https://www.buzzsprout.com/1104815/3840758-why-your-credit-score-doesn-t-matter-when-struggling-with-debt-episode-4.js?container_id=buzzsprout-player-3840758&player=small

Credit is often a misudnerstood concept and leads people to make very poor decisions for their long-term financial wellbeing. David Moffatt, our Senior Debt Relief Specialist, dives into the reasons for this in Episode 4 of the Escaping Debt Podcast.

Transcript

David Moffatt (00:01):
Hello everybody, I hope you’re doing exceptionally well. Welcome to episode four of The Escaping Debt Podcast. Today we’re going to be talking about why your credit and the impact of credit really shouldn’t matter when you look at restructuring debt. My name is David Moffatt, and I’m going to be the host today. I’m the Senior Debt Relief Specialist and Local Director of 4 Pillars Halifax.

David Moffatt (00:21):
Remember, our goal is that no consumer should have to struggle with the overwhelming burden of debt, and we also believe that it’s simply not possible for a company to represent both the consumer and the debtor at the same time in an unbiased fashion, because of this, we work for you, not your creditors.

David Moffatt (00:38):
So today’s topic is going to be a really interesting one. I hear it all the time, people come into the office, swarmed with debt, they can barely pay their bills if at all, and they’re concerned that their credit is going to get impacted. This is something that I understand why it occurs. Think about it, everything in society right now is credit based.

David Moffatt (01:04):
If you want to go buy a couch, you can finance it. If you want to buy a car, you can finance it. You buy a house, you finance it. You want to get a cell phone, you need a credit check. You want to get an apartment, you get a credit check. And so credit has become an integral part of our life, and it’s clear to see why people are so concerned about the possibility that their credit would end up getting impacted.

David Moffatt (01:30):
But it’s a little bit more complicated than that. And the main reason for this is somebody that’s already struggling to pay their bills, unbeknownst to them, their credit is actually already impacted. Now, their credit score might not be impacted, but credit score is really only one of three components of someone’s credit profile.

David Moffatt (01:56):
So what actually makes up someone’s credit profile? So first of all, there’s your actual credit score itself, there’s the credit products that you have, and then most importantly, there is your financial status. I guess, your financial foundation. So what does your asset base look like? What does your savings account look like? Are you making your payments on time? And I don’t necessarily mean again, from a credit perspective, I mean from a money management perspective.

David Moffatt (02:28):
Most people are simply unaware of this. And does your money management skills impact your credit score? Yes, to a certain degree. Can you be very bad with your money management principles and still have a good credit score? Of course. However, if you’re not good at money management, your score will only last so long. So for example, you can build a credit score very, very quickly. You go out and acquire a bunch of new products and you make sure they’re paid off every single month and your credit score will increase. Now, obviously that’s a very general statement, but that is how it works, okay.

David Moffatt (03:11):
The problem is, is if you can’t actually afford to pay off those credit products each and every month and say the case of a line of credit or a credit card, well then slowly but surely your credit will start getting impacted and then you’ll be right back to where you started.

David Moffatt (03:27):
This is why when somebody is struggling with debt, getting another loan to pay off that debt is typically not a good idea without proper professional consultation, because it can simply just further add to the stress that that individual is feeling. So let’s talk about why it really doesn’t matter if your credit gets impacted when you restructured that. So first of all, what is restructuring, right? So restructuring is essentially looking at every single option to deal with debt, ranging from budgeting all the way to bankruptcy and everything in between.

David Moffatt (04:08):
What most people know of as debt restructuring from an invasive perspective that would impact credit are the more invasive options. So these would be credit counselling and formal settlements; consumer proposals and bankruptcies. Now of course these don’t come without consequences and the consequences that your credit ends up getting impacted. And this is the big concern for a lot of people.

David Moffatt (04:30):
They try budgeting themselves out of the situation. They look at assets that they can sell. They try to get help from friends and family. They might go take out a couple extra loans to see if they’re able to dig themselves out of this, but none of that works. And so what we’ve seen is that the average client of ours spent 18 months on average before seeking professional advice to deal with their debt, trying to solve their situation themselves.

David Moffatt (04:56):
Now, that’s a year and a half and that’s from the moment they realized they had a problem, and so you can imagine that most likely the average consumer probably struggled for several years before reaching out for help. Well, actually all of the invasive options have a consequence which is impacting credit. The alternative to not doing these options, in my opinion, is far worse than doing nothing at all.

David Moffatt (05:33):
Imagine if you’re struggling, you can barely pay your bills as it is, or you’re living paycheck to paycheck, how do you actually get ahead in life? It’s next to impossible. You’re probably already … You’re basically probably already having issues paying your regular day to day bills, trying to find money to buy groceries because of all of the debt payments and the bill payments you have. You might be trying to keep your credit up at a high level relatively. Yeah, you just can’t seem to do it because of how much you’re spending on debt payments.

David Moffatt (06:12):
I’ve mentioned this in other episodes, but what’s the point of going to work to come home to pay bills and the credit card and the debt payments to then just simply repeat it over and over again. The goal is to actually advance in life. So for example, a lot of people have aspirations of buying a house. Now, let’s consider a couple of scenarios.

David Moffatt (06:39):
So the first scenario is somebody who’s drowning in debt, is living paycheck to paycheck but has a great credit score. Well, they would go to the bank and the bank would run their debt service ratios, which is the ratio that tells the bank how much free cash you have essentially to be able to afford a mortgage, and because of their debt, they wouldn’t be able to buy a house.

David Moffatt (07:02):
This is true even if they had an 800 beacon score, a very, very good credit score, just simply by the nature of their debt, they wouldn’t qualify. In this instance, if they were to restructure rather and now looking at the second scenario of an individual who had recently restructured is now say, has the ability to save $500 a month yet has impacted credit for a maximum of six years. Well, at the end of that six year period, they would end up having $36,000 saved.

David Moffatt (07:38):
So now you have to consider this, right? In the first one, they couldn’t even save for a down payment even if they want it to. Whereas now in the very least, they’re able to save for the down payment, rebuild credit along the way and by the time they’ve completed their program, there’s a very, very high likelihood that they’re going to be able to get into a house plus or minus a year or two.

David Moffatt (08:02):
Now, they wouldn’t have been able to do that in the other scenario. There would have been two cases that would have occurred. They would have either kept going, hopefully increase their income or decrease their expenses. They would have been able to pay the debt off slowly over time, and let’s pretend that they were even able to do it in five years or less.

