What Are the Consequences of an R7 credit rating?

[Jillyvn]

@caphis

COURT PAPERS? What for? If you’re consolidating debt, you shouldn’t need court papers AFAIK… though things may be different in your state, but that just sounds bogus.

Here, in Canada, it is my understanding that my creditors have to accept the program and there is some filing that has to be done. I’m still shaky on the details, but it sounds like a government sponsered program.

A $150/year processing fee in addition to the one-time $50 processing fee, eh. When I was on a program, my non-profit organization’s share came about to about 20% of my monthly payment, so that may not be but so far off.

The monthly charge is $12.50, and my monthly payment is $500 - $600. Seems low to me considered the INTEREST alone on my Student Loan is racking up over $2.00 a day!!!

Other than that… eek, I wouldn’t do it. If it’s just a student loan, then try to work it out with the loaners. Or get a federal student loan consolidation.

Been there, done that. I’ve tried everything and the end result is I cannot give them enough to substantially pay off anything other than the interest on my loan, which makes me sick every time I pay - it feels like throwing money away

If you have revolving credit, ie: credit cards, then call the companies up and tell them that your financial situation has gone to hell and you’re about to file bankruptcy. They will walk all over themselves accomodating you.

I didn’t use the “b” word, but I did negotiate for lower interest rates. No one comes even close to 5%

As has been noted in this thread, debt consolidation companies don’t do anything you, yourself, can’t do just by calling up the creditors and talking to them yourself. I learned this out after about 6 months of being on a program.

I’m not sure about this. I’ve been making myself sick negotiating with these people, and I get no where. My biggest fear is that 5 years down the road, I’ll barely have touched the student loan principle and STILL be stuck

Thank you so much for your advice!

[Jillyvn]

@featherlou

-snip-

what most people here are saying is right - you can do this on your own, it will just take A LOT of discipline. My husband and I are trying to pay off our debts, and it is taking a long time, and a lot of discipline, but I believe we will get there. My next step is to talk to our credit card companies and ask for reduced interest rates.

One other thing I’ve learned is that you have to keep the money coming in somehow. Even if you’re working for minimum wage between good jobs, you have to have money coming in if you have debt, or you will never, ever get ahead.

Discipline is precisely what I’m lacking. As it is, I make the minimum payments on all my debts and it amounts to nothing. Everytime I pay a bill I feel sick. I know this sounds like crying for mommy, but I really just want someone to go to the companies for me and say, “Look, she fucked up, and now you have to take this reduced interest payback - NO NEGOTIATIONS.” I’m just tired of dealing with it. I’m ready to take the ding in my credit rating for the peace of mind of knowing that in 5 years, this debt will be gone, and that I only have to write one damn cheque a month. No more calls from Mastercard, politely wondering why I’m late again!

I can see myself starting on a downward spiral, and if I don’t do something, my credit will just go to crap anyway. At least this way, I’m still paying back my debts and actually seeing my principle go down.

[alice_in_wonderland]

Listen - before you sign on the dotted line, at least TALK to a bank or two.

Go to the bank you bank with. Arrange a meeting with a banker. Talk turkey.

Will they give you the loan for sure? I dunno. Is it worth your time to try? You bet - a bank loan that’s been paid faithfully is actually GOOD for your credit rating, as opposed to having your credit in the toilet for X number of years.

FWIW, even after the 2 years is up, crap will still show up on your report. Getting it removed is really difficult (the credit reporting companies seem to do their own thing, most of the time) and you can be denied credit for things like a house, a car, etc, etc. based on old, crap information.

Really - call your bank first.

[caphis]

@Rebekkah

I’m not sure about this. I’ve been making myself sick negotiating with these people, and I get no where. My biggest fear is that 5 years down the road, I’ll barely have touched the student loan principle and STILL be stuck

It’s true. No one needs a consolidation program. Look at it this way… you can’t pay what you thought you could; your financial situation is different now than you thought it would be years ago. Bummer.

What you need to do is tell your creditors how much you can pay, not negotiate with them until they’re satisfied. Your credit rating may or may not take a hit, depending on how you make arrangements with them, but I think your problem is you’re trying to come up with money that just isn’t there. I fell into that trap. I told the people I owed money to that I didn’t have it, their response was “come up with it.” So I said okay. Again and again. Sometimes they’d waive a fee or two, or offer me 15% APR instead of 20.

