Interest Rates – If you qualify for a lower interest rate on the consolidation loan, you could save money on interest payments over time.
• Preservation of Credit Score – As long as you make payments on time, debt consolidation can help preserve your credit score.

Cons of Debt Consolidation:

• Requires Good Credit – Qualifying for a consolidation loan with favorable terms usually requires a decent credit score. According to Equifax, borrowers with a credit score of 740 or higher typically receive the best interest rates. For those with a credit score of under 670, debt consolidation may not be a good option because lenders may potentially give high interest rates to high-risk borrowers.
• Potential for Additional Debt – If you can’t consolidate ALL your debts you could simply be adding to your debt load and possibly worsen your financial situation.

What is a Consumer Proposal?

A Consumer Proposal works similarly to a debt consolidation loan by combining all debts into a single monthly payment that pays all the debts off gradually over time. However, unlike debt consolidation loans, a Consumer Proposal does not involve borrowing or taking on a new loan in order to consolidate debt. You just make an offer to your creditors to settle the whole amount you owe. They can accept it or negotiate the amount with you, but if you reach an agreement with them (as the vast majority of people do) it will get you out of debt.

The offer you make must be something you can actually do, otherwise the proposal settlement will fail. So most proposals are made for a percentage of your total debt. It’s what people can afford.

Consumer Proposals are usually arranged with monthly payments and can significantly decrease the total debt burden, sometimes by as much as 80% or more.

A Consumer Proposal is a formal agreement made between you and your creditors through a licensed insolvency trustee (LIT) and is ratified by the court, which ensures that it is legally binding.

Pros of Consumer Proposals:

• Legal Protection – A crucial aspect of a consumer proposal is the automatic stay of proceedings. This forces your creditors to respond to your consumer proposal. If they ignore it the proposal will be deemed accepted and ratified by the court.
• Stress Relief – The simple filing of the consumer proposal usually stops all collection calls and will stop any legal proceedings immediately.
• Fixed Amount – A consumer proposal is usually approved for a fixed sum. So you know exactly how much you have to pay to get out of debt.
• All Debts Included – Once a consumer proposal is accepted by the creditors and approved by the court, all your unsecured creditors are legally bound to the terms of the proposal.
• No Interest Charges – In a consumer proposal there are no interest charges. The costs of the proposal, such as the trustee’s fees, are paid from the amount you offer.
• Preservation of Assets – By proposing a structured repayment plan through a consumer proposal, you aim to satisfy creditors without resorting to selling off exempt assets such as an RRSP. This protects your essential possessions and allows you to maintain stability in your quality of life.

Cons of Consumer Proposals:

• Credit Impact – People often ask which is worse for my credit score: a consumer proposal or a bankruptcy. The answer is they both have a negative impact, but the proposal is usually somewhat less than a bankruptcy.
• Creditor Acceptance – For the consumer proposal to be accepted, creditors must agree to the proposal. Creditors representing at least 50% of your total debt must vote in favor of the proposal. Once accepted, the proposal becomes legally binding on all creditors, including those who voted against it. If they reject it, you may need to consider alternative debt relief options.
• Some Negotiation may be needed – You start a consumer proposal by make a settlement offer to all your unsecured creditors – usually basing your offer not on how much you owe, but how much can you afford to pay every month. Your creditors are not obligated to accept your offer, but because of the Stay of Proceedings and the alternative of a bankruptcy they do have some incentive to try to arrive at a mutually agreeable settlement. It may involve some negotiations (carried out by the trustee) but 96% of consumer proposals are eventually accepted.

Choosing Between Debt Consolidation and Consumer Proposals

The decision between debt consolidation and a consumer proposal depends on various factors, including your total debt amount, income level, credit score, and overall financial goals. The only way you can get all the information you may need to decide which is better for you is to obtain a proper assessment by a Licensed Insolvency Trustee.

Posted On: August 1, 2024

Voluntary car surrender in Canada in general can be a viable option for individuals facing financial difficulties, or those looking to get rid of a vehicle they no longer need or afford.

Owning a car is often perceived as a symbol of independence and convenience, providing individuals with a sense of personal safety and security, the freedom to travel at any time and generally making life easier. However, circumstances can change unexpectedly, and car owners can fall behind on their car loan payments and be forced to reevaluate their transportation needs and decide to part with the vehicle. In such situations, voluntary car surrender will be a potential solution. There will be others, such as selling the car, but returning the car may be simpler and more effective. It will depend on a lot of different factors.

