Долги: не тонуть, а спасаться

Financial debt is like a toothache — it must be treated immediately, says independent consultant Sergey, who calls himself the Debt Doctor — A Debt Doctor. Most importantly, he is ready to help people even in the most desperate situations.

— Sergey, what usually prompts a person to turn to the Debt Doctor?

A Debt Doctor: First of all, it is the personal feeling that they can no longer manage their debt situation on their own. They keep taking out one credit card after another, paying high interest, yet their financial situation does not improve, while the lion’s share of their income goes toward servicing debt. That is a clear sign that the problem will not fix itself — it needs to be dealt with. And I am precisely the person people can consult, the person with whom they can discuss their situation and who can genuinely help. I am ready to provide a consultation, explain what programs exist, and determine what may be suitable in each specific case.

Most of my clients are Russian-speaking, so I can clearly explain to them all the nuances of the financial circumstances they are facing and the ways those circumstances can be overcome.

— What types of debt are especially relevant today?

A Debt Doctor: A great deal has changed recently. The most important factor has been the repeated increase of interest rates by the Bank of Canada, which has led to a significant rise in mortgage payments and other types of loans.

Money that used to be cheap has suddenly become very expensive. Let me give you an example. Previously, most loans were issued by banks at low interest rates — for example, 2% on a variable-rate mortgage — while private mortgages ranged from 10% to 13%. Today, banks issue mortgages at 6% and higher, while private lenders may offer around 9%. You can see how much the situation has changed.

When bank mortgages were cheap, people chose them, turning to private mortgages only in extreme cases. Naturally, when interest rates were low, people invested money in real estate because it was profitable. Today, however, because bank interest rates have risen so sharply, many people are trying to invest their own savings at these higher rates, either through banks or private mortgages. As a result, the supply of private money has increased, and private lending has become cheaper than before.

Unfortunately, because of these banking “obstacle races,” monthly mortgage payments have become too heavy for many people, as have long-term car lease obligations. Food, housing, car insurance, condominium maintenance fees, and other living expenses have also risen substantially. Meanwhile, the income of most Canadian residents, unfortunately, has not increased. As a result, for many families, living with today’s new interest-rate reality is becoming harder and harder.

Naturally, people are trying to survive under these conditions and preserve their financial balance.

The first source they turn to is the promotional rate offered by various credit cards, where a loan may be provided for one year at 0% to 2.5%. However, transfer fees have also increased, from 1% to 3%. And as everyone has noticed, there are now far fewer credit cards offering preferential borrowing terms. In other words, when money becomes expensive, banks are in no rush to give it away easily.

The second source is credit lines, which carry lower interest rates than credit cards.

The third and most expensive source is credit cards themselves.

And so, in these conditions — when many families were already barely making ends meet, and now have even less room to breathe, with the situation worsening by the day — more and more people are “falling into debt,” trying to cover the holes in their budgets with credit lines, credit cards, or other loans. This, in turn, inevitably leads to a growing number of people who need to have these debts written off through bankruptcy or a consumer proposal, meaning partial repayment of the debt.

So, if you find yourself in this kind of situation, there is no need to reinvent the wheel or turn to people who are not specialists in this field. Do not listen to neighbours and friends telling beautiful stories about how they saved themselves in similar circumstances — people, as I have noticed, tend to embellish themselves in the eyes of others. Unfortunately, many people now consider themselves “specialists in everything.” In words, they know all the laws, all the right people, and promise you mountains of gold. But at the first problem — often a problem they themselves may have created, whether intentionally or not — these “specialists” either disappear without a trace or blame you for the obstacle that has arisen. That is why you should turn only to proven professionals with extensive experience in this field and a deep understanding of all the subtleties of this complex industry.

For 15 years, I have been successfully “treating” financial collapses and “patching up” debt holes. I consistently achieve successful outcomes for my debtor clients. Of course, every debt case is deeply individual, and sometimes there are incredibly complicated files. But I know very well how this mechanism works, inside and out, and therefore I am ready and able to help almost anyone.

Let me give you one example. A small but successful company rented premises for its business. Things were going well, and before long it became clear that the company needed to expand — so it rented the neighbouring office as well. Then COVID hit, knocking not only this business but many others flat. Naturally, the business owners could no longer pay the former rent to the landlord, even though it was relatively modest — only $10,000 for both spaces. But as soon as the business owners said they were moving out because they had no way to pay for the premises, and no need for them under total lockdown, the landlord began aggressively demanding payment and turned to lawyers. Although after six and nine months the landlord managed to rent both premises again at the previous price of $5,000 each, he filed a lawsuit against the former tenants for $250,000 in alleged losses and penalties for early termination of the contract.

