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I’m drowning in Debt.  What can I do?

Life after Debt – What saved us… literally.

Did our lives change after becoming debt-free? Yes! But our Lifestyle didn’t change. I’ll elaborate more on this later but, the freedom that you get from being debt-free is amazing and it encourages you for the future. Here’s my story from the start….

After one particularly high spend Christmas (2015) and a trip to Disney, Orlando with the kids I found myself in the bathroom at work, ashen, trying not to cry and about to hurl. The charming gentleman (!) that owned the company I worked for was “letting me go”. Citing reasons beyond my comprehension (and that of the law) he was actually gloating as he hit the final nail into my financial coffin. This was particularly bad for us as both my husband and I worked in the same place and he had already fired my other half four days prior, whilst I was on leave and away at a resort with my girlfriends.

The moment was surreal. I felt like I was watching a Soap opera drama unfold on TV.

After I got home we made some calls:- Lawyer, Human Rights, Credit card companies, bank. Appointments were made with the bank and the counselors but the credit card companies were strangely silent.

At this time there was no panic because I am a very clever little bunny and I had the foresight to sign up for all of the accident, sickness and unemployment insurances on everything. No problemo! 

A few weeks in and the credit cards are being paid and the mortgage is being paid and the lawyers are confident and nothing is a problem. In fact, we are enjoying the time off and taking care of ourselves and our home for the first time in years. Fast forward to three months later and the letters start arriving from the insurance companies telling us the payments are about to finish…. what? Apparently these payments are for a (very) limited time only, regardless of how long you have been making he payments on them.

After the Insurances ran out and the payments stopped It was not long before the vultures started to circle overhead and the phone calls started. A relentless barrage of creditor calls from people who do not have a sympathetic bone in their bodies; who have no concept of time (or appropriate times to call) and who, most of all, have made the act of bullying whilst not listening, into an art form.

When we knew we just couldn’t take it anymore; after the lien was placed on the house and there was a real threat of us becoming homeless (with two kids still in High School), is when we found 4 Pillars.

I’d like to say we knew what we were doing and that, after extensive research into our options, we decided they were a good fit and our best solution, but that would be a lie. We were going down and, just like the drowning man grasps for the life preserver, we looked locally for help and the 4 Pillars Life Raft was launched to save us.

Drowning in debt.

It was during our free 1 hour counselling session that I learned the most horrifying and most valuable lessons of my entire life. Hubster had gotten all of our paperwork together and after a few swift calculations our counselor Sue confirmed that we owed around $88,000 in unsecured debt.

I would also like to say that some avid conversation then took place but in actual fact there was stony silence. Had I just heard her correctly? That can’t be right!

Interestingly enough approximately 75% of Canadians (more if you include all North Americans) do not know how much debt they are carrying. They have no idea and neither did we.

I then got the feeling that Sue realized that she had just hit us with a bombshell and we were having a hard time understanding just where that number came from, when she simply sat back and smiled. A rather odd reaction you might think but, what followed next was what saved us. That’s not figuratively. Hubster has had two strokes already and was permanently grey these days so, when I say saved… I mean it.  Read “Credit card debt – a silent killer!”

With what seemed like the flick of a switch it got all business up on in here and Sue started outlining the options we had to deal with this mess. Options…. a word I never thought I would hear in this situation.

Wait! We have options?

Amazingly, we are not the only people ever to go through something like this! There is help out there that is readily available and affordable and could have made all of this stop before the liens came, before we stopped sleeping at night, before we stopped communicating with each other as we fought to survive.

There are plans to deal with debt situations; at least three really. Not all three may be right for you which is why working with a counselor is important. Before then end of our free 1 hour session we knew which plan felt right for us and Sue confirmed that it was an option available to us.

Why a Consumer Proposal Plan was the way to go.

A Consumer Proposal is essentially a debt negotiation / settlement with your creditors. It is an offer to unsecured creditors to settle the debt amount and/or delay the payment of your debts. It may be negotiated that you either make a lump sum payment or several payments over an extended period of time. The proposal often provides for your creditors to receive less than the full amount they are owed but more than they would receive if you were to file for bankruptcy.

What are the benefits of a consumer proposal?