Surrendering your car can be a difficult decision and the process can be complex, but it’s essential that you understand all the implications before proceeding.

Here’s what you need to know:

The Basics of Voluntary Car Surrender

Voluntary car surrender (AKA voluntary repossession) basically requires you, the borrower, to willingly return the vehicle to the lender. The process involves choosing to inform your lender that you can no longer make payments and intend to return the vehicle.

The decision to voluntarily surrender the car generally arises when you find yourself unable to afford the monthly payments, or when you wish to terminate a loan or lease agreement. Unlike involuntary repossession, where the lender seizes the vehicle after loan payments have become delinquent, voluntary surrender is initiated by you, the borrower.

How Does Voluntary Car Repossession Work?

Most car loans are secured by the car itself. This means that when you take on the loan the lender will require that the vehicle to be put up as collateral (or security) for the loan agreement. When you default on the loan by falling behind with the monthly payments or by letting the insurance on the car lapse, it will put the car at risk of repossession, meaning the lender can claim the vehicle without notice. Mind you it usually doesn’t happen until you fall more than one or two months.

If you can no longer make the payments, you can choose to initiate a voluntary repossession and pro-actively contact the lender to discuss options and consequences, as well as work out the arrangements to deliver the car to the lender. There are potential complications.

As soon as the vehicle is returned to the lender they will attempt to sell it and apply the sale proceeds against what’s still owing on the loan. However, it’s important to know that even if the car is returned voluntarily you will still be responsible for the balance owing if the loan didn’t get paid off in full by the sale proceeds.

In fact, the vast majority of these situations results in you owing something, sometimes quite a lot, to the lender – and the car is now gone!

To add insult to injury, so to speak, you will probably also be responsible for repossession fees, storage fees, and other costs incurred by the lender when the vehicle is sold at auction.

Impact on Credit Score

A significant concern associated with voluntary car surrender is its potential impact on credit scores. While surrendering the vehicle may seem like a responsible proactive step to benefit all concerned, it will damage your credit score.

The surrender is usually reported to credit bureau as a “voluntary repossession”, the key word being repossession. Depending on your previous credit history, it can drop your score from between 60 to 240 points and take your credit rating down to an R-8, which is just above the rating for a bankruptcy filing. A repossession also stays on your credit report for up to seven years. This can have negative repercussions on your future ability to secure another car loan, or other loans or credit cards. It can have a large impact on your future financial flexibility.

The Importance of Communication with Lenders

Before proceeding with voluntary car surrender, it is essential for borrowers to communicate openly and transparently with their lenders. Lenders may offer alternatives to help borrowers through financial difficulties, such as loan restructuring, payment deferral, or refinancing options. Exploring these alternatives can potentially mitigate the negative impact on the borrower’s credit and financial situation while maintaining a positive relationship with the lender.

Understanding Legal Implications

Voluntary car surrender in Canada is governed by Federal, provincial and territorial consumer protection laws and the terms outlined in the loan or lease agreement. It is crucial for borrowers to familiarize themselves with these laws and terms to understand their rights and obligations fully. Seeking advice from legal professionals specializing in consumer rights or debt management can provide valuable insights and guidance, ensuring that borrowers navigate the process within legal boundaries. Make sure you talk to a Licensed Insolvency Trustee.

Evaluating Vehicle Condition

The condition of the vehicle plays a significant role in determining its value and any potential deficiency balance owed by the borrower. Returning the car in good condition is advisable, as it can maximize its resale value and minimize any additional costs associated with repairs or maintenance. This includes removing all personal belongings from the vehicle and addressing any necessary maintenance or repairs before surrendering it to the lender.

The Importance of Documentation

Keeping thorough documentation of the voluntary surrender process is essential for your protection and to avoid problems. This includes maintaining copies of all correspondence with the lender, agreements reached, confirmation of the surrender, and any paperwork related to the transaction. Documentation serves as evidence in case of disputes or discrepancies, providing a clear record of your actions and communications throughout the process.

Planning for Future Borrowing

Borrowers should also consider the long-term implications of voluntary car surrender on their financial future. While it may initially impact your credit score, you can recover from it by taking proactive steps to address your financial problems and responsibly taking on smart strategies that can help to rebuild credit over time. These strategies may involve establishing a solid payment history, reducing any outstanding debts, keeping credit utilization low and demonstrating responsible financial behavior to lenders.

