How to stop an accident from wrecking your credit

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By Jennifer Pritchett, Associate Editor

Being injured in an accident can often lead to devastating financial consequences so it’s important to take appropriate steps early to avoid credit damage and even bankruptcy, says Easy Legal Finance Inc. president and CEO Larry Herscu.

“When people are injured in an accident, often they can’t work.”

“The first thing they should do is create a plan to determine their monthly capital needs, which can be broken down into household necessities and those associated with their rehabilitation.”

The mistake most people make, Herscu says, is failing to make a plan.

“This is generally why they get themselves into trouble financially,” he says.

The economic toll associated with a mishap is on the rise in Canada, according to the 2015 report, “The Cost of Injury in Canada.”

Published in collaboration with the Conference Board of Canada and with support from the Public Health Agency of Canada, the report says the economic burden of injury in Canada has increased by 35 per cent since 2004.

“If these trends continue, by 2035 injuries will cost Canadians $75 billion a year, an increase of 180 per cent,” it says.

Preventable injuries result in a $15.9 billion price tag for direct health care and $26.8 billion in total economic costs, the report says.

But these rising expenses don’t have to spell financial ruin for the people involved, Herscu says.

Firstly, it’s important for any person in this situation to ensure they leverage their third-party benefits, or accident benefit insurance, he says.

The terminology varies among provinces but generally speaking, accident benefits coverage includes supplementary medical, rehabilitation and attendant care, caregiver and the income replacement benefit pays for lost wages up to a predetermined amount,” he says.

Herscu, whose company provides financial assistance to injured people so they can pay their bills while their lawyer fights for a fair settlement, says it’s critical to understand the benefits and what they cover. Often, people have more than one plan so it’s vital to co-ordinate coverage.

“It’s challenging to understand the benefits you have through your insurance policy and the available support mechanisms,” he says.

Herscu says individuals can work with their lawyer to develop a rehabilitation plan, which starts with contacting your insurance company so it’s aware of the incident, your injuries and the details around what happened.

“A personal injury lawyer can help you understand the benefits and co-ordinate the labyrinth of options in your policy to help you get better,” he says. “A lawyer can also assist in arranging appointments with a chiropractor, psychologist or other professional.”

Herscu says it’s important to manage your cash flow, accident benefits and savings until you can get yourself back to work.

“You should look at whether you have the means to support yourself financially,” he says. “Use your savings first before borrowing money from Easy Legal Finance or another company,” he says.

“It would be wise to also simplify expenses and separate needs from wants. Needs are related to basic living costs and rehabilitation to get back to work in a timely fashion. Wants are discretionary spending such as vacations and home renovations.”

Individuals should have a conversation with their lawyer before thinking about borrowing money, he adds.

People sometimes turn to their credit cards when cash flow stops, which is a mistake because of the high interest rates and monthly repayment obligations, Herscu says.

“Use debt sparingly and methodically with a plan,” he says. “It’s wise to borrow the minimal amount of money that you absolutely need to get through the rehabilitation.

“Borrowing to maintain a lifestyle gives you debt faster and it becomes very costly. Once you’re in that situation, it’s very tough to get out.”

It’s also important to keep track of all paperwork related to the accident, Herscu says.

“Retain any documentation around the incident, its causes and injuries, as well as a timeline of what happened,” he says. “Also, keep a record of all doctors’ visits and medical assessments to determine the nature of the injuries and whether they relate to the accident.”

You never know when these documents will become critical to your case, he adds.

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