What to do when you can’t make your payments

So it is a hard reality that many people have been affected by factors well beyond their control.

Be it the economy or an illness there can be many life issues which leave you in a position where your savings are gone and you are unable to pay your mortgage or other bills. So what should you do if you ever find yourself in this situation?

Mortgage related troubles?

• Talk to your mortgage professional. At the first sign of troubles make that difficult call to find out what options are available to you and keep in contact with them as things progress.

• Clarify the picture.

Make a complete list of all credit obligations including any credit cards, loans and household bills. You should also make a list of all of your assets including your current income, savings accounts, investments and RRSP’s.

• Learn about your resources.

There is a great resource called Take Charge of Your Debts from the government of Canada. You can use it to understand debt problems and how to budget, information on credit counselling, collection agencies, credit and credit repair.

• Consider your options.

If your mortgage was done through a mortgage insurer (CMHC, Genworth, CG) then you have a valuable ally. They will work with you to find solutions such as converting a variable rate to a fixed rate to protect you against a sudden increase; offering temporary payment deferral; extending the original amortization; adding any missed payment or arrears to the balance and spreading them over the remaining loan and offering a special payment arrangement until you are back on your feet.

You need to stay in contact with your lender, your mortgage professional and whoever else is involved. Avoiding the phone calls is no way to convince them you want to work to a solution.

Other credit troubles?

• call the credit companies and ask for a reduction to your interest rate which will allow you to pay your debts out faster.

• apply for a consolidation loan which will allow you to pay one large payment as compared to many small which can be overwhelming.

• choosing to refinance your home to be pay out your smaller debts can be a valid choice if the penalty isn’t too high. Again, it can be easier to manage one payment.

• orderly payment of debts – under this government run program you allow this agency to take charge if you will. They will negotiate with your creditors for a lower interest rate and then they will look at your overall financial picture and put you on a set repayment program until all of your debts are repaid in full. You need to know that this program will require you to rebuild your credit carefully after the fact.

• Bankruptcy – this is where you choose to work with a Bankruptcy Trustee. Your assets and your liabilities are all weighed and then the trustee offers your creditors a set percentage of what you owe. You will be required to go through the court system and there are additional costs. This choice also requires a careful rebuild of your credit after the fact if you are to be able to borrow money down the road.

So as you can see there are options available to you when life throws you sideways. Keep in contact with your creditors if they start calling so they know your situation and can make note of it in their systems. Life happens my friends but there are solutions if you need them.

Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.

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