David Moffatt (08:23):
Well, let’s just go with five years. So let’s say they were able to pay off their debt in five years, well, they don’t have a down payment. So if they wanted to buy a house with even a 5% down payment, and let’s assume that the house they want to buy is $200,000, they would need $10,000 saved, which means that even if they were able to save $750 a month, that’s still going to take them about a year. So you’re right at that six year window anyway.

David Moffatt (08:54):
And by the way, you continue to basically live paycheck to paycheck for that entire five year period. It doesn’t take into account that anything that can go wrong and often does go wrong in life. So I always have to go back to the point that in almost every instance it makes sense to restructure.

David Moffatt (09:19):
It really bothers me when I have people come into the office that came and saw me a year or a year and a half prior, and at that moment in time, the plan that they could have implemented would have been life changing, yet they chose not to do it because they didn’t like the credit impacts, which by the way, is probably my fault simply because I wasn’t able to properly portray the benefits of actually dealing with their debt.

David Moffatt (09:52):
If they come back a year or a year and a half later, and then they come to me and they say, “Listen Dave, I really appreciate the time you spent with me before. I didn’t want to impact my credit, but now I have no choice.” So now you consider all of these people, because I bet you the amount of people that need to restructure that don’t because of credit, I bet you the overwhelming majority of them aren’t the individuals that end up increasing their income, decreasing their expenses and getting out of their situations.

David Moffatt (10:18):
I would assume that a lot of them are in a position where they basically, I don’t want to say did nothing, that’s very probably naive of me. They probably struggled through it, tried absolutely everything they could to deal with their debt and then had to restructure but just didn’t come back to me.

David Moffatt (10:42):
I just want people to do what’s right for them. So long story short, if you’re struggling financially and you’re concerned about your credit and you don’t want to impact your credit, but you’re living paycheck to paycheck, it almost always makes sense to restructure. Don’t continue struggling.

David Moffatt (11:04):
So everybody, thank you very, very much for listening to the podcast. This is episode four of The Escaping Debt Podcast. Thank you very much for listening. Remember that our goal is that no one should have to struggle with the overwhelming burden that debt causes, and we believe that it is not possible for a company to represent both the consumer and the creditor in an unbiased fashion at the same time. That’s why we work for you, not your creditors. Thank you very much.

The post Escaping Debt Podcast – Why credit doesn’t actually matter – Episode 4 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-why-credit-doesnt-actually-matter-episode-4/

https://www.buzzsprout.com/1104815/3840563-what-not-to-do-when-your-debt-is-out-of-control-episode-3.js?container_id=buzzsprout-player-3840563&player=small

Knowing what NOT to do when your debt is out of control is arguably more important than knowing what to do. Why? Well – a very large amount of people spend a very long time struggling with debt before they even realize they have a problem. Let’s dive into it in this podcast.

Transcript

David Moffatt (00:00):
Hello, everyone. I hope you’re doing exceptionally well today. Welcome to the Escaping Debt podcast. Today we’re going to be covering an interesting topic surrounding the idea of what options exist when debt is out of control. And kind of paired with that, we’re going to talk about what not to do when debt is out of control.

David Moffatt (00:19):
My name is David Moffatt, I’m your host today. I’m a senior debt relief specialist and the local director of Four Pillars Halifax. Our goal is that no consumer should have to struggle with the burden that debt causes. We believe that it is simply not possible for a company to represent both the consumers and the creditors at the same time in an unbiased fashion. That’s why we work for you, not your creditors.

David Moffatt (00:42):
So this is going to be a really interesting topic and what I’ve seen in my time, having now sat in front of thousands of people to review their debt relief options and help them with their debt is that there’s a lot of things that people do that they probably shouldn’t do. And there’s a lot of things that people do that they should be doing. And so hopefully we can cover off a lot of these things. And I think kind of paired with this, we can also break down each and every option that exists in the debt restructuring world.

David Moffatt (01:18):
Now, as we go through this, remember that we’ve covered a lot of this stuff extensively on our blog. So you just go to Halifaxdebtfreedom.ca/blog and you’ll see all of our articles that are there.

David Moffatt (01:31):
So what are some things that people do that they shouldn’t be doing when their debt is out of control? This is a great question. Now, before we get there, let’s first cover off, when do you know if debt is out of control? Now, this is actually an extremely interesting question, because it’s really subjective and really depends on individual circumstances.

David Moffatt (02:00):
So to define it loosely, if you’re struggling to pay your debt the way it’s intended to be paid, then your debt is out of control. Meaning that if you can only make interest only payments and nothing more, if you struggle to make payments at all, or if you know it’s been four or five years, your debt hasn’t decreased at all, it might be slowly increasing over time, in my opinion, your debt is out of control. To go further with this, if at any point in time, it would take you more than five years to pay off your unsecured debt, then chances are your debt is out of control.

David Moffatt (02:51):
Now this is a really good indicator and the reason why we have a five year limit is because most of the restructuring methods that we’re going to talk about today, will have you debt-free in five years or less. And so very rarely makes any sense to take out debt or to try to tackle debt in a period of five years or more. And we’ll kind of get into exactly why as we walk through this stuff. So what are the things that you really shouldn’t be doing when debt’s out of control?

David Moffatt (03:24):
So the first thing that you really shouldn’t be doing is not giving it the attention it deserves. What I mean by this is that a lot of people, if they get hurt, they obviously rush to the cabinet, they get the bandaid. They go to the hospital, they see the doctor. People are very, very concerned about this type of stuff. If your car breaks down, people will rush to get it fixed because they need it to go to work.

David Moffatt (03:52):
Well, your finances are almost the same. You need your finances to be in place properly and effectively in order to live life in a meaningful way. So don’t not give it attention. I know it might seem bad and it might seem like there’s no end in sight, but sitting down, going through your past spending, coming up with some sort of a budget and a plan and then tracking and making sure that you actually stay on top of that plan is paramount to your longterm success. And I don’t necessarily mean just getting out of debt. I mean, for the rest of your life.

David Moffatt (04:36):
It’s interesting because every successful individual I know from a financial perspective, they make budgets for their personal life, their businesses, or whatever other endeavor they’re actually going to be working on. They’re probably at a point in their life where they don’t need to have a money management plan. They could probably just go and spend money as they want to, but they still do it. And so it just goes to show the power of planning.

David Moffatt (05:05):
So that’s number one, you should not, not give your finances the attention they deserve. You should be giving your finances more attention than most things in your life. Now I don’t necessarily mean from an actual time commitment. I mean, simply from a mental effort commitment.

David Moffatt (05:29):
So how do you actually do this? So, it’s actually quite simple. What you do is you sit down, you review the last 12 months of your expenses. You make a plan, a spending plan, also known as a budget with that information. And then you track it moving forward. I recommend that you look at your bank account on your phone, or however other way you want to do it at least three times a day.

