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Are You in Debt Denial?

Paisley Abbey gargoyle 4Are we just fooling ourselves.? Sure you’re carrying a balance month to month on your credit card, have car payment and a substantial mortgage on your house. But this is normal, right?

No, not necessarily. There’s a good chance you’re fooling yourself. While carrying a balance on your credit card may be par for the course these days, consumer credit rate site RateSupermarket did a poll of 6,000 Canadians and discovered that “27.5% of respondents [were] wrong in how they perceive their debt, with 22% mistakenly believing they owe less than the national average.”

According to RateSupermarket editor Penelope Graham, “Canadians want to believe their credit habits are sustainable and responsible. However, 42% of those who believe their debt is on par with the average are actually carrying more than the norm.”

The flip side of this is that 35.4% of people polled believed they had too much debt when it was actually lower than their peers.

An infographic put together by RateSupermarket points out that the average credit card debt in Canada is $2,627 and that 46% of people who believe they have normal credit card debt have balances exceeding $8,000.

Apparently it’t time for many of us to take a reality check. To overcome debt denial, it’s time to look at your real numbers in black and white. Check your credit card statements, loan papers and bills in arrears and put down on paper how much you owe whom.

You’ll be surprised. Many of us underestimate the size of our debt. Then prioritize your debts by size and urgency and start paying them off.

If you find that the size of your debt has become overwhelming, you may need some sound advice. Come in to a free first meeting at Richard Killen & Associates. We will assess your situation and give you your options.

You’ll know exactly where you stand and what you can do about it. There will be no need to fool yourself.

10 Signs of Debt Trouble

10 Signs of Debt TroubleIf you don’t live in Egypt, being in denial is a bad thing.

Most of us carry some form of debt, whether it’s a car loan or a credit card balance that we just can’t manage to pay off this month. But when does debt load become dangerous?

Well, one sign is when you don’t want to think about it and are kept up nights with stomach-twisting anxiety. The problem scares you so much you put your head in the sand and keep spending as usual.

If you think you have a problem, you probably do. But here are 10 more telling signs that you are sinking too far into a financial morass:

  1. You frequently pay bills after their due date, incurring secondary notices and penalty charges.
  2. Creditors are calling about unpaid bills.
  3. You regularly bounce cheques and overdraw your bank accounts, causing you embarrassment and triggering bank penalties.
  4. You use one credit card to pay the balance on the other, or use it to pay other bills or to buy necessities.
  5. You pay only the minimum balance on credit card bills.
  6. You’ve been denied credit because your debt ratio is too high, or need a co-signor for a loan because you are too much of a risk by yourself.
  7. You hit up family and friends for loans to make ends meet.
  8. You don’t know how much debt you’re really in, because you’re afraid to hear the number.
  9. You hide purchases and debt problems from your family, or you fight a lot with your spouse over debt issues.
  10. An unexpected expense, such as a car repair, sends you into panic mode.

Of course, just not thinking about money problems, or running way from them, doesn’t work. They always manage to find you. The best way to deal with them is head on, using the advice of a trusted expert. At Richard Killen & Associates, we can lead you through the appropriate responses to your particular situation, whether it is debt consolidation, a consumer proposal or bankruptcy.

Contact us for a free consultation – it will be the most stress-relieving call you will ever make.

Money Doesn’t Grow on Trees


For more than 20 years, Bill had run a successful Toronto tree care business, doing tree removals, pruning, planting and much more. His finances fell into the rhythm of the growing season. In the spring, the work would flood in and then taper off into the summer and fall.

In the winter, during his downtime, Bill would use credit cards to finance advertising, equipment purchases, insurance payments and personal expenses. He would depend on the work coming in the following spring to pay things off and get him ahead in the game.

The system  worked until a few years ago, when a perfect storm of bad luck gave his credit heart rot. First the nature of the business had changed, with the Internet killing off traditional advertising channels and flooding the market with cut-rate competition, often under-insured and without much real experience, but still appealing to the price-conscious consumer.

Then there was the economy that had taken a plunge, limiting people’s budgets for yard care. “If they only have $3,000 and have a choice between getting tree work done or going on a vacation, what do you think they are going to choose?” says Bill.

But the leaf that broke the branch was the four trips on credit that he took to Costa Rica, arranging to bring his new wife back to Canada. “I thought that I’d make up the money with the spring boom,” he says, “except that that year it didn’t come.”

Bill found himself with a maxed out line of credit and three credit cards owing about $12,000 apiece. He was finally unable to make payments that were high as $5,000 a month. “I felt real shame,” he recalls. “Once I had walked around with a thousand bucks in my pocket and now I didn’t have enough money to buy food for my wife and baby. That’s really scary.”

