Posted under bankruptcy Kitchener
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We all misunderstand things at times. However, if something as important as the terms for borrowing money are not perfectly clear it is certainly a good idea to have whoever was in charge of the lending explain. I met with an elderly man in our Kitchener office. This fellow is collecting a pension but still works part time as a security guard to make ends meet. This job requires working at night and standing for 4 hours at a time. He wanted to quit this job as he felt it was taking a toll on his already declining health but needed the income to keep up payments on debts. |
Jane Merling |
Here is a big part of his problem. A few years ago he obtained a line of credit from his bank in the amount of $10,000. A line of credit is similar to a loan but is not usually borrowed for a specific item. A bank or lender will allow a certain amount of money to an individual to use to make purchases, home improvements, pay off other debt and so on. The lender will provide cheques and the borrower uses these cheques as required . The interest is considerably lower than credit cards so it makes sense to use this type of credit as an alternative. It is very common for someone to use a line of credit for many different things and most people would only take as many dollars at any given time as they need and then pay down the balance before using it again.
Our fellow understood this process a bit differently. When the line of credit in the amount of $10,000 was granted to him, he immediately issued a cheque for the whole amount and put it in his chequing account. This meant that he was paying interest on $10,000 that was sitting in a bank account that paid no interest. Over a period of time he started to think of this money as “his’ and used it to purchase a car, help his son with bills and “other things”. In fact he told me the money just seemed to slip away . He was also still using credit cards and he was making payments on the cards out of this account .
When he came to see us he had a total of $22,000 in debt. His pension income and income from the security guard job were not enough to keep up all the payments and cover his living expenses. The additional stress of worrying about these debts did not help his health problems.
We reviewed his situation with him and he decided to get a Fresh Start by filing personal bankruptcy. A few weeks later he called and said that he had also given up the security guard job and was starting to feel much better.
If you feel that you need Fresh Start call us in Kitchener at 310-PLAN (310-7526, no area code required) or 519-747-0660 or e-mail us to arrange a free initial consultation.
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