David Moffatt (05:53):
When you wake up, at lunch or around, and then before you go to bed, that way your finances will always be top of mind. And then at least on a weekly basis, I want you to go through and review your spending and actually write down where you spent your money. Even if it just means you are copying, essentially copying your notes, like you would have done in school. It helps you remember them, and it helps you stay present. This trick alone will help you quite a bit.

David Moffatt (06:22):
So the next thing not to do when your debt is out of control is to get too sucked into the “the screw it” factor. And what is this the “screw it” factor? Essentially it is the concept that at a certain point in time an extra $40 of debt doesn’t really matter. Okay. And so you say, screw it, it’s only an extra $40. I’m already 20 grand in debt, so screw it. I’m just going to put it on the credit card. And usually this is said in much harsher words, but for the sake of the podcast, we’re going to stick with screw it. And this concept is actually a little damaging and the reason why is because when you think of your behavior, when you try to create a habit of something, you’re actively trying to change the way you do something.

David Moffatt (07:22):
And so if you spend extra money under this screw it factor, you’re more likely to continue doing that. And it kind of devalues your position. Every dollar counts. And what I find is that the more people think about their money, the more good decisions they make about their money, naturally more good decisions are made down the road.

David Moffatt (07:49):
Now this sounds like common sense. And honestly it is, but most people, when they’re struggling, when they’re deep in debt, they know it, they have the screw it factor and they kind of ride that screw it factor for a little bit of time. Now, you can’t do it forever, of course. And it’s completely natural for this to occur, but you want to try to escape it as quickly as possible. The sooner you escape it, the sooner that you sit back and you go, “Okay, I can’t keep living like this. I’m going to look at my bank account. I’m going to look at my spending. I’m going to try to break the paycheck to paycheck cycle. I’m going to try to save money.” The sooner you do that, the better off you’ll be.

David Moffatt (08:38):
So, [to recap, the] second thing to not do when your debt is out of control is kind of be encompassed and swallowed by this screw it factor. The first one is to not, not pay attention, enough attention to your finances.

David Moffatt (08:55):
So the third thing that people should not do when their debt is out of control is to not save money, meaning they should save money, if I’m mixing my negatives here a little bit. And you’ll actually hear this advice by some financial professionals, they will say, “It makes no sense to save money right now, you have debt.” I have a really hard time with this because I have seen client after client, try their absolute darnedest to pay off their debt and then they keep getting hit by life.

David Moffatt (09:38):
You know, the car breaks down. The house needs a repair. The hot water tank goes. They might have a tenant and their tenant misses rent. Their business has a down month. Their kid gets sick and they have to stay home for a week. I mean, the list goes on and on and on.

David Moffatt (09:53):
And what ends up happening is, if you allocate every single extra dollar that you have to paying off your debt, you will have no cash reserves in the event that you need to go and take care of that event. So take a week off of work, pay for the hot water tank, pay for the brake repairs.

David Moffatt (10:16):
Now here’s the interesting part about this is that say, for example, if you owe money on a credit card, if you pay that credit card down, you can certainly use that balance. I don’t know why, but from my experience in watching clients and talking with clients, there’s a big difference in somebody’s spending their cash savings that they worked hard to do and save for than it is, and I guess the behaviour and the feeling is different when they have to add money to their credit card. When people have spent so much time paying down a credit card and then have to bring that credit card back up because of an emergency, they feel defeated. They feel like a failure.

David Moffatt (11:02):
Now, when they spend money out of their cash savings, they feel grateful that they had that savings in place. They feel empowered because they had the money in their account, when in the past, they would’ve had to put that on the debt. So you almost convert a negative into a positive. The net result is almost identical, whether you’re taking out a cash or spending it on the credit card, your net worth is decreased by the exact same amount, a little bit more on the credit card because of the interest cost. Don’t get me wrong. But arguably, if you had to save the money, you’d be paying less on the credit card, meaning that you’d be paying more interest. Anyway, I’m getting a little technical here. It doesn’t really matter. The concept is that by saving money, even while paying off debt, you will actually have a positive emotion in relation to when bad things happen, rather than a negative emotion.

David Moffatt (11:55):
Now time and time again, as I go through this stuff with clients, they talk to me and they say, “Hey, I can’t save any money. Obviously, I’m paying off debt.” And this is completely true, and so this goes back to, how do you know when your debt’s out of control. If you’re struggling, if you can not maintain the payments you’re making, then you probably need to undergo some professional debt restructuring. And again, we’ll get to those options in the second segment of this podcast. But, there’s always a will. There’s always a way. And if that means you have to restructure to decrease your debt payments, to then add money to savings that ultimately what you might have to do.

David Moffatt (12:38):
But here’s the trick to saving money. Most people, what they do is they write out a budget and they say, “Oh, I’ve got $100 leftover at the end of the month.” And then they go and they try to save a hundred dollars at the end of the month.

David Moffatt (12:51):
Well, here’s the thing is that budgets are actually imperfect. And the reason why is because they’re just a good indication of what you want to spend your money on. But again, life happens, which is usually what ends people up in this financial struggle they’re facing.

David Moffatt (13:07):
So here’s what I recommend. What I want you to ask yourself is, how much money if I burned it would not impact my life in any way, shape or form. So for example, if you could pull out a $5 bill right now, and you could burn it, would your life change? For most people, the answer is probably no. That means that you can save effectively $5. I recommend you save it outside of your regular bank and not in cash. So for example, open up an account maybe like Tangerine or Simply Financial or something like that where the accounts are free and then send money there.

David Moffatt (13:51):
Now you just keep going up the list here. If I burned $5, would it matter? If I burned $10, would it matter? $20, $50, $100, $200. You just keep going and what you’ll find is that that number is actually probably lower than what your budget says it is. This is completely okay. The concept behind this is that you are going to be able to commit to saving money, time and time again. if you could burn it and you won’t miss it, that means you can save it and not miss it. And here’s the really, really cool part.

David Moffatt (14:28):
The science behind this is that you’re going to develop the habit of saving. The amount is actually irrelevant. If you even started with a dollar, this process still works. So if you saved money, every single paycheck, and it’ll probably take you about two to three months to properly establish the habit of saving money.

David Moffatt (14:47):
Well, here’s the neat part is that it becomes really easy to turn $5 in to $10, to take $10 and turn it into $20, to take $20 and turn it into $40. I’m sure there’s some science that backs this up, but what I’ve seen is that the time it takes a client to save their first $1000 is the same time that it takes their clients to save an extra $2,000. Meaning they literally double their savings rate compared to their first amount of saving time, if that makes sense. I think this is because saving becomes addicting.

