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Complex situation?

I have a complex situation that I need help with

My wife and I have approx 80K in Debt not incl Mortgage.

My Wife – Visa 30K, Visa 3K, Dept Store 7K, LOC 20K = 60K
Me – Loan 8K, Loan 6K, Visa 1K, MC 600, PayDay Loans 1K = 16K

*Our mortgage is 262K and monthly payments are 2057 incl prop tax.

Wife – 2400/month
Me – 1600/month (currently on EI – recently laid off)

Payments are 2200 + 2057/Monthly – this number does not inlcude transportation, groceries, utilities, and our 1 yr old daughter.

Our current income does not support the payments required to maintain our debt load and are seeking options. Our credit is bad so consolidation will not work anymore (been there done that). We do not have any equity in our house as yet and we have not been living here a year. There is a 30K penalty that will need to be paid out in the event that we sell. We only put 15K down on the house and with the We can remove the penalty if we port the mortgage a bigger property but with no assets and all this debt – highly unlikely.

I`m looking for options and also recommendations for our current situation. My wife and I have agreed that bankruptcy may be the only way out and we are willing to go this route but it is definitely a last resort. We have already contacted our creditors to inform them of our situation and they won`t budge. We don`t have the money to pay them and it`s very odd that they won`t lower our rates/payments or assist us in this time. I figured they would want their money/interest no matter how they get it.

If anyone can provide some insight on this it would be great.

Posted from: Ontario

One Response to “Complex situation?”

Barton Goth – Goth & Company Inc. -Trustee in Bankruptcy said...

There are a variety of options we typically encourage people to consider. These include:

1. Negotiate with your creditors. Explain why you have fallen behind in payments. Outline your financial situation and expectations for the future. Suggest a payment plan that is realistic and reasonable for both you and your creditors. As this is an informal process make sure that if you come to an agreement get written conformation. .

2. Apply for a consolidation loan. Take out a loan to pay off all of your debts. This can potentially lower your interest rate, total monthly and sometimes the total length of the contracts. With consolidation loan it is important that you examine your current spending habits and stop using your so you do not continue to fall further behind.

3. Make an application to Credit Counseling. This is 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.

4. Make a proposal to your creditors under the Bankruptcy and Insolvency Act. 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.

5. File for 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 licensed trustee.

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.