This is where your finance takes place

However, I did not invent what I just wrote; I heard it from many clients. They are scared of the market and now, a few of them are asking what is going to happen to my money if the bank goes bankrupt? Why are you so concerned about it? I always reply. And here we go with the cataclysmic discussion about Satan coming out of the Bear Sterns’ building smoking a cigar with the CEO of JP Morgan!

So tell me why Canadians are not going bankrupt then!

First things first, in order to go bankrupt, you need to spend more than you earn and not be able to repay your financial obligations. While the financial industry took a big hit since last fall, the major six banks still made profit last trimester. They still operate viable activities and still paying back their bills.

Second, Canadian laws were made so banks would definitely not collapse. Nobody wants to see people jumping off a building anymore. The legal environment is protecting the banks from major crashes. What would happen if we all made a mistake and a Canadian bank still goes down the toilet? Most likely the government would allow a bank fusion between two entities in order to protect the population.

On the other side, if we would let a bank goes bankrupt, it would create much more damage than we think. Before losing everything, the bank would call back all its loans in order to pay back their financial obligation. Can you imagine receiving a call from a loan officer asking for the full payment of your mortgage by the end of the week? This would engage several people to declare bankruptcy as well. A huge amount of people would lose their job at the same time and the government just couldn’t pay employment insurance for everybody. This is why they would allow such fusion.

Then again, we are far away from this sad story. Does anybody remember 2002 with Worldcom and Enron declaring that they were fooling the market for years? We didn’t have time to recuperate from the Techno bubble that we were stuck with another crisis. Several companies were going bankrupt and the whole market was about to lose confidence in all financial statements they saw.

However, starting in 2003, the market went up and investors were making big bucks for a good four years.

While all this happened only six years ago, people tend to think that this time, it is different. That this time, we are really going down and the market will never come back. I bet you that it was the same people who were losing confidence in the market back in 2002…

If you liked this article, you might want to sign up for my FULL RSS FEED. Then, you would get my daily post in your email and can read it at any time. To subscribe, please click HERE.

So I stop looking at the file right away; there is no way for me to do anything for this guy anyway. The credit department would just laugh at me if I wanted to submit this file. Sometimes, you know that the patient is already dead before you try to save him.

So I when I am about to decline the file, I give a call to the guy and explain him why. Then the story starts:

“Well, you know, I went through a hard time. There was that period of my life where I was completely lost and I totally forget about my credit cards. Things went so bad with my wife that I had to leave the house for a few weeks. Then I used my credit cards to pay for my expenses and I could not keep up forever.

However, now things have settled down. In fact, I’m back with my wife and we solved our problem. My bills are now up to date and I even made a lump sum payment on my mortgage at the end of the year. I’m telling you, I’m back in business.”

I listened carefully to his story as he sounded genuine. Unfortunately, his late payments kicked down his Beacon Score pretty hard. In fact, this was the type of file that is being declined by our banking system without going to a credit analyst. I felt bad as I could not do much for him at that time.

This is at this point that I thought about a solution. In fact, chances were that her wife has an impeccable credit. Therefore, I asked him to apply with his wife as main applicant so we have better chance to get his request approved. He agreed and was quite happy to have an alternative.

Since I did not see his wife’s profile yet, I can’t say if they will be approved or not. However, there is one thing I know; if his wife may forgive him, the bank is impetuous when it comes down to late payments. In fact, this dark period of his existence might have length only 3 months but it will show on his credit bureau for the next ten years. Unfortunately, banks will remain reluctant to grant credit this individual until these issues are washed away.

Therefore, always make sure that you make the minimum payments on all your credit cards, even when you go through rough times!

If you liked this article, you might want to sign up for my FULL RSS FEED. Then, you would get my daily post in your email and can read it at any time. To subscribe, please click HERE.

“Well, you know, I went through a hard time. There was that period of my life where I was completely lost and I totally forget about my credit cards. Things went so bad with my wife that I had to leave the house for a few weeks. Then I used my credit cards to pay for my expenses and I could not keep up forever.