Exploring Alternatives to Voluntary Surrender

Before opting for voluntary surrender, you should first explore alternative solutions that may better suit your financial circumstances. These alternatives may include selling your car privately, trading it in for a more affordable option, refinancing or seeking assistance from credit counseling agencies. By exploring other alternatives, you may be able to modify your loan terms to help you keep up with future payments as well as find a solution that addresses your other financial needs to keep you from further defaulting while also minimizing the impact on your credit report and overall financial well-being.

Seeking Professional Advice and Guidance

Given the complexities and potential consequences of voluntary car surrender, seeking professional advice is advisable. Financial advisors, credit counselors, and experts such as Licensed Insolvency Trustees can provide personalized guidance based on your specific circumstances. These debt professionals can help you understand your options, navigate the process effectively and make informed decisions that align with your financial goals and priorities.

Empowering Decision-Making

Voluntary car surrender in Canada can be a complex and challenging decision for many borrowers. Before proceeding, it is essential to thoroughly understand the process, implications, and available alternatives. By communicating with lenders, seeking professional advice, and exploring all options, borrowers can make informed decisions that best suit their financial situation and goals. Ultimately, voluntary car surrender in Canada should be approached thoughtfully and responsibly, with a focus on minimizing the impact on credit and securing a stable financial future.

If your debt levels have become unmanageable and you are sure that you can no longer afford to keep your car, the first step to take is to speak to a Licensed Insolvency Trustee (LIT) who can help you get a clearer picture of your financial situation and what debt management solutions are available to you. It may be possible for a Licensed Insolvency Trustee to help you work out a few adjustments on your budget and your overall debt obligations to make it much easier to make your car repayments so you can avoid a voluntary repossession altogether.

Posted On: April 14, 2020

The world has been brought almost to a stop as we focus on fighting the spread of the coronavirus. Throughout Canada, we see business after business shut down and hundreds of thousands of people laid off. Some closures may be temporary, for some it may be permanent as they may not be able to recover after the crisis has abated. 

While these closures may be necessary to deal with the virus, there are significant financial consequences to individuals and families. For Canadians who are living paycheck to paycheck this means that even a temporary reduction is going to cause a lot of problems.

If you are facing unpaid bills during this uncertain time, what debt should you focus on? What bills do you choose to pay first? Here are a few things to consider: 

• If you are working, continue paying your bills and debts on time. Avoid the deferral programs if you do not need the financial help now, just go on and keep making those payments. If nothing else, make sure to make at least your minimum payments to avoid late charges, penalties, and potential negative hits to your credit.
• If you have been laid off or expect to be out of work in the coming weeks, you may need to look at prioritizing payments. 

FOCUS ON HIGH PRIORITIES

High priority debts are generally the bills where a service will be shut off or an asset is in danger of repossession.

Utilities

You need to pay your utility bills to keep the lights on, the water running, and the gas line open  especially during the lockdown period and you have to stay at home. These bills are top priority so you can keep your home safe and healthy in these unreliable times. 

If you receive your hydro bill, and fear you cannot make the payment for the coming months, you may be protected by the disconnection ban, at least until July 31. 

In Ontario, the Ontario Energy Board (OEB) has implemented protective measures that prohibits all electricity distributors in the province from disconnecting power because of non-payment until July 31. There will also be a rollback on electricity rates as part of cost-saving measures in response to the coronavirus outbreak. 

To find out if you are covered by the disconnection ban and the rollback on electricity rates, read the full details here. 

Communication Bills

You may also want to prioritize your cell phone bill and internet bill especially in the lockdown period or if you are self-quarantining at home. These will be major channels for you to be able to access information about what’s happening globally and stay in touch with family and friends, so keep paying them to keep the lines open.

Rent

Your home has become your greatest protection against COVID-19. If you are one of the 33% of Canadian households who are renting their homes, understandably you will want to focus on paying your rent as high priority. If you’re struggling to make the rent owing to the impact of coronavirus, don’t panic. Several provinces, including Ontario, Nova Scotia and New Brunswick have already issued temporary bans on evictions. This means you won’t be kicked out for as long as the eviction ban is in effect, although your landlord may still issue a notice of late payment of rent and may file the applications when the court resumes. 