David Moffatt (15:28):
The more and more money you have in a savings account, the more you want to keep that money in that savings account, the more you want to contribute money to that savings account. And even if debt exists, savings will become invaluable to you. It’s a safety net. So this is why we recommend that you save and pay off debt. Mathematically this makes absolutely no sense and probably every financial advisor that’s out there is disagreeing with me right now, especially if they come from a very mathematical background. But behaviourally, you are going to be far more successful.

David Moffatt (16:09):
The next thing to not to do when your debt is out of control is, you should try not to succumb to peer pressure.

David Moffatt (16:21):
This is huge. We live in a society now where it is normal and desirable to keep up with the Jones’s, to have the new car, to go out for suppers, to go to the movies, to have the big birthday parties for your kids, to put your kids in every sport left, right and center. So a little bit of background on me for that, those that don’t know. My long story short is I got myself into a pile of debt, got myself out of a pile of debt, went back to school for finance and ultimately left the military because I spent seven years in the military.

David Moffatt (16:59):
The best word that I ever learned, or sentence rather, is, “Sorry, I can’t. I’m broke.” And you can ask some of my old army buddies, at a certain point in time, any time there would be an invitation to do something, “Sorry, I can’t, I’m broke. Don’t have the money.”

David Moffatt (17:20):
Now here’s a really interesting thing that happened is I thought that people would stop inviting me, that people would stop, I guess, talking to me if that makes sense, which is kind of silly when you think about it, but here’s the cool thing that happened. Everybody was broke. Nobody had any money. And so over time, the activities changed from, “Oh, let’s go out to the big restaurant.”, to “Hey, let’s just have a barbecue in the backyard. We’ll go pick up a pack of hot dogs and hamburgers and do it that way.”

David Moffatt (17:55):
And it’s funny because even to this day, and it actually happened yesterday or the day before, from the time I’m recording this, people still message me. Even though I’ve been out since 2015 now, they still message me and ask me for advice. By the time I left the military, I was saving nearly $800 a month. Now wages in the military are good, don’t get me wrong, but I believe anybody can proportionally do the same thing. You just really have to start with a low amount of money, establish the habit of savings, build that addiction to savings, but in a positive way. And then ultimately that will allow you to save money, tackle your debt faster because now you’re going, “Oh, wow. I want to increase that savings. And if I stopped paying this credit card, wow, this is going to be crazy.” Right. I don’t mean stop paying it as in stop paying. I mean, stop paying it as in, pay it off and then move forward with it. So I hope those four items really help.

David Moffatt (19:04):
We’re going to do a little bit of a sponsor break here. The sponsor of our podcast is actually just going to be us. It’s going to be 4 Pillars. So if you’re struggling with debt and you don’t know what to do, please reach out. We’ve assisted thousands of Canadians understand their debt relief options, and really get ahold of their debt. We promise that when you leave our office, you’ll have a perfect understanding of every single debt relief option and debt restructuring option that exists in Canada. And if we’re not the right solution for you, we will make sure that you go there. We have over 1500 Trustpilot reviews. We have 40 plus Google reviews, just for our local office, many more Facebook reviews. And we want to make sure that you get the best possible outcome, period. We work for you, not your creditors.

David Moffatt (19:52):
So now let’s get back to the Escaping Debt podcast. I think that’s pretty fun.

David Moffatt (19:56):
So the next topic is okay. You’ve identified that your debt is currently out of control. You have self-corrected the things not to do when your debt is out of control. So really what do you do next? Really, this part is when you start considering and looking at your restructuring options.

David Moffatt (20:17):
So what I’m going to do is I’m going to go through the options that exist. And I’m going to give you a high level overview of everything. I’m not going to get too deep into every single option and the reason why is because most of these options, even as simple as budgeting, are so highly specific that without looking at an individual circumstance, it’s very, very difficult to give good sound advice. So I hope you understand that.

David Moffatt (20:47):
Your first debt restructuring option that exists is to try and budget out of your situation. Now, this one seems like common sense. And in fact, most people try it before they come into the office.

David Moffatt (20:58):
This is where you’re going to look at either increasing income, decreasing expenses, to free up more cash, to then pay down debt faster. The rule of thumb here is that if you can pay off your debt in five years or less, you’re good to go.

David Moffatt (21:13):
If you can’t, then you’ll want to talk to a professional and move on to the next step.

David Moffatt (21:18):
The next option is selling assets. Now this involves looking at your assets. So your RSPs or TFSAs, your savings account, maybe equity in your home, any other assets and things that you own that might be worth money and look at selling them to pay off your debt.

David Moffatt (21:39):
This is the worst thing that you can do in my opinion. And I’m actually going to release a podcast on it. So stay tuned for that for all of my opinions and the reason why it is the worst thing that you can do.

David Moffatt (21:50):
But unfortunately, a lot of people do it. They liquidate their pensions, they liquidate their savings. It can make sense in certain instances, but I can tell you, there are not many circumstances where it does. So the next option is to get help from friends and family. This option, isn’t a great option, don’t get me wrong. And most people don’t want to pursue it. But I have had clients where I asked this question, and then they’re like, “yeah, actually my parents said that they’re more than happy to help me out.” And if somebody doesn’t have to go through debt restructuring, that’s a good thing. So the question is always worth the consideration. It’s always worth the ask.

David Moffatt (22:31):
The fourth option is to go to the bank and try to get a consolidation loan. Now, this consolidation loan can be in the form of an unsecured loan, a line of credit or a personal loan, or it can be in the form of a mortgage. I’m going to talk about both of these. I’m very hesitant to recommend consolidating in this manner, unless it really makes sense. And the reason why is because we’ve seen, and you may personally be in this situation, you go and get a consolidation loan, or regular personal loan to consolidate your debts and then you didn’t really solve the problem. And the next thing you realize a year or two years later, you’re right back up to the same debt load you were plus you now have a big consolidation loan. Or you go and get a line of credit to decrease your monthly payments, which is fantastic, but you realize, “Oh crap, I can only afford my minimum interest payment, which means my debt isn’t decreasing.”, which means you’ve just handcuffed yourself for the rest of your life.

David Moffatt (23:35):
So that’s my concern with regular consolidating. To be clear, though, it can make a lot of sense. So for example, I’ve had individuals that have, say they took it alone five years ago, they paid it off three years. They had to change in income, their loan payment just simply doesn’t work based on their new position. So they may want to go and refinance that loan into a three or four year loan payment to then pay it off. It’s not a perfect example, but it is an example of where it can make sense.