Some of the benefits of a consumer proposal are:

• You avoid bankruptcy;

• It prevents creditors from continuing any legal actions and garnishments;

• It is preferable to a bankruptcy in terms of re-establishing your credit rating;

• Your assets do not automatically vest in the trustee; (means you get to keep the essentials like home and, in our case, the kids RESPs)

• It may be better for enabling you to carry on a business or a profession than under a bankruptcy; and,

• Once approved by the court, all creditors are bound by the proposal, not just the creditors who voted in favor of the proposal.

You may ask why I underlined that last part. As it happens, we received a call from Virgin mobile the other day (Dec 2018) looking for $2000 owed from 2010. We believed this was an error, for various reasons, (since confirmed by Virgin’s investigation department) but needless to say, that one call colored our whole day.

We started and finished our proposal structured through 4 Pillars – quite some time ago but…. they have an aftercare service! One phone call and our world was set straight again.

Had this not been an error and was actually a creditor from before the proposal looking for money (despite being outside of the statute of limitations, which is 6 years in BC), they would have been out of luck.

The lovely Tina from my local branch of 4 Pillars confirmed that they would have been bound by the terms of the Consumer Proposal and… owed nothing. Phew! What we also noted that, during our negotiations, some of the more aggressive companies would not agree to a settlement but once the majority of creditors did, they had no choice but to be included.

News (March 2019) from Bloomberg:- Canadians are Drowning in debt

What is the first rule to consider if you want to make a consumer proposal?

If you owe less than $250,000, excluding a mortgage on your residence, you are eligible to file a consumer proposal. If you owe more than $250,000, you may still file a proposal but some different rules will apply which can be explained by the counselor.

OK – so how do I make a consumer proposal?

First, I recommend you call or meet with an independent counselor. Remember – that’s free. They will assess your financial situation and explain all the options available to you, not just a consumer proposal or bankruptcy.  They act as your advocate, liaising directly with a licensed trustee, who will file and administer your consumer proposal, putting together the documentation and ensuring you satisfy the legal requirements.

Second, you will sign an application form which will confirm to the administrator (trustee) all the detailed information about your financial affairs is true and accurate. The administrator will then prepare a number of documents which you will sign in order to make the proposal. The proposal will be sent to all of your creditors along with a report prepared by the administrator recommending whether or not the proposal should be accepted.

SPECIAL OFFER
I receive $10 in commissions for every referral but I want to take that $10 CAD and give it to you for the E Book version of Spendaholics Anonymous ($9.99 USD), which means it will only cost $3.59 CAD for you to take up my offer and I make nothing at all.  I’m OK with that!  (see conditions).

Conditions:

**When you Download a copy of the E book “Spendaholics Anonymous”  and attend any office or skype/ phone meeting for your Free 1 hour consultation with 4 Pillars, I will have my referral commission redirected to you. 

NOTE:  Receipts for the download and the use of my referral reference Spendaholics Anonymous: Anna Martin – Courtenay are necessary. 

How does a proposal get accepted?

Your creditors will have up to 45 days to consider whether or not to accept the proposal. A creditor may send a vote to the administrator. If none of the creditors submit a vote, they will be considered to have accepted the proposal. A meeting of creditors will only be held to consider the proposal if 25% or more of the creditors vote against it. If creditors do not request a meeting, the proposal is deemed to be accepted. Upon acceptance of the proposal, you will begin making the required payments to the administrator who will distribute the proceeds to the creditors. Once you have fulfilled the terms of the proposal, you will receive a Certificate of Full Performance of Consumer Proposal and the balance of your debts will then be extinguished.

What happens if the proposal is rejected or I can not fulfill the terms?

If the proposal is rejected or your payments are three months in arrears, your proposal will be in default and you may no longer be protected from your creditors. Your creditors may then initiate or continue legal proceedings against you.

Can the proposal be changed or amended?

Creditors who vote against proposals will often suggest proposal terms that would be acceptable to them and this happened to us.  One creditor in particular requested more be paid monthly than was proposed and, in the grand scheme of things, if we made a few more adjustments we would still be able to make the monthly payments. We agreed to the increase.

If your proposal does not appear to have the required support of the majority of the dollar value of creditor claims, it can be amended in order to gain that support prior to the meeting of creditors. If your income drops or your circumstances change following the acceptance of your proposal, it can be amended as long as no default has yet occurred, but it must be resubmitted to your creditors. While amending your proposal terms will normally provide you with an opportunity to continue to complete the proposal, it also once again requires the support of your creditors.

