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looming crisis

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Topic: looming crisis

Posted By: nobreath
Subject: looming crisis
Date Posted: 25/December/2012 at 3:19pm

I'll try and be concise. I VERY much appreciate all help.

My situation. 40k student loan debt. 6k credit card debt. 10k line of credit debt. Full time job making 55k a year. No car, no real savings or physical assets. Some family help but not much.

In 2012 I experienced a lay-off, major surgery, crashing of my savings, and some personal problems. My credit report is currently bad as I missed about 5-10 various credit payments and I am unable to get any new credit. I am now making minimum payments on my credit.

My student loan is going to collections soon. It is OSAP. I have made no payments on my student loan, I have been unable to. My initial student loan started in 2006, school ended in 2010.

I live in Quebec for 2 years but im from Ontario as is most of my info/mail still. I am also an dual American citizen if this can help me out somehow but have no banking down there.

I have no idea how I am going to get get out of 56k of debt, which is all pretty much coming due in the new year.

Ideas?

1) Bankruptcy, my credit rating already sucks?
2) Open new bank accounts in Canada and the US?
3) ...

Thanks guys.

Replies:

Posted By: nobreath
Date Posted: 25/December/2012 at 3:21pm

4) Go back to school?

Posted By: administrator
Date Posted: 26/December/2012 at 8:31am

Sounds like you're in a tough spot but there may be some things to consider.

I wasn't clear on one thing. Are you back working now?

1) If you are not working, you should be applying for Repayment Assistance. Call the NSLSC and get this started.

2) As for bankruptcy, you'd have to be out of school for 5 years if hardship, otherwise 7 years for your student loans to be included in your bankruptcy. Declaring bankruptcy would clear the credit card debt and line of credit debt, but you'd still be left with the student loan debt. While it may seem like a lot to deal with right now, the consumer debt could be managed.

3) Declaring bankruptcy might also will impact your student loans and possible future funding so you want to consider that carefully.

4) School might be an option but will it improve your chances of employment and a higher salary? Are you thinking of more student loans? If so, then your student loans must not be in default if you want to get more funding.

Hope this info is a bit more helpful. If you are back working now, a consolidation loan on the credit card and line of credit might take some pressure off, because of the interest rate on the credit card.

Anyone else have some suggestions?

-------------
Administrator
Mark OMeara
Author of Let Go and Heal: Recovery from Emotional Pain
https://LaughSingWrite.com - http://bit.ly/heal2024

Posted By: Royal-NCO
Date Posted: 26/December/2012 at 2:36pm

What interest rate are you paying on your credit card and student loan?

If you're employed, and your credit rating allows this, you may find it much easier to replace the sum of your late student loan payments and credit card debt with an RRSP loan. You likely have conisderable room available to contribute to RRSPs Borrow. Make the contribution and use the resulting tax refund to clear your credit card and late student loan payments. If you can then pay off your RRSP loan, you will have a nice savings account to fall back on if you want to return to school in a few years.

The value of this really depends on what interest rates you will be paying on each debt type.

Posted By: Royal-NCO
Date Posted: 26/December/2012 at 2:46pm

For example:

Royal Banks has an RRSP loan interest rate of only 4.75%, whereas your credit car debt may have an interest rate of over 20%. Which means it costs as much to service a $5000 credit card debt as it does a 20,000 RRSP loan. A 20,000 RRSP contribution will give you a $6000 refund on $55,000/yr income. (Very very rough number approximations, by the way)

Posted By: Radagast
Date Posted: 26/December/2012 at 2:54pm

A line of credit is nice due to the ability to make interest-only payments indefinitely. As long as you avoid the trap of doing that forever.

I don't think your debt is too bad, most of it is medium or low interest. Assuming that you *are* currently working... it's definitely fixable. Other than the OSAP being in collections, your situation is fairly similar to mine three years ago, including the debt amounts - and my salary was lower at the time.

"Debt-Free Forever" by Gail Voz-Oxlade is a great book about minimizing your monthly variable expenses and in most cases can get you debt free within three years - or at least consumer debt free.

Most important thing: Don't give up, there is always hope!

Posted By: nobreath
Date Posted: 29/December/2012 at 12:32pm

Hi guys,

Yes I am currently working, full-time, great job at the moment.

I also just checked my credit score, it is 555 (just shy of 'fair').

I doubt going back to school would increase my salary by much at the moment.

Posted By: nobreath
Date Posted: 29/December/2012 at 12:37pm

Im wondering if 16k debt (not including student loan) and 555 credit score are worth declaring bankruptcy over or not. I know I can get out of this but not sure what way is easier I guess (keep in mind I had an extremely bad year and i'm not buying things and simply not paying for them etc).