In a state of shock, and hoping that the court would understand the forced nature of their situation, the business owners turned to lawyers for help, but that did little to solve the problem. Legal assistance is expensive, and court cases can last for months. It makes sense to go that route only if you are absolutely confident in your position and in your chances of success. But when the basis of the claim is a business contract where everything is rigidly written in advance, challenging it in court is often pointless: the creditor will win. Of course, a judge may show mercy to the debtor and reduce the amount owed, but the judge has no right to cancel the debt entirely.

— So where is the way out of this situation, Sergey?

A Debt Doctor: When serious debt obligations are involved, the first step is to seek help, or at least a consultation, from the Debt Doctor — in other words, from me. My 15 years of experience allow me to say that, in principle, there are no hopeless debt situations. Unfortunately, however, there are situations where the time to solve them has been hopelessly lost, and then even A Debt Doctor may be powerless to help.

— In other words, as they used to say in a beloved old film: operate before peritonitis sets in.

A Debt Doctor: Exactly. That is why you should not wait or put the matter off indefinitely. Over time, any debt only grows — sometimes exponentially — and it certainly does not decrease on its own.

— What kinds of debts do people most often bring to you today?

A Debt Doctor: During the COVID lockdown period, many people received not only personal financial assistance from the government through CERB, but also special loans for business owners through CEBA. At first, they were issued $40,000, half of which had to be repaid; later, the amount increased to $60,000, with $20,000 eligible for forgiveness if the conditions were met. During the same period, very large corporations were also briefly able to receive even more substantial HASCAP loans — up to 1 million Canadian dollars.

It is important to note that, under the terms of these loans, the business owner was not personally responsible for repayment; the debt was considered corporate. At the same time, however, a number of conditions had to be met in order to receive such loans, including having at least two employees.

When people took these preferential government business loans in 2020–2022, many did not think much about the conditions. But today, the government is demanding repayment of the agreed portion of CEBA commercial loans. If that does not happen, the former preferential loan — now in its full amount — becomes a debt obligation to the government at a high interest rate. Many people will find themselves in a very difficult position because of this.

I believe the following may happen. For now, the director or owner of a business is not personally liable for this debt. If they declare corporate bankruptcy, it should not affect their personal financial status, should not damage their credit history, and generally should not affect them personally. But I have a strong sense that if people begin ignoring these repayments on a mass scale, the government may launch widespread audits or investigations targeting particular professions or types of businesses. Were these business owners actually entitled to receive preferential loans? Did they meet all the required criteria?

I once received an interesting call from people who had taken a similar loan and tried to explain their situation directly to the bank. The bank began an investigation, and it turned out that the business owners had spent the money for personal purposes, which is strictly prohibited. In short, they created problems for themselves that could have been avoided if they had contacted me in time.

— So when the authorities were handing out loans generously, they looked the other way, and now they have suddenly woken up?

A Debt Doctor: Exactly. People filled out applications easily and received money easily. Even back then, I was surprised by how many truck drivers received business loans, although they had never had any employees at all. Today, these one-person corporations are unlikely to withstand a bank audit, so their owners may possibly have to answer for the debts personally.

For now, this threatening scenario is only my assumption. But now is precisely the time to think seriously about partial or full repayment of government loans. Or other steps must be taken urgently, and alternative plans must be developed to escape these debt obligations. Some people may have to decide on a corporate bankruptcy procedure. And, by the way, that “devil is not as frightening as he is painted.” I have successfully helped write off such debts more than once, including debts connected to COVID-related payments.

To these cases I would add another common business debt known as BDC loans. These are also business loans, but with personal liability. Previously, that liability was partial — 25%. Now the government requires full responsibility. I can also help write off this type of business debt.

— Do you also deal with personal debts?

A Debt Doctor: Of course. Any debts related to taxes, family sponsorship, tax shelters, and pre-construction matters also fall within my area of work.

— Today, people who received bank loans over the past year or year and a half to buy real estate may also find themselves in a debt trap: they purchased property, and now they are literally suffocating under repeated interest-rate increases and more expensive mortgage payments. Can you help them in some way?

A Debt Doctor: This is a very delicate issue. If a person owns real estate, the most important factor is equity — the difference between the property’s market value and the mortgage. Certain financial tools can be used to address the issue of personal equity in real estate. But first and foremost, it is necessary to carefully weigh the possibilities and needs of each specific client. I am ready to take on this work and help everyone who needs it.

In any case, as long as time has not been lost, I believe there are no hopeless, unsolvable debt cases. A Debt Doctor will come to your aid at your first call.