Not being able to pay back LOC

[Brisingr1502]

Hi everyone,

With interest rates rising this much this year, I fear I might not be able to afford paying back my student LOC. I will be contacting a trustee soon, and see if a debt settlement could be reached. I first wanted to ask if anyone on this forum has been through this?

 

Edit: I think it would be good to add that I already work another job on top of being a lawyer.

Edited September 21, 2022 by Brisingr1502
provide more details

[Brisingr1502]

@Pantalaimon I know it might be corny, but thank you for the hug mate. It is rough out there.

[Pantalaimon]

No problem, least I could do. Wish I had experiences to share but I can't imagine. Good luck!

[BlockedQuebecois]

Have you tried discussing this with your bank to see if you can reach some kind of agreement to extend the term of your loan or otherwise reduce your payments? 

The interest rate increases have only added about $200/month to repayment on a fully maxed out, $150,000 PSLOC. While I appreciate that isn’t chump change, adding another year to your amortization would cut that down to $100/month extra and adding two years would reduce it to your pre-rate increase payments.

If you end up looking at your options, make sure you speak to someone knowledgable about your professional obligations and err on the side of reporting your status to the LSO (or equivalent outside of Ontario). 

[123]

59 minutes ago, BlockedQuebecois said:

Have you tried discussing this with your bank to see if you can reach some kind of agreement to extend the term of your loan or otherwise reduce your payments? 

1 hour ago, Brisingr1502 said:

Hi everyone,

With interest rates rising this much this year, I fear I might not be able to afford paying back my student LOC. I will be contacting a trustee soon, and see if a debt settlement could be reached. I first wanted to ask if anyone on this forum has been through this?

Edit: I think it would be good to add that I already work another job on top of being a lawyer.

I did have to work something out with my bank when COVID hit, I'd just started a practice, and I wasn't able to make money in May and June 2020. I went to the trustee and the first thing they asked me was whether I tried reaching out to the bank, which, in my case I had. I agree, it probably makes sense to at least reach out first. There can be fees associated with trustee work, and if your end goal is to save money, you want to be careful about paying those unnecessarily.

If you are trying to negotiate with the bank with a trustee, your leverage is ultimately the possibility that you'll file for bankruptcy. Make sure you understand any implications that bankruptcy and consumer proposals can have on your law society obligations and practice before you agree to take action with a trustee. Trustees may or may not be well-versed in lawyers' obligations, and they may or may not be forthcoming about the consequences in advising you.

Edit: didn't read that BQ had advised the same thing about LSO obligations. I am just agreeing with him again, I guess.

Edited September 21, 2022 by realpseudonym

[Tesseract]

Not sure what route you ended up going but ideally you don't want a settlement on your credit bureau, may as well file for bankruptcy if you want to go that route. 

Reach out to the bank you have your PSLOC through. Often times banks can turn the LOC into a fixed term loan, you would lose the revolving credit aspect of the LOC and it would effectively be "closed" but you would still pay on it monthly until you reach a zero balance. This is a great option because these arrangements have no impact on your credit. 

Good luck. 

[GoBigOrGoHome]

On 6/12/2023 at 1:51 PM, Tesseract said:

Not sure what route you ended up going but ideally you don't want a settlement on your credit bureau, may as well file for bankruptcy if you want to go that route. 

I am not a lawyer but you I think I strongly advice against this. You may end up with practice restrictions if you file for bankruptcy. 

Do not take the decision to file for bankruptcy as a lawyer lightly. You could end up throwing away everything you worked so hard for or generally be blacklisted. The legal community is smaller than you think. 

[Tesseract]

16 hours ago, GoBigOrGoHome said:

I am not a lawyer but you I think I strongly advice against this. You may end up with practice restrictions if you file for bankruptcy. 

Do not take the decision to file for bankruptcy as a lawyer lightly. You could end up throwing away everything you worked so hard for or generally be blacklisted. The legal community is smaller than you think. 

This seems like an over reaction to bankruptcy protection. Filing for it will not end your legal career. Yes, you will end up with practice restrictions during the 7 years that it remains on your bureau, but following this period it vanishes and so do the practice restrictions. I highly doubt anyone would be blacklisted for what would have likely been falling upon hard times financially, not everyone is financially privileged.

That being said it is always the last option, and the point of my post was to demonstrate that a settlement should be down there with it.  