Further information on consumer proposals:

If you would like to know more about debt negotiation and debt settlement through a consumer proposal, please feel free to make contact for a free confidential consultation.

Common Questions ~ from the 4Pillars website

How much will this cost?

All 4 Pillars offices provide a free 1-hour information session, educating you about all the options available; Learn more about how to deal with overwhelming debt and bankruptcy alternatives.

These sessions can happen in your local 4 Pillars office (they have offices across Canada) or via skype or telephone.

• Get detailed information about consumer proposals, debt consolidation, and how these debt relief options affect your credit rating and mortgage.

• Get expert answers about your current debt situation and offer an unbiased review of your options.

• Information about spousal responsibility and debt, the long-term effect of different options on your ability to get another mortgage, and what you can do to best deal with your creditors.

The fees will be determined by the option you choose and the services you require from 4 Pillars to implement the plan.

These services include:

• Debt Restructuring Strategies

• Credit Rebuilding

• Budgeting

Will debt restructuring affect my credit rating?

Different restructuring options have different effects on your credit rating. As a general rule, any time you settle your debts at less than 100 cents on the dollar, it will have a negative effect on your credit rating. 4 Pillars has one of the most comprehensive credit rebuilding programs in Canada, to help you minimize the impact of debt restructuring on your credit rating.  Wondering why your credit score is so important and what to do about it?  Read 5 Steps to improve your Credit Score.

Common Myths surrounding credit card and other unsecured debt.

There are Government programs that will take care of my debt for me.

Reality: The Government will not bail you out. Unfortunately, this statement is common (especially on the Internet), but is ultimately misleading.

A Bankruptcy or Consumer Proposal will do permanent harm to your credit rating.

Reality: Your Credit Rating and Credit Score can be repaired, whereas money spent servicing debt is gone forever! Ironically, people who struggle with debt often expend considerable effort in trying to pay their bills regularly and on time. The result is someone who is deep in debt, but has a top notch credit rating. Those struggling with debt often fall under the impression that despite their debts, they can at least take pride in the fact that they’re paying their bills and getting by, and that eventually the debt will be paid off. While it makes sense to want to pay back your creditors, the sad fact is that those attempting to pay their debts month to month are on a path that often has no end in sight for many years – even decades.  In fact, there’s so many financial myths out there I felt the need to blow some of them out of the water!  Read  20 Financial Myths… busted!

If I cannot pay my creditors how can I afford to pay your fees?

As part of the consulting process 4 Pillars works with you on your household budget to determine what is affordable based on your current financial situation. Most clients find our payment plans affordable as the fees are paid over a 2-3 month time frame while we work with you on your file. Our goal is to ensure that your household budget is stabilized as you learn to live without relying on credit. This strategy ensures you will be successful in your restructuring plan.

Have more Questions?

“Legal Line is a Federal not-for-profit organization providing access to the laws under which we are governed. Our answers empower Canadians by giving them the information they need to make informed decisions that impact everyday life.”  Head over to www.Legalline.ca for independent answers to your questions.

So, what did I mean in the opening sentence?

Some of us have spent so much time worrying about our debts that we had completely forgotten what it’s like to have money leftover. Here’s some ideas of what to do with your life after debt.

• Start saving

• Educate yourself – no going back

• Use your credit cards again

• Build an emergency fund

  

  By Anna Martin

• Start Investing

There is life after debt but, in order to remain debt free one must learn from the past. 4 Pillars after care service includes budgeting lessons, online courses (see point two – Educate yourself) and someone at the end of the line, even two years later, to give advice and counselling.

Debt doesn’t have to be a life sentence. Seek help today! You will be so glad that you did.

Our experience with 4 Pillars and our Consumer Proposal has meant that I now only need to work three days a week and the rest of the time I blog to help people like me.

I have so much free time now that I wrote a book! I think that’s pretty cool.

 

Here’s Sue explaining how 4 Pillars works in her words.

 

Whilst this is not a sponsored post I am an affiliate and I may receive a small commission for referrals that I am using to give people a discounted copy of my Debt E book. Applicants moving forward to a full consumer proposal plan may result in secondary affiliate income for me, at no extra cost to you.