If you think you can’t pay your rent this month, the best thing to do is to talk with your landlord. Offer to pay what you can, even if it’s only part of the rent. This will help ensure you are not too far behind when things return to normal. 

If this crisis looks like it will last for months, and it may, contact us so we can look at your situation in total and perhaps help you deal with the rent arrears then.

If you are having issues with your landlord, please find more information and resources on our blog’s section for Housing Help.

Our general advice is if you don’t have enough money to pay all of the bills, focus first on paying your utilities and rent before paying the other bills such as credit cards, medical bills, or other unsecured debts. As soon as you can, contact your landlord and service providers and see what they can do to assist you.

SECURED CAR LOANS AND HOMES LOANS

If you are paying a debt that is secured by an asset like your home or your vehicle the debt is classified as a secured debt guaranteed by the asset. This means that there are real consequences for not paying these debts – you risk having your car repossessed if you can’t make car loan payments and you can risk losing your home for nonpayment of mortgages. Hence, these are important, but not very immediate needs, to focus on as well. 

What to do If you are falling behind on car payments

According to Ontario law, if you have been behind on the payments of your car loan, the lender has the legal authority to repossess the vehicle, and sell it to recover the amount you owe them. After the car is sold, if the amount is not enough to cover your car lease you will still have to pay the balance,  and the lender could sue you and potentially garnish your wages.

Under normal circumstances, most lenders will not repossess a car until it is delinquent which means no payments have been made for 60-90 days. You can also take comfort in the fact that banks and lenders do not want to repossess your car as it usually entails that they take a financial loss. The repossession of a car is literally taken as the last resort. Hopefully, this will give you time to catch up on any missed payments. 

In light of COVID-19 many of Canada’s banks and lending institutions are much more sympathetic to clients whose finances have been impacted by the health crisis and most are providing a deferment of payment on car loans for up to six months. If you see yourself starting to miss payments on your car lease, the best thing to do is reach out to your bank or car lender so they can assess your situation and see how to best help you. 

Remember that banks and car lenders greatly prefer to keep the contract going rather than repossess the vehicle or house. They will normally be very willing to work on arranging a payment schedule. 

What to do If you are falling behind on mortgage payments

In Ontario, a mortgage lender has the right to take possession of your home using either the power of sale or through a foreclosure if you default on your housing loan.

The good news is Canada’s banks and lending institutions are postponing mortgage payments for up to 6 months for those affected by the current health crisis. This will give you much needed time to catch up on payments.

The most reliable information on your mortgage options can be found at the Government of Canada and CMHC websites.

Another thing to keep in mind, lenders generally never start taking action for a power of sale or foreclosure as soon as you miss a single payment. The process for both is expensive and time consuming. They would rather work out an alternate payment plan to bring your mortgage back into good standing. If you are not able to pay your mortgage, the best advice is to contact your lender directly. They’ll look at your options and come up with a plan that will work best for your financial situation.

It is important to keep secure loan payments current, whether that’s a home loan or a car lease or some other loan that is tied to a valuable asset. If you think you’ll be unable to make an upcoming payment on any of these loans, the first thing to do is to reach out to your lender before you miss the payment and find out about deferrals or partial payments that can buy you some time.  The key is to keep the loan on track so you can keep your assets. 

CREDIT CARD DEBTS, MEDICAL BILLS, AND OTHER UNSECURED DEBTS

We do not advise anyone to stop payments on their credit card or other unsecured debts. However, we would put them at or near the bottom of the priority list when you are facing a financial crisis, such as now. The only reason we assess it this way is because there is the least immediate consequence for missing a few payments. With COVID-19 they will likely be the most flexible creditors to deal with. However, don’t ignore them either. If you can’t make a debt payment you should let them know so they won’t think they’re being forgotten or ignored.

In any case, the reality is that you may probably rely on your credit card or lines of credit to meet your immediate needs for food and medication because of your cash flow situation, and so you will have to keep on making payments to keep the credit lines open. 

The good news is most credit card lenders are also offering up to six-month deferrals on credit card payments. This will give you time to reach out to your credit card company and possibly negotiate a payment plan that is best for your situation. 

