If you have filed a Division 1 or Consumer Proposal, or declared Bankruptcy, you are required by the Bankruptcy and Insolvency Act to attend two Credit Counselling sessions. Look at these sessions as an opportunity to learn the tools to help you manage your finances in the future.
The Credit Counselling that will best help you is not going to be the same as the counselling that’s best for someone else. Your needs are different, your learning style is different, and no two stories are the same. That’s why, at GTA Credit Solutions, we tailor our sessions to your needs. Our counsellors are serious about helping you build a better life.
From debt management and budgeting, using credit well and rebuilding your credit, to identifying and achieving financial goals, these sessions give you the knowledge and skills to start over. And succeed.
If you have specific issues that have contributed to your financial predicament, such as compulsive shopping or gambling addiction, we can help you find the support you need to keep it from happening again.
Our goal is to help you through your current problems, and onto a brighter future. Helping you solve your financial issues and giving you the tools you need to succeed is what we’re all about.
What happens to me after I declare bankruptcy or make a proposal?
You’ve gotten through declaring personal bankruptcy and has been discharged, or your consumer proposal has been accepted. Now what do you do?
One of the biggest concerns for someone in your position is the effect all of this will have on your credit rating. And rightfully so. Your credit rating is important – it can be the key to buying the house you want, driving the car you want, even sending your kids to college. You should want to rebuild it, and protect it in the future.
Fortunately, doing so is easier than you might think.
What about my credit rating?
Credit-reporting agencies (or credit bureaus) collect borrowing and repayment data from your lenders and compile it into your credit history. When you want to borrow money again, a potential creditor has only to contact one of these agencies to find out if you’re a suitable risk.
If your credit history is poor, your request for credit will likely be denied. If it is granted, many lenders will charge you a higher rate of interest than they charge someone with good credit. Seems a bit backwards, doesn’t it? But lower interest rates are just one of the many rewards for maintaining a great credit record
In Canada, we have two major credit-reporting agencies, Equifax and TransUnion Canada. These agencies compile a snapshot of your credit history into a credit report. You have the right to see your credit report.
Visit www.equifax.ca or www.transunion.ca to order a copy of your credit report. It’s actually a good idea to order your credit report periodically. It’s not expensive, and sometimes an error will crop up that may affect your borrowing power. They’re usually quickly corrected with a phone call or a letter.
No one can see your credit report but you, but when you apply for credit, the lender will usually ask for your consent to do a credit check, which allows them to check with these agencies to learn about your credit history.
Although each of these agencies has different methodology, they both provide this information about your credit history in the form of an assessment, usually referred to as a “credit rating” or a “credit score.”
That rating is based on several factors. They include how promptly you make payments on your revolving credit accounts, such as credit cards and lines of credit; how far past the due date you made any late payments; whether you have ever missed a payment; whether you’ve made special payment arrangements to settle your debts; whether anything you’ve purchased on credit has been repossessed; whether any of your debts have been placed into the hands of collection agencies; whether you’ve ever disappeared without a forwarding address etc.
You probably already knew some of that. But would it surprise you to know that, even if you make all your payments on time, keeping a balance greater than 50% of your limit will harm your credit? You should always aim to keep balances under 20%. And did you know that applying for credit too often can affect your credit? Every time a potential lender checks up on you, a “hard inquiry” goes on your file.
You may also not realize that never borrowing any money isn’t good for your credit history either! Creditors like to lend money to people with an established history of borrowing in moderation, paying promptly, keeping balances to less than 30% of their limits, and never letting their total monthly debt exceed about 40% of their income – and that includes your mortgage, taxes, insurance, car payments, student loans and child support.
Your goal should be a balanced credit profile that involves a mix of revolving credit accounts and loans, and a low debt-to-income ratio.
Let’s say I made a mistake, and missed a couple of payments. How long will that information stay on my credit report? So how do I fix my credit history after declaring bankruptcy or submitting a consumer proposal?
It varies by province or territory, and also by agency. For example, a bankruptcy in Ontario stays on your history for seven years with TransUnion, six with Equifax. A debt sent to collections stays on your history for six years from the first date of delinquency.
Start by opening a secured credit card account. With a secured card, you put up a deposit equal to the credit limit, and the lender holds the money in a special savings account. It’s their guarantee that you won’t default on payments. Let’s say you want a card with a $500 credit limit. You put up $500 as a deposit, and the lender issues you a card that otherwise behaves like any other credit card. If you use it wisely, it will reflect favourably on your credit history.
Remember that keeping a balance that’s too close to your limit will adversely affect your credit history, so don’t carry over a balance greater than 30% of the limit from month to month. If you can’t pay the entire balance, make sure you make at least the minimum payment by the due date on your statement. You can ask for your own credit history as often as you like, but remember that too many inquiries by potential lenders doesn’t look good, so be careful about asking too many lenders for credit too often.
