Canadian Budget Binder

I am a person living with debt that I can’t pay and terrible credit. I am a single mother of a now 17-year-old son soon to be 18. Over the years there was never enough money and debt just seemed to keep piling up and I wasn’t sure what to do about it. I needed the car to get my son to daycare, then me to work. It  seemed every time I turned around there was a repair that needed to be made on it. My one credit card with the highest balance which is now in collections was typically used for repairs to my vehicle at the time.

I was working full-time to pay some of the mechanic’s bills as well as to keep paying my everyday bills and putting food on the table which was hardly enough. That meant that the repair bills often ended up on the credit card. I eventually refrained from using that credit card because the balance was just too high but luckily had a low-interest rate of only 10%. What’s worse is the car had to be junked as it was no longer in a state of repair. I haven’t had a vehicle since that time in 2001.

Employment Status

I lost my full-time job of 10 years in 2006 but I was lucky to find another job within weeks of this happening.  One year later that job was gone when the company started lay-offs (they eventually went bankrupt 2 years later). Before I lost that job, I was going to consolidate my other 2 credit cards (each had balances of about $2,000 on them) with the one I was no longer using but had the better interest rate. My plan was then to direct as much money to it as I could each month so that within 5 years I’d have it paid off.

But then when I lost that job, I didn’t feel comfortable doing that. I managed to hold on through my Employment Insurance (EI) which was for 40 weeks, but when I hadn’t found any work during that time period and my EI ran out. I then had to apply for and go on social assistance. At that point I was barely getting enough to pay the bills to keep a roof over our heads and put food on the table, it was the credit cards that suffered.

At first I was directing about $25 to the 3 credit cards but since it wasn’t putting a dent in the debt and often was leaving me short come month-end, I stopped that. The other 2 credit cards are now also in collections. I have one credit card in good standing however, I have not used it in a year and do not intend on using it. My attitude towards credit cards has changed dramatically these past 5 years.

Social Assistance

I was on social assistance for nearly 3 years. At one point while on social assistance I wasn’t allowed to job search because of a medical issue. Once I was given the go ahead I looked for work again. In May 2010 I finally found part-time employment at Wal-Mart. From May 2010 until November 2011 my wages were topped up by social assistance. However, the 2-3 months where I really could have used the money from Ontario Works (OW) I didn’t qualify because of my reported employment income when it was highest at work due to increased hours because of the Christmas season. So, January through March I struggled financially.

Then OW decided that my child support should not have been directed to them so they turned it back over to me. Adding that into my work income that they use in their calculations (OW using 50 cents of every dollar earned from employment) it no longer was worth staying with OW because I would have been lucky to get anything from them except for maybe one to two months a year. I decided to have them close my file.

Living Pay Cheque to Pay Cheque

I basically live pay cheque to pay cheque while working retail January through to March (April, May), my hours are reduced to the minimum. I’m part-time so right now I’m getting only 12 hours per week. The problem is that with everyone in the same position any available shifts that come up are quickly grabbed and no one is giving up shifts unless necessary. The only time I saw hours upwards to 37 per week was the week before Easter, the week before school started, during the anniversary sale, and then the month of December. When I need to buy something that’s not in my budget, I have to figure out what can be cut that month. My bills (other than the credit card debt) are paid each month.

Terrible Credit and Potential Bankruptcy

I’m at the point where I feel I need to speak with a trustee in bankruptcy. The total of the debt between the 3 cards in collections is around $32,000. That’s more than I made when I was working full-time and my work income these past few years has been no more than $12,000 give or take. It’ll never get paid off and this year I lose the child tax benefit as my son will be turning 18. That is going to remove close to $400 from my monthly “income“.

When the debts were still with the credit card companies I tried many times to get them to cut me some slack based on my situation. For a couple of years the credit card with my bank at the time was understanding and allowed me to pay what I could. Then that credit card company started demanding payment for the balance just as the other two were already doing (those 2 just weren’t cooperative) and eventually all 3 turned them over to collection agencies (which have changed so many times I’m no longer clear which one is with who).

If my son decides he’s not going to continue his education the child support of $344 will also end. That means that ANYTHING I can save each month has to be put aside to cover my expenses when those months come around where my work income is less than $500 per month. I’m lucky right now my rent is subsidized but that won’t last forever and then I’ll be in big trouble.

Job Search

Meanwhile, I continue to search for full-time employment or part-time if I can find something that works around my current job schedule. Despite responding to job postings and sending out resumes I rarely get called for interviews. I really believe it’s because of my age and even though my résumé is modified they can still guess roughly how old I am from the information that is provided. I’ve talked to others I’ve worked with before who have lost their jobs and they are finding it tough to secure employment as well.

