Dealing With Creditors

Unfortunately, there are a lot of people that run into money problems.  A lot of these people end up being hounded by collection agencies and getting sued.  I can't help you with your cash flow, but I may be able to help you minimize the damage caused by your problems.

The first rule in collection matters is communication. It is essential to communicate with your creditors.  If you don't communicate with them, they have to assume the worst (that you are no longer going to pay anything) and they will rush to get a judgment against you, so that they can try to collect something before you disappear or go bankrupt.

If you can't make a mortgage payment, phone the bank and tell them before the cheque bounces.  Don't wait for them to contact you.  (They will eventually contact you, often after three months, at which time they will have started proceedings to sell your house and incurred a few thousand dollars in legal fees, which the terms of the mortgage will oblige you to pay.)  You might be surprised at how they accommodate you.

Creditors have one desire: to get paid.  Typically, as long as they are being kept informed and are receiving some reasonable amount of money, they will probably be co-operative. 

Don't get snooty with creditors.  It's not their fault that you can't pay.  They may not care why you can't pay (you lost your job, for example).  Remember, you are essentially asking them to change the contract and accept less money than they are entitled to demand. Whether the creditor is a bank or your local dentist, you are always dealing with a human being that has some discretion to deal with the file.  Getting that person angry or offending them does not help you in any way.

Don't just start paying creditors less without an explanation. If you figure that you can pay everyone 75% of what they are owed, you should contact them and advise them that this is the best you can do and ask if they will accommodate you until your finances improve. 

It is important to show that you are trying.  Telling your creditors that you can?t afford to pay them because the money is not in your monthly budget is not going to cut it if your budget is allowing for $300/month for beer and alcohol, $200 for cigarettes, $300 for entertainment, $300 for eating out, etc.  You have to sacrifice the extras if you can't carry your lifestyle on your income.

It may not be a good idea to pay all your creditors a reduced sum.  There may be reasons to pay some creditors ahead of others. Remember, your first priority is food and lodging. 

If you are having difficulty making ends meet, there are not-for-profit agencies that assist people with their debts.  They may be able to give you some debt counselling to help you manage your money, make payment arrangements creditors (sometimes resulting in a reduction or complete waiver of interest charges), and get started on a debt repayment program.  Look up the Credit Counselling Service in Oshawa (905) 579-1951.  Sometimes, the situation is out of control and bankruptcy is the only option.  The counselors at the Credit Counselling Services will be able to tell you if that is the case.