A friend suggested he go to Richard Killen & Associates, to get a free consultation so he could understand his options to deal with the crisis. “When I went in to see Richard [Killen], I felt horrible,” he says. “But by the time, I left I felt excellent. It was the best day I had in a long time.”

A large part of the Licensed Insolvency Trustee’s job was to give Bill a reality check. Still deep “in denial,” he hoped that he could find someone to give him a loan to buy his way out of the crisis. Killen pointed out that throwing more money into the pit would not solve his financial problem and would in fact make his position worse.

When people see a trustee they learn that they have options other than to simply go bankrupt. One of the most important things the trustee should do is carefully explain the consequences of the various options available. In Bill’s case;, after fully digesting what Killen explained to him, he determined that the best course of action was bankruptcy.

Bill’s main concern was that he needed to keep his business going, because like everyone else he still had to earn a living for himself and his family. As Richard explained, a bankruptcy would not deprive Bill of that right. Even in complying with the legal requirements of the bankruptcy, Bill was able to keep all his equipment, including his tree truck, and chipper – the mainstays of his business.

It came as a big surprise to Bill to find out that a bankruptcy generally allows a self employed person to retain his ability to make a living. Most people believe or have heard that if they go bankrupt they lose everything. That’s just not the case.

Today discharged from his bankruptcy, Bill is more careful about how he uses credit for his business. He tries to pay as he goes with a debit card. He and his wife have a secured credit card with a $2,000 limit, ensuring any credit used is covered by what they have in the bank. “I pay off my balance right way,” he says.

As far as his seasonal business, last winter’s ice storm has proven to be a real boon, providing all the tree debris removal business he can handle in the spring. Still, Bill is acutely aware of how quickly his fortunes can change in this line of work, like a healthy maple suddenly brought down by blight.

Asked about what he could do to protect himself from such vagaries, he smiles and says, “We could always move back to Costa Rica. Money goes a lot further there.”

Calculating the True Cost of Debt

Calculating the True Cost of DebtMany people don’t have a clear idea of what their debt really costs them, whether it’s a credit card balance or a student loan. Financial writer Gail Vaz-Oxlade points out in “How Much is Your Debt Costing You?” that if someone buys a $2,000 TV on credit, with an 18% interest rate, the minimum monthly payment would be about $40. Of that payment, only about $10 would go to the principle and rest would cover interest. So if you just made minimum payments, the $2,000 TV would cost you $7,000 and would take 30 years to pay off.

To tally up the true costs of your debts, the sites for many financial institutions and credit-counselling agencies have  calculators available for free use. Punch in your numbers and weep.

Credit Counselling Canada,  the national association of non-profit credit counselling and government agencies, offers links to a variety of calculators. They include ones designed to  help you to get a clear picture of your debt situation,  change your spending patterns for your home budget,  determine repayment strategies for your loans and lines of credit, track your weekly expenses and  show you how to reach your savings goal. Its SMART (Specific, Measurable, Attainable, Relevant, Time-Bound) Worksheet can aid you in setting financial goals and putting them in action.

Most banks offer calculators to help you figure the cost of loans before you sign on the dotted line. Typical is TD Canada Trust’s Debt Repayment Calculator. Select your type of debt, the amount of the loan and interest rate, and then you’ll get back the numbers for how much you’ll pay in total, over what period of time. If the numbers for your debts become oppressive, TD also offers a Debt Consolidation Loan Calculator, showing how you can ease your situation by consolidating all your debts into a single loan, with one monthly payment that is probably lower than what you are paying overall now.

Students about to enter university or college, and their parents, should point their browsers to the Government of Canada’s CanLearn Loan Repayment Estimator. Plug in your settings and it will help you estimate the monthly payments you’ll need to make to repay your Canada Student Loan or other government student loans. Simply enter the total amount of your loan(s), select the interest rate and grace period options, and decide on the number of monthly payments that you would like to make.  You can also compare repayment options.

The trick is to pay off the student loan before you hit retirement age.

If you are in debt and have questions,  call us at Richard Killen & Associates. We would be  happy to help you find a proper solution to your problem. 1-888-545-5365.

About Richard Killen & Associates

Since 1992, Richard Killen & Associates, a Licensed Insolvency Trustee, have helped thousands of people resolve their financial problems. With 25 years experience in this industry, our president, Richard Killen, and the rest of our team understand the difficulties that honest people can sometimes find themselves in. This expertise makes it possible to provide you with a service that effectively deals with the issues.

Contact us now for a fresh start!

"Serving the GTA for 25 years."