My résumé has been prepared twice now by professionals and after the changes I’ve received a couple of opportunities but nothing that has offered me full-time employment. I’ve done plenty of reading online regarding resumes/cover letters and taken out books from the library in hopes of making sure I have a top-notch resume and interview skills, but with no luck. It doesn’t help that my experience and skill level with certain computer software is not high which most of the jobs in my field require or desire in a job role. I simply can’t afford to take computer classes and the self-study I do just doesn’t seem to be enough.

How I Manage My Money

I know my schedule about 2-3 weeks ahead of time so I can figure out close to what I’ll earn. I guesstimate what my monthly income will be then subtract the fixed expenses I have to pay each month. The remaining money is what I have to work with for groceries, miscellaneous, clothing etc. I avoid paying full price for anything if it can be helped. I complete most of my shopping at work since I have my employee discount so I price match whenever possible to help save money on groceries.

If my pantry is getting low on an item but I can’t find a good price for it when I look at all the weekly flyers I’ll put off purchasing it until I can get it at a good price. I use coupons as much as I can matching them up with the weekly flyers to try and get more bang for the buck. I check my bank account before I go shopping to determine what has yet to come out of the bank and what is in there so I have an idea what I have to spend on that week’s groceries.

Update on managing money since submitting her post

I’m budgeting now and planning my weekly shopping around the flyer inserts. I use coupons more than I ever have and I no longer rush into buying something. My hours at work have increased to about 20 per week as more people are giving up shifts which I can pick up. I’m also going to open a savings account and at least 10% of each pay I’ll direct to that account. If there is any money left at the end of the month after paying all the categories in my budget the money will go into emergency savings for when it is needed.

Where Do I Go From Here?

I’ve lived without a credit card for over a year now and should I choose to get one in the future the first one would be a secured credit card with a low credit limit to start rebuilding credit. Since I’ve been fine paying debit or cash all these months I’d use the credit card but then make the payment to it immediately (as we suggest to customers when we motivate them to apply for the Walmart credit card) so I’d earn the reward dollars and not carry a balance.

Looking back now over 5 years having been without full-time employment, 3 of those years were with no employment whatsoever and with losing 2 sources of income this year I’m at wit’s end. I have come to the point that I do feel bankruptcy is the only way to go in order to start my financial life over. I have talked to two co-workers who have gone the bankruptcy route and they are advising me I should look into my options. Neither of them were in as much of a bind as I am (and both are married and have a spouse’s income to fall back on), yet they felt bankruptcy was best for them rather than a consumer proposal.

I kept thinking things would improve if I knew back in 2008 what I know now. I believe I would have considered my options in regards to bankruptcy the moment I had to go on social assistance. At least I wouldn’t have stressed about the debt all these years. The past few years, I feel like I’ve existed, and have not been living.

March Post Update

Since I wrote to you in February, I did meet with a trustee in bankruptcy. The trustee told me that the one thing I have going for me is that the creditors a) can’t go after assets as I don’t have any b) I had already done what he would have said to do and that was change banks to one where I owed nothing c) he said that the only thing they could do is garnish my wages.

Even if they figured out where I worked it would take  them upwards of 6 months to a year to get the court to approve garnishing my wages. So in that regard, my declaring bankruptcy isn’t something I need to do just yet if I don’t want to. The fact that I’m losing one if not two income sources this year is a concern. He said I could wait until later in the year to file or wait until I got my income tax refund for this year (this was in February, and he told me I wouldn’t want to file until I had that refund.  If I filed then, I would lose both my refund for 2012 and 2013.

By waiting until I had my 2012 refund I would lose only my 2013 refund if I filed before the year ended). I’ve thought long and hard about waiting to file for bankruptcy — but I’m leaning towards doing it in April. My reasoning is my income tax refund can pay the monthly bankruptcy fee in full for those 9 months I’d be in bankruptcy. Any money from work I can then direct towards monthly bills and building up some savings for the lean months. My son works part-time now which has eased up on some things that I used to pay for him as he buys them himself now. I just want to file bankruptcy, get it over with, then start fresh and eliminate that stress from my life.

Contribution by: This is a Canadian Budget Binder fan who would like to remain anonymous.

Editor’s Note: The contributor wanted to share her life with terrible credit in hopes that others who are in her position don’t feel alone and can learn something from her story. It’s always nice to hear success stories but it’s also important to hear the stories of those people who don’t know where to turn and feel like they have “just been existing”. Life is about learning from mistakes we make and hoping that we don’t make them a second time. I believe by sharing her story today she has opened the gate and now she has to walk her path which she has started with budgeting. I wish you all the luck in your journey towards fixing your credit and understanding your personal finances.

Questions:

• How did you turn your credit around?
• What tips do you have to share with other readers that might have terrible credit and on the verge of bankruptcy?
• What motivation can you give to our contributor today?

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