What to Do When Your Credit Card Debt Has Been Charged Off

One of our readers, Ashok, sent us this question:

Sir, I am a credit card defaulter. I changed my address and likelihood of bank finding me is almost zero. But I feel guilty to do this and want to settle my account with bank, However, i am not in a condition to pay the full amount, but would like to get my name written off from bank’s defaulter list. How do I settle my account with bank? What kind of rebate i can expect? Is there any agency to help me out in this?

Thanks for your question Ashok!

You are wise to want to settle the account out for several reasons:
Credit card companies employ entire departments of people they call “skip trace”. Which basically means when someone skips out, they harass everyone you know until they find you.
The credit card company will keep reporting the debt to all three credit bureaus until they write it off. When they write it off, they will sell your debt to a new collection company, who will also report your debt to all three credit bureaus. When they give up on trying to find you, they will simply sell your debt to another company.
If anyone ever does catch up to you, you can expect them to sue you, and garnish your wages.

Now, assuming that they do not ever find you, you will still have to deal with the damage that delinquent account is doing to your credit score. So, you are exactly right to want to make good on the debt. It will begin the process of repairing your credit.

There is one thing you need to be aware of before you begin. Now, I do not know how old your debt is, but I can tell you that if your credit card company has written off your debt already, calling them will “re-open” it, and they will begin collections all over again. This could actually cause you to have multiple negative accounts on your credit report over the same debt – so do a couple of things first.

If you want to make good on your debt what you have to do is pull all three of your credit reports, and find out who currently owns your debt. From that point, you have two options:
Call the collection company who owns your debt now, and offer a settlement for a reduced amount.
Send a certified letter to the collection company that currently owns the debt telling them that you refuse to deal with anyone but the original owner of the account (the bank that issued the card.) This is your right by law.

There are pros and cons to both of these:

Collection companies are used to making settlements, and they will likely settle for less than your original bank will. However, they may have tacked on quite a few additional fees to your account that would not be charged to you if you deal directly with the bank that gave you the card.

The best way to know if fees have been added is to look at your credit report. Look at the amount your bank charged off, and then compare it to the amount the new collection company says you owe.

Settling the debt with the original bank will look better on your credit score because it will show a paid charge off. If you pay your original bank you can wait a few months, and challenge any negative information on your reports that resulted from the collection companies (not the original bank.)

As far as what kind of a settlement you can expect: it depends on how much you are willing to negotiate. In situations like yours, you should easily be able to cut the total by 50% if you are dealing with a collection company. If you deal with the original bank, upwards of 30% is a reasonable expectation.

As far as organizations that can help, yes, you will get the help you need from a credit counseling agency. Just be careful which one you choose, because not all of them do a good job. They will negotiate with your creditors on your behalf, and get the account settled for you.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Canada Scraps 'Millionaire Visa,' Sends B.C. Property Market Reeling

Real estate agents in Vancouver say property prices could take a hit, after Canada scrapped a program which allowed wealthy immigrants to fast-track the visa process.

The Immigrant Investor Program, launched in 1986, offered visas to business people with a net worth of at least $1.6 million who were willing to lend $800,000 to the Canadian government — for investment across Canada — for a term of five years.

By 2012, the scheme had to be temporarily frozen due to a huge backlog of applications from wealthy mainland Chinese hoping to come to B.C. Now, the government has announced it will end the program for good and scrap all 59,000 applications backlogged worldwide.

The decision came less than a week after the South China Morning Post published a series of exclusive investigative reports into the controversial scheme.

Property prices could take a hit

In West Vancouver, real estate agent Clarence Debelle is still receiving offers from mainland China for luxury property, but she’s concerned the end of the investor program will have an impact on the local economy and the high-end housing market.

“I deal directly with these people who bring a lot of wealth, who are creating lots of jobs for local Canadians — builders, trades, architects, realtors like myself,” said Debelle.

“Most of the buying is coming from Chinese immigrants who are wealthy, so if we make it difficult for them to come into this country, we have killed 80 to 90 per cent of the buying in West Vancouver.”
Immigration lawyer Richard Kurland agrees.

“When you suddenly stave off the intake of literally hundreds of millionaires in the Vancouver property market, prices can only go one way and that’s down,” said Kurland.

Market impacted by more than investors

Others aren’t so sure. Even with the investor program frozen, housing prices continued to rise.
Tom Davidoff with UBC’s Sauder School of Business says the market is driven by other things like low interest rates and the local and global economies.

“Given that in the last couple of years, we haven’t seen the market cool off, it’s hard to believe that freezing the investor market is going to kill even the high-end in Vancouver,” said Davidoff.

The government has also announced the end of the Entrepreneur Program, a smaller scheme for business people who plan to own and manage a business in Canada.