David Moffatt (24:12):
In terms of mortgage refinancing. I highly recommend talking to an unbiased professional when you do this. And what I mean by an unbiased professional is, I mean, somebody that is not selling you the mortgage. The reason for this is because unlike an unsecured debt, if you stop paying a secured debt, you lose or at least risk losing, whatever asset is being used as collateral, for example, for a car loan, that would be the car, but for a mortgage that is your house. So by refinancing into your house, you are risking your house. So it’s not to say that this isn’t a good idea. In fact, if it makes sense, it’s probably one of the best forms of restructuring, just because of the fact that it usually brings you your lowest monthly payment, but you’re now amortizing your debt now over 20, 25 years or however long it can be. There’s also only applies if you have a house, which I think is statistically 40% of Nova Scotia or something along those lines, I don’t have those exact stats on me.

David Moffatt (25:23):
So those were the first four options. So budgeting, selling assets, getting help from friends or family or a consolidation loan, whether it’s unsecured or secured. Those four options are the only options that won’t impact credit. Anything past this point will impact credit. And I actually have a, the next episode that we’re going to be releasing, or maybe the one before this, it just depends on when they come out, talks about why it shouldn’t matter that your credit gets impacted if you need to restructure. And the truth of the matter is, if the first four options do not work for you and you have a debt problem, you realistically should be considering restructuring.

David Moffatt (26:03):
So the first option is credit counselling. So credit counselling is essentially where a credit counselling firm takes a hundred percent of your debt load. They amortize it. Now over typically four to five years, you pay a fee, which depending on the firm ranges, typically from five to 15% of your overall debt load, and you pay it out, typically at an interest rate of around 5%. When you look at the math, in terms of more invasive forms of restructuring, this is actually the most expensive option that exists in the market for most people. It can make sense for smaller debt loads, but once you start getting up there, there are usually far better options.

David Moffatt (26:50):
The problem with this option is, you end up paying all of your debt plus some, and it impacts your credit. So it’s quite strange that you pay back everything yet your credit gets impacted. Really at the end of the day, no differently than a proposal of bankruptcy or informal settlements. And that’s a good note to make, is that really from a real world impact day one, that you do any type of restructuring, including bankruptcy, your credit is going to be impacted the same, no matter the option. The real difference is how fast you can re-establish after the fact and how much you pay on a monthly basis, which also impacts how fast you can re-establish your credit.

David Moffatt (27:30):
So after that, you can look at what’s called an informal settlement or an informal proposal. This is essentially where you accumulate a lump sum of money and you make an offer to your creditors for a percentage of how much you owe. So if that is a $20,000 and you have an $8,000 lump sum, you may offer $8,000 in lieu of paying back that entire 20,000. This option can make sense if you have lump sums of money. In my experience though, most people don’t and so it isn’t really that great of an option for most people. When it is an option, though, it is usually a very, very, very good option.

David Moffatt (28:14):
After that you have a consumer proposal, which is an option whereby you pay more than you would in bankruptcy, but less than you owe and you come to an agreement with your creditors. These are filed through licensed insolvency trustees, and I’ll probably end up having a podcast on those, on how consumer proposals and bankruptcies work. And I also have companion articles for those, which you can go check out at the blog. Consumer proposal is arguably one of the most effective ways to deal with debt, because in most instances, it is actually the cheapest monthly payment that you will obtain in most instances, not always, of course, but in most. And it comes with very, very limited consequences on a long term basis when you compare it against bankruptcy.

David Moffatt (29:04):
Essentially how it works is it’s a five year payment at 0% interest. There’s no penalties to pay it off early. And if you paid off early, your credit is restored quicker. The credit impact is for maximum of six years or three years past the date of the last payment. Meaning if you pay it off early, it’s better for you. The next option after this is a bankruptcy, of course, a bankruptcy is, in our opinion, a last resort option. It comes with the harshest penalties. And for a lot of people, bankruptcy is actually the most expensive option. And the reason why is because it’s based upon a calculation that takes into account how much money you make and how much things you own.

David Moffatt (29:47):
So if you own anything that has equity in it, and for example, a house that has equity, or if you have a TFSA or an RESP or anything of that nature, bankruptcies can actually be extremely expensive. Now bankruptcy is an option for some people, but for example, in our office, we see, I believe the stats that I last polled are less than 3% of our clients really opt to file bankruptcy when they truly understand the pros and the cons of all these other options that we’ve talked about.

David Moffatt (30:18):
Bankruptcy is worse than the more times you do it, which means that a first time bankruptcy is bad enough, but it’s not that bad. But if you have to go bankrupt a second, third or fourth time, which going bankrupt a second time is statistically fairly high, it will be devastating, not just emotionally, which of course it will be, but also financially as well.

David Moffatt (30:46):
So everybody, I hope that makes sense. So to kind of recap, in this episode, we discussed what not to do when your debt is out of control and what options exist when your dad is out of control. We always recommend that you speak with a financial professional to really cover these options as they pertain to your financial situation. No two situations are alike. And so I highly discourage you from listening to your friends and relatives that may have done some of these options, because I don’t know how many times I have to dispel myths. We covered, more importantly in my opinion, what not to do. And so make sure that you’re just very conscious of your financial situation. Remember the more attention that you give to your finances, the better outcome you’ll have.

David Moffatt (31:43):
Anyway, I hope that was helpful for you. Again, my name is David Moffatt, I’m the host of the Escaping Debt podcast. Remember that our goal is that no consumer should have to struggle with the burden that debt causes and we believe it is simply not possible for a company to represent both the consumer and the creditors at the same time in an unbiased fashion. And because of this, we work for you, not your creditors. Have a great day.

The post Escaping Debt Podcast – What NOT to do when debt is out of control – Episode 3 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-what-not-to-do-when-debt-is-out-of-control-episode-2/

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Episode 2 of the Escaping Debt Podcast is based upon an article we wrote. Check it out here – How much debt is too much debt?

The post Escaping Debt Podcast – How Much Debt Is Too Much Debt? – Episode 2 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-how-much-debt-is-too-much-debt-episode-2/

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Episode 1 of the Escaping Debt Podcast is based upon a blog article we wrote. You can check it out here: 5 Things You Don’t Know About Debt Forgiveness

The post Escaping Debt Podcast – 5 Things You Don’t Know About Debt Forgiveness – Episode 1 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-podcast-5-things-you-dont-know-about-debt-forgiveness-episode-2-2/

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We’ve launched a podcast. And we cannot be more excited! You can find it where ever you consume your podcasts.