If you are worried about the uncertainty of your household finances right now and are having trouble organizing what debt to pay first during this financial emergency, make some priorities:

1. Focus on meeting your immediate needs for food and medication
2. Give importance to high priority utility bills like hydro, gas, internet
3. Pay what you can on your rent or mortgage and talk with your landlord or mortgage lender about deferrals or partial payments.
4. Meet the minimum on credit card payments and be very careful about taking on new debt, and if you must, make sure to keep your expenses and balances as low as you can.

If you have a lot of debt and are worried about how your finances can cope in this global pandemic, the best thing you can do right now is to talk with a Licensed Insolvency Trustee. We encourage you to be proactive so you can keep the best options open as long as possible. 

We at Richard Killen and Associates continue to be committed to providing you with the best guidance and advice as you battle through this COVID-19 financial emergency. Our phones, emails and video chats remain open, call us at 1-888-545-5365 for a free consultation now.

Posted On: January 24, 2020

You’re now looking at your bank statements and credit card bills with wide eyes, and the amount of cash you’ve blown this past December is finally starting to sink in. It gets you wondering: What can I do to pay off holiday credit card debt quickly?

It can be very scary to go into the New Year with a hefty credit card debt weighing over your shoulder. For too many of us, the cycle of credit card debt starts in the holiday season and it’s the type of debt that’s difficult to recover from. When you only make the minimum payments and the interest charges continue to increase over time, it will take much, much longer to pay it off and you could end up paying triple what you originally paid for the item that you bought. In fact, it’s not uncommon to hear of people who are still paying down holiday credit card debt two or three years later, says Jeffrey F. Schwartz, executive director of Consolidated Credit Counseling Services of Canada.

It’s all too easy to go overboard during the holidays – just dip into your credit card, enter its numbers at the checkout and you’ve got your purchase done. The ease of credit availability is why Canadians, particularly millennials, love to use credit cards during the holidays.

Over a third of Canadian millennials expect to go into debt this holiday season, according to a survey from Credit Karma. Add to this, 62% of Canadian millennials will rack up more than $500 in debt over the holidays with most of them planning to do this with credit cards, and some by using personal loans.

Those surveyed also said that it would likely take them five months or more to pay the debt off. Only 42% of shoppers said they would pay off that debt in three months or less.

“What we’ve seen in Canada over the last year and a little bit is that Canadians are having a tough time meeting their obligations on their credit card…recent research by financial institutions indicates almost half a million Canadians are behind in their credit card payments by 90 days or more,” says Schwartz.

If you’ve acquired a post-holiday debt problem, what you can do now is make a commitment to pay off holiday credit card debt quickly so you can become financially healthy in the new year.

Here’s how you can do it:

Audit your credit card debt

A crucial first step to do is to add up all your expenses including the interest rates to know the exact total debt you now need to pay off. Thinking it’s “around” a certain number is not going to help you understand how much you spent and make an exact plan to pay it off.

Once you’ve taken a look at the numbers, make sure you take the time to identify the root cause of why you’ve accumulated so much credit card debt over the holiday season. Don’t stress over it, don’t wallow in guilt over it, because there’s no point beating yourself for taking on debt. Accept the fact that debt happened, and you’re handling it and looking for resources to help you move forward.

Make a realistic debt payment plan

If you have a small amount of holiday-related debt you will need to make sure to pay it all off in January. If possible knock all your holiday debt out quickly in a month or two, three months at the most. If it will take any longer than this, it’s time to create a realistic plan to eliminate the debt as quickly as possible. Paying down holiday debt in two or three years isn’t worth the unease and sleepless nights. If you’re going to pay just the minimum monthly payment, you’re never going to get out of debt. And, it’s also not realistic to altogether stop spending for the duration of your debt repayment, especially if it’s going to take longer than a month or two.

A realistic debt payment plan takes into account that in real life you will spend for things like the occasional coffee or takeout order, and so you will need to factor this in on what you expect to spend in a normal month including fixed costs for your housing expenses, food, and bills plus your current savings and debt payments.

The difference between paying your holiday credit card debt off in three to six months and in two years can be huge, and so the aim is to zero out the debt as quickly as possible. Make more than the minimum payment wherever possible. If the minimum amount is all you can afford now, then pay that. Don’t stop paying, or you’ll get into deeper debt trouble. Focus on paying off your most expensive debt first, which is the one with the highest interest rate, and then move on to the one with the next highest interest rate and so forth until your debt has gone down. Consider if a balance transfer credit card might be a good move in helping you curtail holiday credit card debt. A debt consolidation loan can also be an option if it can result in lowering your interest rates.