Edited June 14, 2023 by Tesseract

[GoBigOrGoHome]

41 minutes ago, Tesseract said:

This seems like an over reaction to bankruptcy protection. Filing for it will not end your legal career. Yes, you will end up with practice restrictions during the 7 years that it remains on your bureau, but following this period it vanishes and so do the practice restrictions. I highly doubt anyone would be blacklisted for what would have likely been falling upon hard times financially, not everyone is financially privileged.

That being said it is always the last option, and the point of my post was to demonstrate that a settlement should be down there with it.  

A practice restriction notation during your early years while you were trying to build a career is something I would try to avoid at all costs. 
 

Personally, I would not want my professional reputation built with a practice restriction at the forefront of people’s mind. 

[t3ctonics]

The impact of the practice restrictions would depend on your role in your firm/office and your practice. I think you get barred from practicing real estate altogether, and you can't handle trust funds in any way - you can't receive or hold trust funds, and can't have signing authority on a trust account. This would be crippling as a solo, and problematic for almost anyone in private practice. You'd need another lawyer to handle all of the money for you. You're also not bondable until discharged, which would be a problem for some in-house and government jobs.

That said, I think practice restrictions are only automatic for bankruptcy, not consumer proposals. Those are still terrible for your credit though. I'd definitely prefer to work something else out, like BQ's idea of extending the term.

[123]

As I posted above, I did have financial troubles when COVID-19 hit. I explored the options with a trustee, bankruptcy lawyer, and the law society. The universal advice was to avoid bankruptcy. I would have likely been removed from the Legal Aid Ontario panels. I wouldn't have been able to operate a trust account. I struggle to imagine how I would have gotten to seven years of practice after declaring bankruptcy. I was able to resolve, because my income picked back up with a couple of larger cases. I would urge any lawyer or prospective lawyer to get professional advice before considering bankruptcy, and to seriously consider all other options first.

[Brisingr1502]

Hey everyone!

Just thought I would post an update: I ended up filing for a consumer proposal. I thought about extending the term, and negotiating with my creditors. However, I came at the conclusion that it was just way too much debt to carry. I contacted a trustee who had had experience filing consumer proposals for doctors and lawyers. The filing process was straight forward. My creditors accepted my first proposal with monthly payments of $1,000.00. I can now see the light at the end of the tunnel.

I want to thank you all for your advice and suggestions, they helped me make what I hope was the right decision.

[Lilbb19]

nice yea i fired up a consumer proposal 2 months before i started articling

Edited January 25 by Lilbb19

[BlockedQuebecois]

29 minutes ago, Lilbb19 said:

nice yea i fired up a consumer proposal 2 months before i started articling

Not legal advice, etc., but students and articling students should be particularly careful about this. The Law Society of Ontario and most other law societies (including the LSBC and LSA) expressly ask whether you have lodged a consumer proposal as part of their assessment of whether you meet the good character requirement. 

[SNAILS]

Not to rub salt in the wound of the OP, but this issue here is something that all students entering 1L should be VERY concerned about, especially with interest being higher. 

I know there are uncontrollable costs with law school (tuition, housing, etc) but some law students seems to be spending the money that they anticipate earning on Bay Street before they earn it (not pointing fingers at anyone here because I don't know you!)

I have bought food from a restaurant maybe 6 times in 3 years of law school. I pack lunches. I don't pay for parking/Ubers. I take the bus/subway. I bought all but 1 textbook used from upper years, and have resold most of them. I put some of my summer work money aside for the next semester.

This attitude would be good for people entering 1L. For people over $100 000 in debt, I mean no offence. I'd suggest living modestly while paying the money off as best you can.

[Misfit]

6 hours ago, SNAILS said:

I know there are uncontrollable costs with law school (tuition, housing, etc) but some law students seems to be spending the money that they anticipate earning on Bay Street before they earn it (not pointing fingers at anyone here because I don't know you!)

I have bought food from a restaurant maybe 6 times in 3 years of law school. I pack lunches. I don't pay for parking/Ubers. I take the bus/subway. I bought all but 1 textbook used from upper years, and have resold most of them. I put some of my summer work money aside for the next semester.

This attitude would be good for people entering 1L. For people over $100 000 in debt, I mean no offence. I'd suggest living modestly while paying the money off as best you can.

I have friends who spent $$ on vacations, fancy clothes and restaurants throughout law school. Some got a job that could service their exorbitant loans, and some have spent the ensuing post-grad years with a lot of anxiety over their unstable finances. One friend is working with the government in a legal-adjacent role (the only job she could get as a new call) and living with parents indefinitely - debt will control every aspect of your life. That’s not to say don’t go to law school, we need diversity in the profession, not just those with families that can finance it, but please live within reason and take care of your future self.