Monthly Archives: March 2013

Help with Credit Card Debt in Thunder Bay & NW Ontario

Am I okay if I’m just able to make minimum credit card payments?

If you are struggling under mountains of credit card bills, you’re not alone. Per capita credit card debt has been at record levels in recent times. Many people in Northwestern Ontario are struggling and can’t make significant payments on their credit card debts. Instead, people make the minimum payments, doing enough to keep the card companies at bay, but not making any real impact on their total debt levels.

To illustrate the fact that minimum payments do not make any real contribution towards the repayment of debt, the Canadian Ministry of Finance has mandated that credit card companies disclose how long it would take you to pay off a credit card while making only the minimum payments. For instance, if someone has a credit card of around $2,000, with a standard interest rate of 18%, the minimum payment would be around $40 each month. By making these $40 payments each month, it would take almost 31 years to pay off this $2,000. 31 years to pay off $2,000! And that’s if you never charged another thing to the card! Almost $5,000 of interest would result. And that’s just on a relative low credit card balance of $2,000… many people have credit card debts much higher than that. You can see how being able to make the minimum payment isn’t really helping you to get out of debt fast. Being allowed to make only a minimum payment is useful if you have a month where you are tight on money, but being able to make only minimum payments for an extended period of time is a definite warning sign of financial difficulty. Take a look at your own credit card statement for this disclosure and you will see for yourself how long you would be paying minimum payments for.

As result, if you are only able to make minimum payments, and don’t foresee this changing anytime soon, you should really talk to someone who can provide you with debt help in Thunder Bay, Dryden, Fort Frances and the rest of Northwestern Ontario. At Grant Thornton Limited, we can discuss solutions with you that will bring actual debt relief, as opposed to the false sense of security provided by making minimum payments. Call us at 310-8888 or email us today at nwodebthelp@ca.gt.com for a free, no obligation consultation.

Should I use my RRSPs to pay debts and become debt free?

We get this question asked of us every day as a possible debt solutionto get out of debt fast.  However, RRSPs are meant for our retirement and not to be used to become debt free.  RRSPs can be liquidated at any time but individuals with locked in pension plans don’t have this option which is a good thing in order to protect their future income for their retirement years.

Before withdrawing money from your RRSP, you should consider the following:

(a) RRSPs are intended to save for retirement. Every dollar you withdraw today is a dollar that won’t be available when you retire.

(b) Funds taken from an RRSP will be considered income in the year in which it is withdrawn. The institution will withhold income tax based on a sliding scale, but depending on your income, this may not withhold sufficient tax. This could leave you with a large tax bill at the end of the year.

(c) Depending on the amount that is withdrawn from the RRSP, your increased “income” for the year may bump you into a higher tax bracket, which would increase your overall amount of income tax.

(d) RRSPs are exempt in a proposal or bankruptcy (except for contributions made in the last 12 months). This means that if you file a proposal or go bankrupt, your RRSP will not be affected. If you have already withdrawn RRSP funds to pay debts and later file a proposal or go bankrupt, those funds are gone – your Trustee cannot get them back. However, the Trustee could help take care of the income tax liability created by the RRSP withdrawal.

Grant Thornton provides advice and solutions to individuals and businesses experiencing financial difficulty and reviews all the alternatives to bankruptcy. For Thunder Bay Bankruptcy, Dryden Bankruptcy, Fort Frances Bankruptcy, Thunder Bay Consumer Proposal, Dryden Consumer Proposal or Fort Frances Consumer Proposalplease contact us toll free at 310-8888 or email us at nwodebthelp@ca.gt.com to book a FREE private consultation to review all of your options.