GTA Credit Solutions offers free debt counselling, and a no-cost, no-obligation first consultation, in private, with one of our professional agents.
Credit history & repair Questions
Q: I’ve gotten myself into a mess, and now I just want to stick my head in the sand and pretend none of it ever happened. Collection agencies are calling me. I’m getting letters in the mail almost every day. If I ignore them, will they go away?
A: Sadly, no. The worst thing you can do is ignore it all. All that stress is bad for your health. Call GTA Credit Solutions, and together we’ll begin to make them go away – but in the smart, legal way. Q: I didn’t think my debt load was a problem because I always made my monthly payments, but my business has taken a downward turn lately, and I’m starting to have trouble. I feel like I’m on a slippery slope to real financial problems. How do I get things turned around?
A: Great question! Fixing things before they become a real problem is always the best course. The bad news is that your descent on the slippery slope started long before now. If you’re just barely making your minimum payments, you’re paying way too much in interest – wasted money that goes straight into the deep pockets of your already-wealthy creditors. Minimum monthly payments barely scratch at the surface of your principal debt, and all that money you’re spending on minimums and interest is money you can’t use to build wealth for the future. Plus, once you’re struggling to make those minimums, it isn’t long before you’re using one card to pay the minimum on another, and you start to feel like you’re on some nightmare merry-go-round you’ll never get off. Does that about sum it up?
Fortunately, there’s good news too. The good news is that it isn’t too late to get off the merry-go-round, get on track, and create a financial future that looks very different from your past. Call us, and we’ll help you create a budget that works, and a debt repayment plan that makes actual progress.
Q: What’s some good advice for the average person?
A: We don’t believe any person is “average.” Everyone has different circumstances, different priorities, different jobs, different families, different debt loads – you get the idea. Our solutions to your problems
are custom-tailored to you and your unique situation. Our advice to the “average” person is to give us a call.
Q: Why should I pick GTA Credit Solutions over the others?
A: Because we treat our clients like family. That may sound a little corny and we don’t blame you for being sceptical. But we understand financial problems, and we know the last thing you need is to be stuck with some stuffy advisor with an attitude who makes you feel even worse. We pride ourselves on our customer service – the GTA Credit Solutions family truly is the one thing we can offer you that no one else does. All you have to do to find out for yourself is come in for a visit. We treat you with the warmth and respect you deserve.
Of course, this particular “family” is comprised of a well-trained, professional, knowledgeable staff that has helped thousands of clients, in numerous languages, to get through a rough time with dignity, and then to face the future with hope.
Our team of progressive, honest individuals were hired for their skills and qualifications. They are here to assess your situation and help you take the best next steps for you. They’re available any time during business hours to answer your questions and offer some advice.
Q: What services do you offer?
A: We provide debt management, credit counseling, Credit repair, consumer proposal and backruptcy services,
We can put a stop to those threatening phone calls, re-establish your credit, reduce your debts, stop any more interest from piling up, and stop your wages from being garnisheed. We offer free debt counselling, and a free first consultation in a private session where your advisor can answer any of your questions.
Q: I read on one of your other pages where you talk about “secured” and “unsecured” debts. What’s the difference?
A: “Secured” debt is backed up by some kind of collateral, which reduces the risk for your lender. Your mortgage, for instance, is a secured debt because the value of the house itself means the lender’s risk is minimized. To oversimplify things a bit, if you fail to pay the loan, the lender takes the house, and they lose nothing. A credit card is an example of “unsecured” debt. There is no “lien” on your property; that is, the lender has no right to take your property if you don’t meet your repayment obligations. Secured debt usually carries a lower interest rate because of the lesser risk for the lender.
Q: Harassment from my creditors is ruining my life! How do I make them stop?
A: When you file for bankruptcy or submit a consumer proposal, your creditors are prohibited from contacting you.
Q: My wages have been garnisheed! What can I do about it?
A: When you file for bankruptcy or submit a consumer proposal, any further garnishment stops too. It’s part of the “stay of proceedings.
Q: My credit is pretty bad. Can I still get a bank loan?
A: If you already know your credit is bad, you shouldn’t even apply. Just applying can make your credit score even worse. Let us help you fix your credit first.
Q: If I come to see you, what are you going to be looking at?
A: We’ll look at your assets and liabilities, and figure out your net worth, even if it’s negative. In other words, we’ll take what you own and subtract what you owe. We’ll take what’s coming in and subtract what’s going out. And that way we’ll have a clear picture of your situation. We’ll check out your credit report, too. Then we’ll get you set up with a monthly budget to get you started on the right track.
Remember, a trustee represents your creditors, but we work for you!
Q: What are my options when dealing with my creditors?