Ask for help

Don’t be ashamed to discuss your financial situation with your partner and other significant people in your life. In fact, get the whole family involved if possible. You’ll be surprised how resilient kids can be and often they will have some really creative ideas on how to cut back on spending habits. This will take some of the stress and pressure of dealing with debt on your own.

Getting professional help from trusted financial experts like an or a licensed insolvency trustee can also be beneficial in helping to put your total debt picture in perspective. You may think your debt problem is unsolvable, but these debt experts can help you find ways to tackle your debt in payments you can afford.

Your best course of action to pay off holiday credit card debt quickly is to relax, take a deep breath, take an objective look at your situation and then figure out what you need to do to fix it. Don’t avoid the problem as it’s going to catch up on you anyway sooner or later. Face the debt head-on, and do everything you can do to get out of debt quickly so you can enjoy the rest of the year free of debt.

Posted On: November 21, 2019

Posted On: December 21, 2018

If you are struggling with debt, you are certainly not alone. Most Canadians, if not all, have debt. Some of us have just a little bit of debt and that’s completely normal, and we must know how to take measures to keep it at a manageable level and avoid becoming trapped in a cycle of debt.

On the other hand, there are also some of us who have a large amount of debt and it’s creating stressful financial issues as we try and juggle payments on the debts and put more effort into meeting the monthly payments on time.

And then there are a number of Canadians, unfortunately, who have out-of-control debt that has really become a burdensome problem and causing them to feel a deep sense of shame, guilt, and embarrassment to the point that they suffer physical and psychological health issues, such as anxiety and depression.

Managing debt is the very first step to prevent it from getting out of control. That’s really the rule of thumb when you take on credit. Once you take on any type of debt, it can affect your entire financial life. That’s why it’s so important that you take the steps towards being the one in control of your debt, instead of debt taking over your life. If you are in control of your debt, it will make you feel confident about being able to pay it off in a timely manner and you won’t be afraid about facing any financial demons over time.

Here are two important things to understand to help you always take control of your debt:

Know how much you owe.

Monitor your debt so that you are always aware of how much you owe. You monitor your debt simply by creating a detailed budget to plan your expenses.  A budget will provide very important information for effective debt management. It will show you:

• The net income you have available to spend.
• What your regular expenses are (e.g. rent, childcare, food, transportation, savings).
• The total of the payments you have to make each month for your debts (e.g. credit card debts, mortgage, car loan and other loans).

Make sure you list each of your debts, one by one, indicating the total amount each creditor it is owed, the monthly payment you need to make, and when the due date is. Check your credit report to verify all your existing debts and to make sure you didn’t miss putting something on your list. Total up your expenses and payments and subtract this from your net monthly income. Depending on how much money you have left over at the end of the month, you’ll need to decide whether you have too much debt or if you feel comfortable with the level of debt you have now. Make it a point to update your debt list as you make payments on the due date. This will help you to stay aware of how much you owe all the time and prevent you from making any financial decisions that will lead to potential debt problems in future.

Recognize if you need help.

For some people, following a realistic budget to pay off debts and plan expenses is enough for them to take control of their debt. However, for others who have bigger debt problems and budgeting is not enough, there may be a need to create a manageable repayment plan to help you pay your debt and other bills each month in order to regain control of your finances.

As soon as you find that you’re struggling with payments and feel that you may have a potential issue on your hands, maybe you’ve made a late payment or think you’re not going to make a payment on time, reach out to your lender right away to find out if they can offer some ways for you to catch up or stay on time with payments. You’d be surprised that there are a number of creditors who are more than willing to work with borrowers who reach out to them for help before they are way behind on payments.  Creditors may lower your interest rate, reduce your payment or even temporarily suspend your payments for a number of months until you get back on your feet. The key is not to wait until you’re delinquent because you have more options if you have no missed payments.

If you really cannot pay even the minimum payments on your debts or cannot even meet your basic monthly needs such as buy food or pay the electric bill, then your debt problems are more severe and you may need a more permanent solution to help reduce or eliminate your debts entirely.