Transcript

David Moffatt (00:01):
Hello everyone, I hope you’re doing exceptionally well. My name is David Moffatt, and I’m your host of the Escaping Debt Podcast. In this podcast, we’re going to be covering everything from debt, budgeting, credit, and just general finance. I’m the Local Director of 4 Pillars Consulting Group located in Halifax, and what we do is we assist consumers figure out their debt situations. We really want to make sure that no one has to struggle with the overwhelming burden that debt causes. And we believe that a company cannot work for both the creditors and the debtor at the same time in an unbiased fashion. And that’s why we work for you, not your creditors.

David Moffatt (00:47):
Our goal is to ensure that you get the best possible outcome period. This is a little different than what most companies do. Our goal is to empower you to make informed financial decisions so that you’re able to make the best possible choice for your situation. You shouldn’t have to worry about who you talk to, you shouldn’t have to worry about who you get information from, you should know that that individual that you’re getting information from is working exclusively in your best interests. So that’s the point of this podcast.

David Moffatt (01:25):
We’re going to be covering off everything from what’s debt settlement, things you don’t know about debt settlement and debt forgiveness, how consumer proposals work and how bankruptcies work, how debt restructuring as a whole works, the intricacies of them, how to make them successful for your situation. The goal is just to make sure that you know how to deal with your debt. It’s interesting. They say that a house is the biggest financial purchase that most people in their lives will make, and so much information is given on those topics. And when people go out and buy a house, they’ll typically do a lot of research. They’ll figure out what the process is and hire a realtor, they’ll hire a lawyer, they’ll get a mortgage broker involved, and you have all these professionals working for the consumer. But when it comes to people dealing with their debt, seemingly, they go to the first person that they reach out to that contacts them and they trust that person unequivocally.

David Moffatt (02:34):
And this can be very damaging for people. You can imagine that if you have a company, and most companies operate this way, that are funded either directly or indirectly by creditors, you have to ask yourself, who are they really working for? Or at least, where do their interests really lie? Do their interests lie in you getting the best outcome possible or do their interests lie on their bottom line?

David Moffatt (03:05):
Now, I’m proud to say with 4 Pillars, our interests entirely rely on the outcome that our clients face and that they obtain. We want our clients to obtain the absolute best possible outcome. Period. Without this, we wouldn’t have a company. We wouldn’t have 1,500 plus reviews online. And that’s only Trustpilot. We wouldn’t have the hundreds and hundreds and hundreds of other reviews. We wouldn’t have clients willing to be on video interviews with us, which if you check our YouTube channel, 4 Pillars Halifax, you’ll see video interviews of clients. You wouldn’t have clients that are willing to take photos of how much debt they’ve cut off and that they’ve gotten rid of. You wouldn’t have this if we truly didn’t care. People know when you don’t care.

David Moffatt (04:02):
Anyway, enough of talking about 4 Pillars. Welcome to the Escaping Debt Podcast. My name is David Moffatt, I’m going to be your host through future episodes. We’re planning on making these about 20 to 30 minutes in length, very bite size, and we’re going to be covering topics that actually give you valuable information. You can visit our website at halifaxdebtfreedom.ca, our YouTube channel, 4 Pillars Halifax, our Facebook page, 4 Pillars Halifax. Pretty much any other social media page that you want to look into. We’re very active on all of these platforms. So thanks for listening. Good luck in catching up on the episodes. We’re going to release probably four or five before we release this to the public, but have fun.

David Moffatt (04:50):
Send in your questions. You can send them directly to halifax@4pillars.ca and we’ll cover them in future episodes we plan on releasing every single week. Most likely, the podcast will be released on Sunday mornings. However, that may change slightly depending on when people want to listen to it most. So again, I’m your host, David Moffatt. And remember that our goal is that no one should have to struggle with the overwhelming burden that debt causes. And we believe a company cannot work for both the creditors and the debtor at the same time in an unbiased fashion. We work for you, not your creditors. Have a great day.

The post Escaping Debt Podcast – Welcome – Episode 0 appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/escaping-debt-welcome-episode-0/

A consumer proposal typically does not impact a mortgage renewal. In every client instance, that our office has assisted with, we haven’t had a single client experience any issues in renewing their mortgage. In certain instances the rate the bank offers you might be slightly higher than ‘market’ rates, but even that is exceptionally rare.

It isn’t really in a bank’s best interest to NOT renew. They are very well aware that while in a consumer proposal your mortgage options are limited, especially if you have less than 20% equity in your property. The last thing the banks want is for you to default on your mortgage obligations and be forced into foreclosure where they may take a loss.

Does a consumer proposal impact my mortgage rate?

This is a slightly more complicating subject. In most instances, upon renewal, a consumer proposal will have no effect on the rates offered. They will simply be the rates typical of the product and increase/decrease with interest rates.

However, if you are looking to purchase a house and/or refinance your interest rates will typically be a bit higher until it is paid off and you have rebuilt your credit, as your mortgage product will typically be issued through a ‘B’ lender (lender who lends in riskier situations). While interest rates are higher here, they are not as high as private mortgages which usually range from 8-20% per year. B lenders are usually 1-2% higher than a traditional mortgage.

The post Will a Consumer Proposal Affect My Mortgage Renewal appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/will-a-consumer-proposal-affect-my-mortgage-renewal/

In a perfect world, debt consolidation of any kind wouldn’t be needed. We would all have everything we needed and have healthy bank accounts to go along with them. There wouldn’t be any life events that negatively impact finances, and even if they did occur we would all be adequately prepared for them.  We would be able to go to bed and sleep soundly, knowing that our bank accounts had sufficient cushion.

Unfortunately, the world doesn’t work this way. With sudden job losses, family issues, medical issues, separation, unexpected expenses such as car repairs, home repairs, etc all get in the way of us being financially secure. In a world where so much can go wrong, it is easy to understand why someone would have to invasively consolidate their debt. Many see this is as a negative action but it often provides struggling consumers the chance to actually get ahead of their debt instead of living a life wherein the best case they can afford to make minimum interest payments only, or in a worst-case can’t even afford those.

Invasive debt consolidation is any debt consolidation method that impacts credit. These are typically credit counselling, informal proposals, consumer proposals, and bankruptcy.

What are the benefits of invasive debt consolidation?

Freed up cashflow

By far the largest advantage of invasive debt consolidation is its ability to free up a massive amount of cash flow. This, of course, is situationally based but to give you an example, our average client has just shy of $50,000 of unsecured consumer debt. The payment on this would range, on average, between $1,000-$1,500 per month depending on the interest rates and the term of the debt. It isn’t uncommon to see this drop by at least 50% and that is a very high estimate. Our clients are seeing an average payment of $225 per month, post-restructuring. To be fair, the client most likely couldn’t afford the $1000-1500 per month to begin with so a consumer isn’t usually actually ‘saving’ $775-$1,275. But even if it were 1/2 of that amount (which is what we see) a client saves typically ~$350-$650 per month?