However, wealthy investors can still come to Canada through the Start-up Visa Program, which encourages immigrant entrepreneurs to partner with private sector organizations to invest in local start-ups.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

UPDATE 1-Canadian Housing Starts Slow Modestly In January

TORONTO, Feb 10 (Reuters) - Canadian housing starts fell more than expected in January, data released on Monday showed, reinforcing the view that the country's housing market is stabilizing after a recent boom.

Starts slowed to 180,248 units last month at a seasonally adjusted annualized rate, a report from Canada Mortgage and Housing Corp showed, shy of the 184,000 forecast by economists.

In December, starts were a downwardly revised 187,144. They were originally reported as 189,672.

The January figure continues a trend that has seen groundbreakings slow from 187,923 units in 2013 and the breakneck pace of 214,827 starts in 2012, when the housing market was at record highs and the government intervened to tighten mortgage lending rules.

Economists are largely predicting a softer but stable Canadian market this year as mortgage rates edge higher and the economy continues to chug along slowly.

"We anticipate that construction activity will continue to edge lower over the course of the year as the forecast increase in interest rates should restrain demand," David Tulk, chief Canada macro strategist at TD Securities, wrote in a research note.

"A smaller contribution from the housing market is consistent with the macro theme of domestic fatigue that will leave headline (economic) growth at or below its trend rate until net exports are able find their footing both in response to a weaker currency and a fundamentally stronger U.S. economy," Tulk added.

Multiple urban starts - typically condos - fell 6.0 percent to 102,289 units in January, while single detached starts rose 3.4 percent to 60,869 units, a modest rebound after two months of weakness.

Starts were down in British Columbia, Quebec and the Atlantic region, but rose strongly in Ontario and the Prairies.

RBC economist Josh Nye said unusually bad weather in December and January may have weighed on activity, and that housing starts could stage a small recovery in the next few months. Nye also noted that building permits outpaced starts in the fourth quarter of 2013 - 210,200 permits versus 194,500 starts - which could mean homebuilding will strengthen in the near term.

"However, we expect modestly higher interest rates as 2014 progresses will weigh on housing affordability and lead to some moderation in residential building activity going forward," Nye wrote in a research note.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Toronto House Prices Could Slip In 2015, TD Bank Predicts

Report estimates Toronto, Vancouver real estate markets are 10 to 15 per cent overvalued, compared to 10 per cent for rest of country
Barely has the year — and a whole new round of bidding wars — begun and the first of the big banks has weighed in with a warning that Toronto’s housing market is 10 to 15 per cent overvalued.

So is Vancouver’s, says TD Economics in a report released Monday, noting that both cities have been seeing “frothier conditions” than the rest of the country, where house prices remain about 10 per cent overvalued, largely because of low interest rates.

“Toronto and Vancouver make up 40 per cent of the Canadian housing market, so that’s what’s really driving the overvaluation measure,” said TD economist Diana Petramala in an interview.

A spike in interest rates or a “negative economic shock” could potentially send resale home prices tumbling by 25 per cent, Petramala notes. But it’s far more likely there will be a “gradual unwinding of excesses” in the Canadian market as interest rates slowly rise, along with incomes, over the next few years.

It’s likely to be 2015 until Toronto, and much of the country, start to see any real downturn in sales and prices, according to TD.

While Toronto home prices jumped 6.8 per cent in 2012 and 5.4 per cent in 2013, they could rise just 2.7 per cent this year and slip by 1.2 per cent in 2015, when interest rates are expected to start climbing, the report forecasts.

Petramala notes that “prices ended 2013 on a much higher note than we had been expecting as households faced an unusually low level of homes for sale.”

That has played out in the old City of Toronto, in particular, in an unexpectedly feverish start to 2014, with a simple Junction Triangle row house going for $210,000 over asking price in a flurry of 32 bids.

“The one concern we have is that we’re seeing more strength in Toronto’s house prices than expected,” says Sal Guatieri, senior economist with BMO Capital Markets.

Even all those new condos coming on the market haven’t been enough to hold down housing prices, says Guatieri, noting that resale condo prices were up almost 4 per cent in December, year over year.

“We thought, if anything, Toronto house prices would fall somewhat last year. But underlying demand is pretty strong, net migration is pretty healthy and the number of echo boomers aged 30 to 34 is growing quite rapidly at the moment and they are a prime homebuying cohort, especially for condos.”

The housing market is “overshooting,” but “it’s not a market that is crashing,” says Benjamin Tal, deputy chief economist at CIBC World Markets.

He continues to believe that the market will slow to a soft landing and that real estate numbers to be released this week detailing January sales and prices (those from the Toronto Real Estate Board are due out Wednesday) could start to provide a more “realistic” picture of the health of the housing sector.

“This market will be tested when interest rates start rising, and that means it won’t be tested for a while.”

The Canadian housing market and worries about a real estate bubble have been key concerns for policy-makers for several years.

Recent indicators have suggested the market may be headed for a soft landing instead of a bubble bursting, but concerns have persisted.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.