You’re under the obligation to pay them, yes, but you need to sit down and say “look, bottom line, this is how much I can afford, period. If we can work out an arrangement with that, then great. If not, then bankruptcy is an option I have to consider.”

Just my 2 cents.

[Jillyvn]

Ok, for those who are following my little saga, I did some more research on Canada’s ODP program.

The reason I need to file court papers is because the program is legislated. Canada’s legal governance of the program can be found here: http://laws.justice.gc.ca/en/B-3/C.R.C.-c.369/21556.html

Silly me, I didn’t note the link, but this is from the PEI provincial government website:

Orderly Payment of Debts, or OPD as is known, is a legal remedy for debt problems. To qualify for this program you must be “insolvent”, that is, unable to meet your required payments to creditors as they fall due. At the same time, you must have enough money left over after providing for necessary monthly expenses (food, rent, transportation, etc.) to retire your debts in a reasonable period of time - 3 to 5 years in most cases.

This method of repayment involves a Supreme Court Order which consolidates all consumer debts (mortgages and certain other debts cannot be included) and requires you to make one monthly payment to the Clerk of the Court on the Consumer Services Section. Consumer Services does not pay off your debts, but distributes your payment amongst your creditors.
Procedure
If Orderly Payment of Debts is a realistic solution to your debt problem, application is made by completing a financial affidavit at the Consumer Services Office and payment of the $20.00 application fee.

Next…

1. A “Notice to Creditors” is sent to all your creditors and you.
2. Creditors are given about one month to consent or object to OPD and to submit their correct balances. When all consents are recieved, the Consolidation Order is issued and a copy is sent to you.
3. If an objection is received, a hearing is held at the Division office to determine the validity of the objection. You are given at least 10 days notice of the date and time of the hearing.

ADVANTAGES OF OPD

1. All debts are consolidated and share on a percentage pro rata basis.
2. You make only one payment each month.
3. Interest rates are reduced to the Judgement Interest Rate (5% per annum).
4. Ordinary creditors may take no further legal action (e.g. garnishee wages) as long as your payments are up to date.
5. The monthly payment is set on the basis of what you can afford to pay.
   DISADVANTAGES OF OPD
6. You may not obtain any further credit while on the program and will likely encounter difficulty obtaining credit after the debts have been repaid.
7. A creditor who has security (for example, a lien on your car) may elect at any time to realize on that security (e.g. repossess the car). If a creditor repossesses all of the security, however, the balance of the debt may not be extinguished.
8. If there is a co-signer, the creditor may elect to get payments from the co-signer rather than going along with the program.
9. Although the payments are fixed at the time you enter into the program, you or a creditor may apply at any time to change the amount of the monthly payments, as a result of a change in income or living expenses.
10. A judgement will be filed against you, your property, and other assets to prevent a sale or encumbrance of the property without the consent of the Clerk of the Court.

SUMMARY
Orderly Payment of Debts is an alternative to bankruptcy which gives the consumer the oportunity to re-organize his /her financial situation while repaying the creditors, consistent with the ability to do so, and at the same time, allows the debtor to maintain a reasonable standard of living.

I might go see a banker before I sign on the dotted line, just to see what they can do for me.

• Rebekkah

[gardentraveler]

It’s a good idea to try talking to a banker about your options. Even if they can’t give you a loan, they might be able to give you advice about how to handle your situation or how to deal with your finances in the future. OPD sounds like it might be a reasonable alternative, but I’m sure there will be less impact to your credit rating if you can arrange something through a bank.

It’s overwhelming, I know, to be in your situation. I was in a similar situation 12-15 years ago. It took a while to get everything paid off, but I learned to be much more disciplined about everything and I’ve gotten to the point where I have virtually no debt (mortgage on my house and a very small car loan).

While you’re working through this, you might want to consider looking at some personal finance books (browse intensively at a bookstore or borrow from a library). There are several that are written by people who started out in your situation and worked their way out of it.

Good luck with everything!

GT