Posted by PattiM on
Almost any material you read about how to deal with debt will tell you to talk to your creditors, your banker and/or your mortgage company. Your creditors may be willing to be patient for a month or two but when you are in a situation which doesn’t have a defined endpoint, don’t hold your breath on your creditors being kind and understanding. Let’s have a look at your other sources of information.
Usually the first thought you have when your finances start to go off track is to appeal to your banker for help. The most common form of that ‘help’ is to consolidate your debts into one loan so you can pay it off with one payment a month.
That sounds like it would really be the ticket out of the problem. Keep in mind, your banker has a job to do, to sell you banking services and helping their employer make a profit. You need to explore very carefully how much the difference in interest costs would be to determine if you would actually benefit from a consolidation loan.
If the total interest is not substantially lower, you are in fact incurring more debt while you are trying to wrestle the total load into the ground, that is not a benefit.
My suggestion: inquire if you would qualify for a consolidation loan but don’t commit until you have explored all your possibilities and carefully examined the total costs. A diversified list of debts is actually to your advantage. Once you consolidate and then start having difficulty meeting your payments, your available options become fewer.
If you have accumulated some equity in your home, considering an increase in your mortgage could be one way to bring your debts under control. Proceed with caution when wanting to take this approach. You don’t want to over mortgage your home, nor add on high interest debt which would put you in jeopardy later of not being able to carry the debt load.
I strongly suggest you contact CSS before going after a mortgage, you’ll need a review of your options to determine if mortgaging to consolidate debt is a good idea. If you are already looking at a mortgage, don’t allow the amount of the mortgage to exceed 80% of the value of your home and DON’T sign any deal which doesn’t consolidate all of your debt and leave you with a payment you are certain you can manage.
My suggestion: only look at doing re-mortgaging if the benefits far outweigh the downside and if you don’t exceed 75-80% of the value of your home. Be extremely cautious here. Your mortgage is secure debt. If the plan doesn’t work out, you could be placing yourself in danger of losing your home if you fall behind on the payments.
Credit Counseling firms are usually non-profit organizations who work with you to develop a budget and a repayment plan that your creditors will agree to. For people owing total unsecured debt less than about $15,000 this approach can be effective as long as there is no Income Tax debt involved.
All your creditors are not required to take part in the repayment plan. Any who choose not to take part can still continue to press you for payment. Non-profit credit counseling organizations usually receive at least a portion of their funding from those who grant credit. That creates a conflict of interest, you need to be wary of.
My suggestion: If you owe less than $15,000 and no tax debt is involved, you can likely benefit from credit counseling. Search out 2-3 non-profit agencies and find out what their plan would be for you. Go with the one which you feel most comfortable with.
Trustee in Bankruptcy
A Trustee is an officer of the bankruptcy and insolvency court. They have a duty to work in the interests of your creditors while being able to provide you with advice on the bankruptcy ‘process’. Note, this is the process, this is not advice on how you can protect your assets or how to best leverage your current situation to work as much to your advantage as possible.
If you eventually find you need to file a consumer proposal or a bankruptcy, you will have to attend in front of a Trustee in Bankruptcy. The trustee receives his income out of the money you pay into the court. In a consumer proposal, the amount the trustee will receive from what you pay to the court to go to your creditors increases with the value of the proposal.
The question is, are you going to attend in front of a trustee alone or with someone who is going to represent you?
My suggestion: Don’t talk to a trustee until you have talked to someone who represents your interests in the process.
An insolvency counselor which is what Credit Support Services provides. We are focused on how to get you out of a bad debt situation with as much as you can legally retain intact. We are who you need to talk to before you make any final decision on any of the above options.
Why? Because the strength of our business is providing you, the consumer, with some confidence you are getting as much benefit from the process as you are able to. Our objective is for you to get an agreement with your creditors which leaves your assets intact and is based on a payment you can manage with prudent budgeting.
The initial consultation is no charge. The fees we charge are for our representation of your best interests in the process and you can be sure we are able to deliver that counsel without bias or conflict of interest.
My suggestion: Contact us before you get locked into a worse situation. Just click here to get help.
disclaimer: The contents of this post is based on circumstances current at the time of the post and are intended for general knowledge. For more specific answers to your questions about your own circumstances use our contact form or post a comment below. NOTE: For a FREE, confidential analysis of your situation click here.
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