Frequently Asked Questions
Frequently Asked Questions
WHAT DEBTS CAN YOU HELP WITH?
- Credit cards
- Lines of credit
- Personal loans
- Student loans
- Payday loans
- Phone bills
- Debts in collection
We do not deal with secured loans such as car loans and mortgages.
WILL FILING A CONSUMER PROPOSAL AFFECT MY CREDIT?
Yes, any debt restructuring which involves forgiving some of the debt which is owed or paying back at a lower interest rate than agreed will affect your credit. We have one of the most comprehensive credit rebuilding services in Canada which will help you rebuild your score. You should also remember that your credit worthiness also depends on your debt to earnings ratio and therefore you must also have a low debt level compared to your income if you are to qualify for new credit. So, your action plan to become creditworthy must include two things:
1 Reduction of debt
2 Building of credit score
WHAT IS A CONSUMER PROPOSAL?
A consumer proposal is the alternative to bankruptcy for those who wish to avoid bankruptcy and attempt to pay back some of which is owed. A consumer proposal is an offer to pay your creditors a portion of what is owed as full and final settlement of the full debt, paid over a period of up to 5 years at zero percent interest rate. When a consumer proposal is filed the debtor is legally protected from his or her creditors. For example if you owed $20,000 this may be settled by paying $150/m for 60 months (depending on income and assets). Total paid would be $9000 and the remaining $11,000 would be forgiven. Why would your creditors accept less? The reason is $9000 is more than what they would receive if you filed for bankruptcy. A consumer proposal is better for the creditors and better for you. That is why they are so successful.
WHAT IS THE DIFFERENCE BETWEEN A CONSUMER PROPOSAL AND BANKRUPTCY?
If a debtor files for bankruptcy all their assets (subject to exemptions) are assigned to a licensed insolvency trustee who will liquidate them and distribute the proceeds to the creditors. The ongoing monthly payments in a bankruptcy are based on the debtor`s monthly income which is constantly monitored. If instead a consumer proposal is filed all the debtor`s assets are protected from the creditors and the agreed monthly payments are based on the debtor`s financial status at the time of filing with no ongoing monitoring.
For further information on this topic:
WHAT IS THE DIFFERENCE BETWEEN 4 PILLARS AND A BANKRUPTCY TRUSTEE (LICENSED INSOLVENCY TRUSTEE)?
A Licensed Insolvency Trustee (LIT) is an officer of the court with a duty to act impartially and represent the interests of both the creditors and the debtor. He cannot be an advocate for the debtor. In fact, the more he recovers for the creditors the more he is paid which some say is a conflict of interest. 4 Pillars is an advocate for the person in debt and only represents their interests with the objective of achieving the lowest possible settlement for our clients. 4 Pillars also has a client for life program with a focus on aftercare once the debts have been restructured. This aftercare comprises the delivery of credit rebuilding, budgeting and financial literacy programs to ensure a robust long-term financial recovery. Clients can contact us anytime after their proposal has passed for help and there is no time limit.
DO YOU CHARGE A FEE?
For some options we do charge a fee which is rolled into any payment plans we quote to you. Any fees will be explained to you at our free consultation.
WHY WOULD BANKS SETTLE FOR LESS?
If you are really struggling with your debts the banks realise that you may be considering the option of bankruptcy in which case, they may receive next to nothing. When an offer is made to pay more than what they would receive in a bankruptcy they are usually happy to negotiate.
WILL I STILL BE ABLE TO PURCHASE A HOUSE?
Any process which involves forgiving some of the amount owing to a financial institution will affect your credit, but the good news is that your credit may be rebuilt thus enabling you to qualify for a mortgage. Bear in mind that the banks will also consider your debt to earnings ratio when you apply for a mortgage and you must therefore reduce your debts to an acceptable level. We can assist you with this. It is also necessary to place a down payment for a house and in order to save for this you must first gain control of your high interest debts.