Now, what does this allow you to do? With that type of savings you can:

1. Save a healthy emergency fund within 1-2 years.
2. Within 5 years have $21,000-$39,000 saved towards a down payment for a home.
3. Get debt-free faster!
4. Do the things you actually want to in life.
5. And the list could go on and on.

I need to reiterate that these are averages. This means that some people pay less, and some people pay more. Some people free up more cash flow and others free up less cashflow.

Reducing how long it takes you to pay your debt off

Take a look at your credit card statement. Usually, on the right-hand side of the statement you will see a line that says how long it will take you to pay off the account if you only make the minimum payment. This number is usually shocking. It isn’t uncommon to see 20-30 years, depending on interest rates, minimum payment requirements, etc.

All invasive debt consolidation plans will see your unsecured debt paid off in 5 years or less. Comparing that to a credit card which, when paying minimum payments only, can take 20+ years it is easy to see the advantage.

Mental Health Benefits

If you’ve felt the mental stress and sometimes even physical pressure in relation to your debt you know how hard it is to be in deep debt. Consolidating your debt is the best way to reduce this stress. I cannot express the number of times I have personally witnessed an extremely positive change in someone’s mental health and attitude as they journey through their debt restructuring process with us.

This has occurred too many times now for it to be a coincidence (Several hundred times at this point). A client’s first appointment is extremely negative ‘I feel like i’ll never get out of debt’, ‘I only work to pay bills’, ‘I feel like a failure because I can’t give me kids what they deserve’, ‘I try so hard to be good at money but bad things keep happening to me’, and the list goes on and on. When you compare that to their aftercare appointments it is usually filled with confidence and an extremely positive attitude towards their money and more importantly, their life.

I have seen multiple business owners experience a downturn in business – when looking at when the declines began it usually begins with when their debt started to accumulate. Interestingly enough, once their debt is taken care of their revenues typically begin to increase again (And at a very fast rate, I might add).

Funny how much our mental health is impacted negatively by debt and how we can turn that around to be a positive impact.

A True Reset

This one is kind of a combination of all of the above. Depending on your personal situation, invasive debt consolidation can truly result in a ‘Reset’. You may have experienced a series of unfortunate events that caused your debt, you may have gone through separation, medical issues, poor money management, etc none of it matters. It may change the solution you choose and the way it is structured but it doesn’t change that a solution is available to you and that you can obtain the relief you need.

Tips for restructuring with minimal credit impact

In all honesty – the truth of the matter is that invasively restructuring debt will nearly always cause a credit impact. What is important to understand is that the benefits to restructuring (listed above) FAR outweigh the fact that your credit will be impacted. Understanding why is an article for another day but for now if you are struggling with debt but are unsure about the true impact on your case, please reach out.

Regardless of that, here are a few tips to ensure that you minimally impact your credit:

1. Work with a company that has a proper credit rebuilding program. Credit rebuilding is something that takes more than a couple of sessions. For example, we offer a minimum of a 12-month credit rebuilding program that is delivered via online training as well as in-person appointments and is customized to every client’s situation and goals.

2. Make sure you explore ALL invasive debt consolidation options. We’ve written extensively on all of them: Consumer Proposal, Bankruptcy, Credit Counselling, and Debt Settlement or Informal Settlement. It is impossible to make an educated decision when you don’t know every option!

3. Get the help you need as soon as you know you need it. Going years with frequent missed payments will certainly look worse to creditors in the future than an isolated incident.

As always if you are considering debt consolidation please reach out to us. The last thing we want is for you anyone to struggle with debt.

The post Benefits of Invasive Debt Consolidation (Tips For Restructuring with minimal credit impact) appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/benefits-of-invasive-debt-consolidation/

Do you currently have a garnishment against you? Are you wondering if you consolidate your debt if the garnishment will be lifted? This is a great question and largely depends on the type of debt, the type of consolidation, and your situation. We’ll go through various situations below. If you are in a situation that isn’t covered please feel free to comment at the bottom of the article and we can let you know!

A garnishment is when a creditor sues you, wins, and applies for an ‘assignment of wages’. This allows your creditors to seize a portion of your wages for an unpaid debt. Having debt is hard enough. Getting garnished just escalates the problem tenfold.

Traditional Debt Consolidation Loans

A traditional debt consolidation loan only removes a garnishment if you are able to pay the outstanding debt that is tied to the garnishment.

This typically isn’t possible because by the time a creditor gets a garnishment against you your credit is most likely already affected. Because of this obtaining a traditional consolidation loan isn’t an option that is usually available to tackle a garnishment because your credit is most likely already affected.

Just Making A Debt Payment Plan Through Budgeting

You may be wondering if you are able to simply call up your creditor after they have successfully obtained a garnishment against you and offer to make them monthly payments. While it is certainly worth a try, the creditor would have little incentive to do this. Garnishments can be up to 30% of your gross wages. Depending on your tax rate this can be 40-50% of your take-home pay. This is obviously extremely damaging to your financial position.

Because creditors, through a garnishment, will typically make more on a monthly basis than you can afford there is little incentive for them to accept a monthly payment plan.

Informal Settlements

We are now getting into the realm of where a garnishment can begin to be lifted entirely. An informal settlement can be an effective way to have a garnishment lifted if you can come to a successful agreement with your creditors. In saying that, the chance of this occurring is still very low through this means as in order for an informal settlement to work effectively you need to have access to a lump-sum of money.

Most of the time if a debt has got to the point where a garnishment has been applied any type of lump-sum of cash would be slim to none.

Will a consumer proposal lift a garnishment?

Absolutely. When you file a consumer proposal there is what is known as a ‘Stay of Proceedings’ which stops any on-going or future legal action as it relates to your debt. This applies to garnishments. The day you file a consumer proposal your garnishment will be lifted. However, it should be noted that there are certain debts where a garnishment will NOT be lifted. This typically applies to child support & alimony garnishments.

Also – while the garnishment will be lifted the same day you file, it may take the creditor/employer several weeks to remove the garnishment. Typically speaking, any funds that you pay after you file will be returned to you. For a typical creditor, this happens relatively quickly. If the garnishment was for a CRA debt then it can take them several months, unfortunately.

Will a bankruptcy lift a garnishment?

As with a consumer proposal, bankruptcy also has a ‘Stay of Proceedings’ that applies as soon as you file. To avoid re-explaining it, you can simply look above as the same rules apply.

What can you do if you are being garnished?

If you are being garnished you are most likely passed the point of self-help. We highly recommend speaking with a professional as although we have covered 90% of the cases above, there are always special circumstances.

