Get a new deal on your debt
Financial burdens have some floundering, but professional help may be a call away
Five years ago, Luke Algers’ finances were in shambles. The expenses of equipment for a disabled daughter were already taxing his income; when other complications arose, he found himself floundering.
“For a while, I was able to keep up with payments, but it caught up with me,” said Alger, 38, a service manager for an Ottawa auto dealership. “I owed about $50,000.”
He decided he was in financial waters too deep for credit counselling and turned instead to Goldhar & Associates Ltd., a licensed insolvency trustee (LIT) with offices across Ontario. Richard Goldhar, the firm’s owner, reviewed Algers’ finances and suggested filing a consumer proposal.
This solution, made under the auspices of the Office of the Superintendent of Bankruptcy Canada (OSB), is a legally binding process, administered by an LIT, available to anyone with debts of $250,000 or less.
In creating a consumer proposal, the trustee is empowered to negotiate with creditors to reduce a client’s unsecured debt. Once the proposal is accepted by creditors, the client has five years to pay off the agreed-upon amount and makes one monthly payment to the trustee, rather than individual payments to each creditor. A client’s assets aren’t seized, as they are when bankruptcy is declared. The client who chooses a consumer proposal is also required to attend two credit-counselling sessions with an eye toward helping develop better habits.
Goldhar was able to negotiate Algers’ debt down to $12,000 with payments of $200 monthly over five years. The reduction in debt let Algers afford the monthly payments, which were applied directly to principal, rather than interest. Much of the additional money he would ordinarily have paid each month went into savings instead. As a result, Algers was able to pay off his debt in three and a half years, rather than the proposed five.
“I’ve been debt free for over a year now and my family is doing well,” he said.
“I knew it was the only option for me. Rich (Goldhar) gave me the pros and cons and it was clear I was too far gone for credit counselling. Even though my payment history was good, when you’re carrying such a large debt, it will eventually catch up with you.”
Although the OSB reported that bankruptcies and insolvencies were down by a combined 2.9 per cent in November 2020 over the previous month and insolvencies have dropped by 33 per cent since November 2019, Goldhar doesn’t expect the good news to continue.
“Government subsidies and banks holding off (during COVID-19) are keeping people afloat,” Goldhar said. “I believe there will be an onslaught.”
Adriana Molina, the communications manager for Credit Cana, a nationwide non-profit debt and credit counselling agency, is also expecting a lot of calls.
A recent Credit Canada survey indicated that 28 per cent of Canadians are concerned about credit cards nearing their limits; 19 per cent are having trouble covering household expenses and 17 per cent lack steady employment.
“As we move into the end of January, credit-card bills from the holidays will be coming in and there will be an uptick in people needing our services,” said Molina, whose agency uses only certified counsellors. “That’s generally true, even in non-COVID times, but now, a lot of people are in survival mode. They’re worried, uncertain where they’ll be able to find the income to pay their bills.”
For anyone who is worried about their finances as 2021 gets underway, both Goldhar and Molina believe it’s wise to act sooner rather than later. An initial consultation with an LIT or a credit counsellor is free and confidential.
An assessment of a client’s financial situation is the first step. Their needs determine the next step. Basic credit counselling and guidance on how to budget better may be all that’s required. If not, debt consolidation might be the next step. It can be done voluntarily through a certified credit counsellor (be sure to check their credentials). They are empowered to negotiate a longer repayment term and to reduce interest, not principal.
“Many of our clients want to make good on their debt,” Molina said.
“They feel it’s their responsibility to pay it off in full simply because they accumulated it, fair and square.”
Clients can still back out of a debt consolidation agreement, but they will then bear the responsibility of dealing with creditors and collectors directly and will probably lose any negotiated advantages.
A licensed insolvency trustee like Goldhar may also have licensed credit counsellors on staff to help assess an individual’s financial situation. If the situation has gone beyond counselling, an LIT is authorized to negotiate a consumer proposal. This is a legally binding option, however — the client cannot renege on the agreement. The LIT is paid through a government tariff. Whichever route a client chooses, there is support available.
“You have to be kind,” Goldhar said. “Our clients are in such emotional distress. I tell them, ‘There’s no judgment here.’ We’ll help you deal with debt you can’t afford so you can move on with your life.”
Molina said, “The goal of our Debt Consolidation Program is for clients to not feel alone as they deal with their debt issues and to know they have a debtand-money-management expert on their side to coach them as they pay off their debt, so they can acquire the necessary skills they need to never run into a debt problem again.”
If debts are keeping you up at night, consider picking up the phone.