Drowing in Debt and need a fresh start

November 20th, 2008 by Questions

I am 37 years old and have simply been very bad in the past with credit cards. I find myself not being able to get any cards due to bad credit… I have not filed taxes for a few years because I did not have any money to pay what I owe anyway -and of course I have had an assesment sent to me telling me I owe monies now to the government. In total I owe money to a large loan… a car loan which is more then the black book value of my car…. and money in back taxes.
Now I am in a better career and make ok money but by the time I pay child support, rent, food, and my car I don`t even have anything left to live let alone pay my debts. I am currently trying to sell my car and get a second job to increase my income but I will then owe remaining money on the car and will still have this huge black credit cloud over me. I would like to be able to look forward to starting to own things and etablish a good financial state in the next year or so… but I just don`t see how I can with a bad rating and the me looking over my shoulder for the tax man. What can I do? Would filing be a wise thing to do in my case? I can`t get any cards… have a $6,000 high interest loan (and I mean HIGH) that will take me forever to clear… how can I start over????

Posted from: Ontario


One Response to “Drowing in Debt and need a fresh start”

, Barton Goth - Goth & Company Inc. -Trustee in Bankruptcy said:

The best thing for you to do is to contact a local trustee as I don’t have sufficient detail above to suggest which option would be the best fit given your situation.

The major options we suggest people consider are as follows:

The options that we suggest people consider when they are experiencing financial difficulty include:

1) A Debt Consolidation Loan – you approach a bank or other lender and apply for a loan to repay all of your existing debts. This solution is the only one listed here that will not adversely affect your credit rating. The advantage of a consolidation loan is that the interest charged is generally significantly lower than credit card interest rates. If you apply for a consolidation loan at a bank and your application is turned down that means the lender thinks you have accumulated more debt than you can reasonably be expected to handle.

2) Credit Counseling – a voluntary program where your debts are pooled together (they aren’t actually paid off) so that you are only required to make a single monthly payment to a non-profit counseling agency. As you make your payments the agency forwards funds to each of your creditors in proportion to your total debt. The advantage of this procedure is that usually the interest on your unsecured debts is reduced to prime or even eliminated. You are required to repay 100% of what you owe, but because of the reduced interest your monthly payment is much lower than all of your minimum payments would have been without the plan.

3) A Proposal to Creditors (also called a Consumer Proposal)- this solution is used by people who cannot afford (or get approval for) a consolidation loan or a credit counseling plan, but don’t want to file bankruptcy. In a proposal you offer to repay a portion (perhaps 100%) of the debt that you owe. Proposals are an excellent alternative to bankruptcy, but they are not well known so I suggest you contact a local trustee and ask them about proposals if you are interested in this solution.

4) Bankruptcy – if none of the other procedures listed is appropriate for you then bankruptcy may be correct solution. The concept behind bankruptcy is that you cannot afford to repay even a portion of your debts. To file bankruptcy you must meet with a trustee in bankruptcy, licensed by the federal government to handle this type of procedure. To find a trustee in your area use the links on the right hand side of the website.

Certain provinces have an additional option for their residents called an Orderly Payment of Debts. When you speak to a trustee they will advise you whether or not this solution is available where you live and makes sense for you.

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