As always, if you are struggling with debt (Especially a garnishment) please reach out. We would be more than happy to help you navigate the complexities of the debt world.

The post Will Debt Consolidation Stop a Garnishment? appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/will-debt-consolidation-stop-a-garnishment/

Will My Creditors Accept My Consumer Proposal?

Knowing how a consumer proposal works is important – we wrote an extensive article on how they work, what they are, how much they cost, etc. We highly recommend you read that article prior to reading this one. A consumer proposal is arguably the best debt restructuring vehicle that exists for most people who are struggling with debt. The reason for this is it typically provides maximum relief when comparing the consequences.

However, as with any restructuring method, it isn’t entirely perfect. There is a chance that a proposal can be refused by your creditors. To get any anxiety you may be feeling out of the way right now – When you work with 4 Pillars, the chance of your proposal not getting accepted is nearly 0% when we base this off of past clients’ results.

Why are creditors willing to accept a consumer proposal?

This is an important question to ask as it really paints a picture as to what creditors are looking for. Creditors are willing to accept a consumer proposal because of the next alternative that exists; bankruptcy. A consumer proposal is based upon what is known as your ‘hypothetical bankruptcy value’ which determines how much you are work in bankruptcy. In 99.9% of cases, a consumer proposal requires that you offer your creditors more than you are worth in bankruptcy. This means that if you went bankrupt, creditors would stand to make less money than if you filed a proposal.

So in a nutshell – creditors are willing to accept a proposal because if you file bankruptcy they will make less money.

How Much Money Should I Offer to My Creditors to Improve the Chances of My Consumer Proposal Being Accepted?

Knowing what you offer your creditors in a proposal is more of an art than a science. Things such as your backstory, which creditors you owe, how much you owe them in proportion to the others, your current financial situation, your potential future financial situation, and the list goes on and on. This is why it is very important to speak with a professional as knowing what to offer your creditors is extremely important.

Look at it this way, a $50 difference per month in a proposal may not seem like a lot, but in fact, this represents an extra $3000 paid over the life of the proposal. Most people wouldn’t bat an eye at a $50 difference in payment. When you start considering how much a $100 or a $150 per month difference makes it starts to make sense why speaking with an unbiased professional makes sense.

Did you know that 4 Pillars is the only company in the Atlantic provinces that exclusively works for you, the consumer? We are not paid by creditors in any way, shape, or form. Reach out today.

What we personally recommend you do is work with a professional to determine your hypothetical bankruptcy value. Once you have determined this hypothetical bankruptcy value you need to review this against what you can afford and the creditors you have. Some creditors, like CRA, typically want to receive more than your typical collection agency would in a proposal. In these instances, you may want to be on the conservative side.

The amount you offer is definitely correlated to the chance creditors accept it on the first offer. However, based on our experience, this is not a linear correlation. What we mean by this is that if you double your offer, it doesn’t double the chance of it being accepted at the first offer. It may be shocking to most people but the actual offer itself is sometimes the least important part of the file. It is far more important to properly portray your struggle to the creditor than your offer is in certain instances

Because of this, we actually recommend that people be as aggressive as possible with their offers only after they have properly considered their hypothetical bankruptcy, understand their mix of creditors and how they may respond, and finally their ability to properly portray their struggle to the creditors.

The truth behind this question is it is nearly impossible to properly answer this question without fully understanding your situation. While most professionals would recommend that you offer to pay back at least 30-40% of the debt that you owe in a proposal we wholeheartedly disagree with this. We recommend you be as aggressive as you need to be, given your situation. If that means you can only afford to pay 10% back (And are worth nothing in bankruptcy) then that is a great offer.

The best part about a consumer proposal is that you only need 51% of your creditors to vote in favour of your proposal for it to be approved and binding on everyone. We wrote about this in our consumer proposal article. Check it out to learn all about how a proposal works!

If you want advice on your particular situation, please feel free to contact us.

The post Will My Creditors Accept My Consumer Proposal? appeared first on 4 Pillars Halifax.

source https://www.halifaxdebtfreedom.ca/will-my-creditors-accept-my-consumer-proposal/

What is the Cost of Debt Settlement?

Cost is certainly the biggest question that most people have when it comes to any debt relief option, let alone debt settlement. Typically speaking, most people considering this form of debt forgiveness are already struggling financially and are worried that an additional cost would put further strain on their budget. The last thing people want is to try and implement a solution but only be put further behind.

Rest assured – When properly designed by a professional your affordability will be taken into account. The last thing any professional debt restructuring firm wants is for you to fail.

The truth behind debt relief is that there are actually no truly free debt restructuring options. You will always be paying a fee whether it is hidden or not. Who works for free, right? Well, this is true in the debt restructuring world. You have to make sure fees are transparently disclosed.

Let’s look at the costs of a debt settlement program. There are two main points of view when considering cost. Where you are now, and what your life would look like if you do not fix your situation and the cost of entering into such a debt settlement program.

This article is a series about Debt Settlement. We recommend you start from the beginning. The other articles are linked below:

Part 1 – What is Debt Settlement

Part 2 – How Do Debt Settlement Programs Work?

Part 3 – Can I Negotiate A Debt Settlement By Myself?

Part 4 – What Is The Cost Of Debt Settlement? – You’re reading this now

The Cost of Not Entering into a Debt Settlement Program

The cost of not entering into a debt restructuring program usually far outweighs the cost of actually doing something. Unfortunately, this is harder to understand at face value. But hopefully, we can shed light on this below.

• Continued interest payments – The biggest cost of doing nothing is continuing to make the payments you are currently paying now. This cost is often overlooked by most people. They simply look at the principal balance owing but do not consider the long-term cost that interest comes with.

 

• Mental Wellbeing – It is no secret that debt causes a lot of emotional and mental strain. Simply owing the money is taxing enough on most people. Pair this with creditors and collectors who may begin calling to collect on the money and most people will begin to suffer greatly.

 

The Costs of Entering into Debt Settlement

Unfortunately, there are no free debt restructuring options. Even going bankrupt has a cost. Debt Settlement is no exception to this. While Debt Settlement can be a great option when it makes sense, it is oftentimes one of the most expensive restructuring options available outside of Credit Counselling.

The main cost debt settlement is the fee you pay to your debt settlement firm. This fee is often based upon either how much debt you have, or how much debt is saved.

Want to know more about Debt Settlement?

Not sure if debt settlement is a good option for you? Feel free to full out our consultation request form and we would be more than happy to review all of your options to ensure you get the best possible outcome.

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source https://www.halifaxdebtfreedom.ca/what-is-the-cost-of-debt-settlement/