At this point, the best thing you can do to take control of your debt is to talk to a debt professional. A licensed insolvency trustee is the only debt expert in Canada licensed by the federal government to give advice about other options for debt relief such as a debt management plan, a consumer proposal or a bankruptcy. Each of these debt solutions have advantages and disadvantages and a trustee will be able to explain each option thoroughly and answer any questions you may have. The trustee will do an in-depth assessment of your financial situation and be able to make recommendations on the best option to solve your debt problems. By getting the help you need, you can get back in the driver’s seat and take back control of debt with some good advice instead of ignoring your debt problem and making matters worse like leading you to declaring bankruptcy.

Taking control of debt is a commitment. You need to be able to manage it responsibly. Even if you have just a little bit of debt, you need to exercise restraint to keep it at a level you are able to manage. If you have more than just a little debt, you need a little more self-discipline to have more control over your debts. If you have more debt than you can handle, it would require you to seek the help you need and make certain sacrifices to get back on top of things.

Debt problems and financial challenges are inevitable in life.  They will happen to each one of us at some level and at some point in our life. It’s important to realize that there are solutions to debt problems no matter how terrible your situation may seem to be. There is no need to spend your entire life in debt and allow it to ruin your other financial goals. All you need to do is make the decision to take control of debt and do all that is necessary to improve your financial situation.

Posted On: December 18, 2018

If you use credit with good judgment and with a solid plan to pay it off, you stand a good chance of profiting from the funds you borrowed. It’s important to remember that when it comes to taking on debt, you should approach the decision carefully and only take on debts that will grow your financial worth and/or positively affect your life. The best way to know how to control debt — along with most things in our lives — is to look before you leap. Be sure to ask yourself if the credit is necessary, what will it involve, is there a better way to get what you want than by incurring this debt and how fast will you be able to get rid of it. For example, ask yourself:

• What is its purpose, i.e. the long-term goals and benefits you will achieve as a result of taking on the debt?
• How you will pay it back?
• And, where it fits within your cash-flow budget?

One way to ensure that taking on new debt won’t be an issue for you is to understand the difference between good debt and not-so-good debt.

Good debt generally has the following qualities:

• It is taken on for something that will likely not lose value over time
• It will leave us better off in the long-term and provide us with lasting and, with luck, ever-increasing benefits
• The debt will not have negative consequences on our present and near-future overall financial position
• It will help us manage our finances more effectively
• It will help leverage your wealth
• The debt is used in a responsible way, with details carefully thought out and with the long- term view in mind
• There is a clear and specific reason for taking out the debt
• There is a realistic plan for paying back the debt as quickly as possible
• The debt was obtained through the cheapest and most effective borrowing method available, with the most reasonable interest rate, term and charges

Not-so-good debt has the following features:

• It feels like free money
• It often provides some form of instant gratification
• It will not provide some increase in value to us over time
• It reduces your wealth or offers no opportunities to grow wealth
• It keeps growing, because of the interest rate and supplementary charges
• It seems like it will never be paid off
• It may have an unrealistic repayment plan

How to stay out of debt

The fact is that no matter how much our financial life may have jumped the rails, you always have the power to get it back on track, regain control and avoid debt situations like bankruptcy. You’ve also seen how much of a role our attitude plays in grasping that empowerment. Seeing the glass to be half-full rather than half-empty can make all the difference in the world. If you can manage your credit wisely, you can enjoy the many benefits it offers. As you know, it can be a very useful tool by helping you accomplish important life goals, boost your net worth over time and enhance your quality of life, just so long as you remain the one in charge.

The next logical question likely is: “What can I do to make sure that I do remain the one in control of my debt?”  Of course, the short flippant answer is: don’t borrow. But as we’ve already seen, there are times that taking on debt will be necessary. The majority of us may see abstention as too lofty a goal. It can be done, but very few of us will be in the envious financial position of having the money to satisfy all our needs, and our wants, without borrowing. The trick will be to manage it properly and not allow it to take control.

