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What Happens When Everything Goes Wrong With Your Spending?

Sometimes, your financial situation gets so out of hand that you don’t know what to do. You have not been watching your spending and it creeps up on you.

You might realize that there is a problem only when you get a letter from the phone company, the bank or the collection agency. In one situation, for example, a problem with unpaid taxes was only noticed when the property bills were found in the person’s drawer while she was in the hospital.

There might be other factors that contribute to problems with money. Here is another example of someone`s spending being excessive. This person was found to have an anxiety disorder. It took this person a while to discover that buying DVDs relieved his anxiety. If a DVD set was coming out or one needed to be replaced, the person would not be able to wait and plan the purchase. He would immediately go out, often spending more than he should to buy the items. It seemed like it was just poor judgment that was contributing to his budgeting problems until the real issue was realized. He had 22 copies of the same DVD of his favourite TV show. His only explanation was that he really enjoyed this show. That’s when it was realized that he had a mental health issue and help from a mental health agency was sought.

The one silver lining of living on a disability pension or a low paying job is that you can never really get into a large amount of debt. However, to someone on a low or fixed income, a debt of $4000, $1500 or even less can seem like a lot.

What is the effect on the Disability Pension? The Ontario Disability Support Program (ODSP) in Ontario

The law does not allow ODSP payments or proceeds from ODSP in the bank to be taken by companies to pay for bills that you owe. It means that you will still have the money to keep paying rent and buying food.

The down side, though, is that for those who choose to ignore paying the debt off, it lets the person off the hook without taking responsibility for their spending habits and they do not learn how to better manage their finances.

Collection Agency

After many attempts at collecting the money someone owes them, a company will often hire a collection agency to attempt to get the money owed. An example of this is when someone has not paid their cell phone or cable bills for several months and after warnings from the service provider. In another case, someone stopped making his contractual monthly payments to a Fitness Centre he joined.

There is usually a letter from the company indicating that the bill must be paid or it will go to the collection agency. The company owed the money will usually make contact by mail and/or phone. If the person does not make the required payment in the time provided, the account gets sent (sold really) to a collection agency. The Collection agency then contacts the person asking or demanding payment.

Common situations and possible solutions

The most common problems people have are excessive cell phone and cable TV bills. It is often very hard to understand the contracts and the additional usage fees. Getting a local fixed rate or pay as you go 24/7 talk and text monthly plan with one of the budget carriers will solve this problem. With providers like Public Mobile and Wind, you can pay upfront and there are no overuse costs or hidden costs. The next month, the phone gets turned off if payment is not received – this tells you that you have not remained within your budget.

One strategy that is sometimes used is to suggest to the company that the sales person should not have sold the person the plan in the first place, because their understanding of the contract was questionable. Let them know that the law does not allow them to garnish disability pension benefits.

In the Fitness Centre example, a support worker wrote a letter noting the person’s fixed income, the law about garnishing and criticized them for having a commissioned sales person who sold a pricey membership to someone who really didn’t have the ability to understand what he was signing.

Credit cards, even with low limits can become a problem. The interest rates are so high that the person just gets deeper into debt. The first step should always be to cut up all cards so the situation does not get worse. For credit card amounts, a solution could be to make minimum monthly payments. Alternatively, a family member can pay off the amount and the person slowly pays back the family member.

For the property tax arrears example, an option is for the person or a family member to take out a small mortgage and pay off the taxes. Total up the monthly payments: taxes, mortgage, utilities and report that amount to ODSP so there would be the proper adjustment to the shelter allowance. Next, set up pre-authorized payments for all those expenses.

Sometimes, when someone opens a bank account they will get overdraft protection. Over time, the amount of the overdraft can gradually be increased to where the person is using it so often that they live in overdraft. After several months of this, the bank will often call to put a stop to it. A possible solution would be to lower the overdraft amount and have someone, perhaps a family member, give the person money to get them out of overdraft. The person can slowly pay back the family member.

Here are some other options:

You could use the ‘You can’t get blood from a stone’ analogy and suggest that there is no money available to pay the bill.

You could offer a few very low monthly payments. Often, the company will drop the case.

An option is to let it go to a collection agency. If the person ignores the attempts made by the collection agency to collect, eventually the collection agency might stop mailing and calling them.

The collection agency does have the right to contact revenue Canada. However, once they find out the person is on ODSP they often no longer pursue it.

If the calls get to the point of harassment then the person can write a letter and send it by registered mail. The letter should state that they dispute the amount owing and would like the matter taken to court. It is also a good idea to state that the collection agency is not to forward the account to another collection agency. Once the letter is sent via registered mail, the collection agency is not allowed to call to ask for payment but only to ask about a court date. This is when the collection agency usually drops the case.

The person could also change his phone number and have it unlisted. He might get a couple more letters before all efforts to collect stop.

The company or collection agency might threaten to go to court but the amounts are usually small enough that it is not worth their while to take it any further.

If the person agrees to be assessed and is deemed not competent to handle finances, the Office of the Public Guardian and Trustee can take over finances. For more information, see the article Guardianship: Office of the Public Guardian and Trustee

Another option is for a family member to agree to be the trustee to handle finances.

Credit Canada Debt Solutions is a great resource that provides you with credit counselling and helps put your finances in order.

There are always options to help you get out of debt when everything seems to have gone wrong. Once you figure out that you have a problem, it is important to talk to someone you trust to help you get the help you need.

It is also a good idea to talk with your trusted person about your financial situation every once in a while to help ensure that your financial situation never gets out of hand.

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