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economist suntribune business thursday june 13 2002 rebounding from credit despair by jeff mitchell staff writer seven years ago steve naiman was on a roll he had a good job in sports broadcasting a new car and a promising future he also had a solidgold credit rating the result of years of using credit and storecharge cards and faithfully paying monthly charges by the time he was 30 he had amassed a wallet full of cards visa mastercard amex the bay simpsons and an everincreas ing credit limit on all that plastic i was a great customer mr naiman said they loved me in time he was carrying a huge accumulation of debt he esti mates it was in excess of 25000 but was not overly concerned he was young employed and deter mined to meet his obligations i never anticipated anything would go wrong mr naiman said then he got sick the aurora mans mental break down precipitated a long fall into ill health that has been defined as including panic and anxiety disor ders a mixed personality disorder and other debilitating illnesses he was incapacitated unable to work his world screeched to a halt but the wheels of the credit industry kept on turning his former friends the bankers and company credit officers turned into enemies demanding payment qn- the huge sums he had rung up on his plastic phone calls came at all hours of the day as collection agents and skip tracers tried to track him down letters threatening garnishees and asset seizures began arriving now on a disability pension mr naiman is essentially untouch able creditors cannot garnish a welfare cheque but he lives with the legacy of bad debt mr naiman freely admits he is responsible for the debt he amassed but he also feels he fell like so many others into the credit trap youve got a dollar in the bank they give you a credit card he said youve got a job they give you a credit card theyve made it almost impos sible in this country to live without a credit card it can be said credit is a way of life for north americans we buy houses by taking out mortgages and purchase automobiles by arranging loans we pay for clothes vacations and din ners out with our plastic as credit card use increases so do our unpaid balances according to the federal governments finan cial consumer agency its latest credit cards and you staff photosjoerd witteveen cathy may credit counselling supervisor at markham stouflville family life centre displays a pile of cutup credit cards at her hwy 7 office report issued in april showed a 10- percent increase in the number of visa and mastercard credit cards in circulation in canada and a cor responding 59percent increase in the number of accounts with unpaid balances there were an estimated 686 million credit cards in circulation in canada at the end of 2001 more than 75 per cent of canadians over the age of 18 have at least one cred it card fully onefifth of those cus- tomers carry forward balances each month on which they are charged interest ranging from 129 per cent for low rate bankissued cards to 20 per cent and more for retail cards alan farber head of the coun trys largest personal bankruptcy firm a farber partners said credit is the underwater hazard that tears the bottom out of many a households finances the inability to handle credit and failure to see the huge cost of credit the hidden cost of credit are factors in the majority of per sonal finance crises mr farber said credit offers a bridge over the gap that separates us from what we want and what we can afford we have a desire to acquire and then to improve upon what we own credit is the fuel that feeds that fire those were harsh lessons for tamara and her hus band who went bankrupt in the early 90s newly married both had good jobs she was a customer service rep working for a large company downtown he had a flourishing contracting busi ness and they saw no need for concern when in 1989 they bought a pricey condo in richmond hill we bought it for 225000 at 135percent interest with condo fees as well tamara said their monthly accommodation costs came to a whopping 2900 then the recession hit within seven months we start ed to feel the pinch tamara said her husbands business dried up virtually overnight there were no tenders to even bid on she said with him not working it was impossible to pay that sort of money as the situation worsened the couple attempted to renegotiate the terms of their mortgage with the bank no luck they considered selling the condo on which they still owed 189000 but in three years the going price for the units had fallen to 140000 they could sell but still be left owing almost 50000 f despite pleas the bank refused to relent in its pursuit of the mortgage and the interest owed on it after all this was the great recession every body was taking a bath and breaks were hard to come by they started coming after us so we had to file for bankruptcy tamara said they were pretty nasty the couple abandoned their condo and moved into a rental unit and began to rebuild their lives tamara said she and her hus band saved diligently scraping together a 25000 down payment on the semidetached home they now own in aurora they bought a new mini van with 13000 savings reducing the outstanding balance upon which theyd have to make payments always careful with money tamara now budgets cautiously and absolutely refuses to tread any where near the credit trap it was a lesson we learned the hard way she said this is never going to happen to me again indeed management of finances striking that elu sive balance between income and expenses the necessary and the extravagant is what its all about said cathy may a credit counsellor with the markham stouflville family life centre we see many people here whove learned the hard way said ms may in an interview room at the centres unionville offices those approaching the centre range from young people whove just graduated from school and are snowed under by huge student loans to career workers who have struggled with debt for years before seeking help ms may said for a number of reasons it has got away from them she said by the time they come for assis tance many people are totally stressed out and unable to see a ten able solution to their problems ms may said they may have fallen into arrears with payments and are being pursued by collection agencies the first advice a good counsel lor will give a client is to calmly and rationally assess the situation seek ing solutions that will be manage able for the consumer and accept able to the creditor she said it is essential to maintain lines of communication and show creditors good faith ms may advised even when it has reached that point there are still options ms may said do not ignore your credi tors these are your financial obliga tions no matter how youve got into them these are your obligations clients are immensely relieved to learn creditors will be flexible ms may said ultimately the creditors goal is to recover the money that may mean lowering interest rates or monthly payments or coming to some other arrangement but as long as the debtor works diligently to repay what he owes solutions are in most cases possible she said many of the major creditors have working relationships with credit counselling and in fact will refer debtors ms may said a credit counsellor can play a number of roles from helping a client establish a budget and a plan to repay debt to acting as a trustee to whom the debtor makes regular payments that are doled out to creditors often counselling can show someone the situation is not as hopeless as it appears for a lot of people coming in for just that initial appointment is enough ms may said the most basic advice given by counsellors can prove the most sound avoid credit pay off credit card balances and household bills each and every month and above all live within your means although bankruptcy is a source of fear and dread for many it can be a neces sary and conclusive meas- ure in erasing overwhelming debt and starting over mr farber said the great pity is that the vast majority of people come to see us relatively too late mr farber said still trustees are obligated to explore all possibilities for resolu tion of outstanding debt including negotiating with creditors on repay ment plans as alternatives to bank ruptcy people often have a limited view of options available to them mr farber said many people feel theyre in a black hole and they cant see the exit to that black hole ultimately fewer than half the clients who approach a farber partners are assigned to bankrupt cy he said but as many as 80 per cent of them hire the firm to help them out ofthe hole theyve dug while it comes at a cost both in terms of personal anguish and financial obligations the declara tion of bankruptcy can be a new start and one of the requirements of declaring bankruptcy is to attend mandatory credit counselling our job is to make sure they dont get into this problem again mr farber said why shouldnt a young guy who gets into trouble when hes 27 be able to dream of owning a home when hes in his 30s he asked r annual spring savings 4747 hwy 7 east of kennedy unionville 9054775524 v mbn wed 106 pm thursfri 109 pm saturdays l65pm sunday ends saturday