Consider sticking the following reminders to your fridge to help keep you on the straight and narrow in 2019:

1. Best way is to stay out of debt completely, don’t borrow full stop. But some are not avoidable:
   • Mortgages
   • Car loans
   • Student Loans
   • Impulse — clothing, food, entertainment
2. f you actually need to take on some debt, what is it that you are trying to accomplish?
   • Have a plan – this is the goal of how you’ll pay of the debt
   • Develop good habits and stick to positive financial routines
   • Most important, learn to manage your cash flow
   • Create a simple cash flow spreadsheet or table; this can also be done through money management software like Intuit Quicken or MS Money
   • Make tracking your money an automatic process; enter and update your transactions regularly
3. Remember, when it comes to tackling your debt:
   • Be honest with yourself about what went wrong
   • Make a decision to tackle the problem
   • Seek professional advice to understand your options; remember, you’re not alone, keep your pride in check
   • Accept the reality of the situation and stay positive
   • if it becomes too much for you to handle, never be afraid to consult with a debt expert or professional.

Posted On: December 5, 2018

As we get closer to the holiday season, there is one thing we can all agree upon: the holidays stress us out. Whether we’re juggling an increased social calendar, rushing to finish work before the end of the year, or trying to grab that last-minute gift, we’re all feeling somewhat overwhelmed. Along with all this rushing around is a tendency to over spend. We know we probably shouldn’t, but we tend to shrug it off and think about the consequences later. But then the first credit card bill arrives in January and we’re hit with one of the most difficult kind of stresses to deal with: debt stress.

Debt stress has an overarching effect on our lives. It affects our credit score, our financial independence, career choices, well-being and standard of living. In October, Equifax Canada announced that consumer debt continues to rise; in fact it’s up 5.4% since last year. But, we have it in our power to avoid the pitfalls and handle debt properly to achieve positive and desirable results. To ensure we don’t let debt control us it’s important to remember the difference between good debt and not-so-good debt. For example, good debt should leave us better off in the long-term and provide us with lasting benefits. By contrast, not-so-good debt will not provide some increase in value to us over time and tends to reduce our wealth.

Also, another way to control our debt at this time of the year is to understand how much we currently owe. Then we should set a holiday spending budget to ensure we don’t continue to overextend ourselves financially.

Calculate how much cash and debt you currently have: On a spreadsheet or paper and pencil, list your assets (what you own) and your liabilities (what you owe). Now calculate your net worth by adding up your assets and then subtracting your liabilities. If your net worth is positive, you’re doing a great job of managing your money. If your net worth is negative — or “in the red” — it’s time to be honest with yourself and not take on any more debt this holiday season.

Make a list, pay in cash and stick to your plan: Consider this list a mini-budget. Itemize what you realistically think you’ll need over the holidays, like modest gifts, food, refreshments and decorations. Based on the calculation you did above to identify how much you can afford and put an affordable spending limit next to each category. Your goal is to stick to this plan. There are often great sales in November and December, so do your research to find the best bargains.

Enjoy the season: It is possible to have a great festive season without spending a lot of money. Besides, it’s the thought that counts, not the expensive price tag. It’s also possible to use credit with good judgment and with a solid plan to pay it off. Happy holidays!

Richard Killen, Licensed Insolvency Trustee in bankruptcy and author of the new eBook The Glass is Half Full which is now available to be downloaded for free on this page.

Posted On: July 29, 2017

In this video, Richard Killen, a Licensed Insolvency Trustee in bankruptcy Toronto talks about, How long a Bankruptcy lasts.

There tends to be some general misunderstanding about how long a bankruptcy lasts. People hear things about this 7 years business, not being able to obtain credit, and things like that. But, essentially a bankruptcy is a legal process, it has a beginning and it has an end. It begins when you file for bankruptcy. It ends when you are discharged from the bankruptcy and therefore from your debts. So, how long will it last? Well, for the majority of people who have gone bankrupt, it’s their first and hopefully only bankruptcy, they are eligible for the discharge to take place in nine months. If they earn above a certain pre-set amount, an amount the Government sets for your monthly income, then if you earn more than that, bankruptcy might be extended by 12 months, from 9 to 21 months. If you have been bankrupt once before, you are going to be eligible to be discharged automatically in 24 months, not nine. And if you earn again, above that amount, then you will get the 12 months tacked onto that too, so you will end up being bankrupt for 36 months. So, generally speaking, a person goes bankrupt, they are bankrupt either 9 or 24, or 21 or 36 depending on the circumstances. Now, there are other factors that come into play, that could extend the bankruptcy, it would result in a person having to go to court to get their discharge and all that. Now, those are the kinds of things a Trustee needs to explain to you. And there are so many different variables.

If you are uneasy about bankruptcy you should definitely visit a licensed insolvency trustee so that you will be given an advice about your bankruptcy problems.