A: You can try to get a consolidation loan to pay off your creditors while lowering your monthly payment (and often your interest rate too). A bad credit history or the inability to meet the loan payments may mean this isn’t an option for you.
In that case, the next step may be to try to negotiate a settlement or new payment terms with your creditors. This option is more successful when you have only a few creditors. It’s more difficult to get many creditors to agree to payment terms that are favourable to you.
A more practical option may be to submit a consumer proposal with the help of a GTA Credit consultant. Our consultant will help determine how much you can afford to pay and what payment may be acceptable to your creditors.
As a last resort, you may have to consider getting a trustee to help you file for personal bankruptcy.
Q: What’s the difference between personal bankruptcy and a consumer proposal?
A: Basically, with a consumer proposal you get to keep your assets and you will still pay off (at least a percentage of) your debts. The terms of the proposal may last as long as five years, at which time you will be legally released from your unsecured debts. In Ontario, a consumer proposal stays on your credit history for three years. In personal bankruptcy, you may be able to keep some of your assets; those that are not exempt under law will be sold and any proceeds distributed among your creditors. Once all the conditions of your bankruptcy have been met, you are then legally released from your unsecured debts. A first bankruptcy with no unique issues or surplus income takes nine months; it stays on your credit history for seven years or more.
Each consumer proposal and bankruptcy is unique, so talk to your trustee about your particular situation.
Q: If I declare bankruptcy or submit a consumer proposal, do I get to keep my cell phone, internet service and things like that?
A: Yes, as long as you are current with your payments.
Q: Will declaring bankruptcy affect my ability to sponsor my family for immigration?
A: The sponsorship application does ask if you are bankrupt, since you are stating that you will be financially responsible for your family. Filing a consumer proposal is a better option in this case.
Q: If I am bankrupt or have filed a consumer proposal, can I still rent an apartment?
Q: Will declaring bankruptcy get rid of my student loans?
A: There is specific legislation that deals with student loans in a bankruptcy. Ask your GTA consultant about the particulars of your situation.
Q: How will filing bankruptcy or a consumer proposal affect my future employment?
A: Sometimes, a job application will ask if you have ever filed for bankruptcy. They don’t usually ask about consumer proposals. In some professions, bankruptcy can mean a restricted licence.
Q: What about my income tax debt?
A: Personal income tax debt is just like any other unsecured debt. Once you’ve filed for bankruptcy or submitted a consumer proposal, Canada Revenue Agency (CRA) can’t take any further action against you, including wage garnishment or freezing your assets. Your trustee will notify CRA once you file, and instruct it to stop any further action against you to collect your debt.
Q: I used to be able to meet my obligations, but my income has dropped. What can I do?
A: An income reduction because of a job change or job loss isn’t unusual. If you fall behind on your debt repayment and your creditors are threatening to put you into collections, you may want to consider filing a proposal, which would allow you to reduce your payments. If you don’t have enough income to consider a proposal, you may have to consider filing an assignment in bankruptcy.
Q: If I have to file, what assets will I lose? And what will I keep?
A: A consumer proposal doesn’t have any effect on your assets, unless you choose to liquidate them to fund the proposal. Check out our “What We Do” page for a list of those assets that are exempt under provincial law should you file for bankruptcy. In many cases, you can make arrangements to allow you to keep even those assets that might normally be sold.
Q: What’s a credit score?
A: A credit score is a number value assigned by credit bureaus to represent your credit record. It’s kind of a shorthand way of summing up how you’ve handled credit and debt repayment in the past.
Q: What happens to my credit score if I file a proposal or for bankruptcy?
A: Your credit score is affected whenever you don’t pay your bills on time, even if you haven’t filed a proposal or for bankruptcy.
When a credit bureau is notified of a proposal, they will drop your score to “bad debt,” which is the same rating you would get if your debt went to a collections agency, until the proposal period is over, which can be up to five years. It’s called “R9.” After that, it becomes an “R7,” which means you are making regular payments through a special arrangement to settle your debts. After three years, the R7 is taken off your file.
In bankruptcy, your credit score goes to R9 for the nine months it takes for your bankruptcy to be discharged (assuming it’s your first time), and stays that way for seven years or more afterwards.
Q: Will closing unused credit card accounts help my credit score?
A: Closing unused credit card accounts can actually hurt your score, either by making your credit history appear younger than it is, or by reducing the total credit available to you, which can affect your debt utilization ratio very badly. Your debt utilization ratio is the total amount of credit you have available (add up all the credit limits on your cards and lines of credit) compared to the total amount of debt (add up all your balances). As a general rule, you never want your debt utilization ratio to go higher than 20% (or a one to five ratio of balance carried to limit available). Closing an unused credit card account has a bad effect on your debt utilization ratio if you are carrying a lot of debt on your other cards.
Q: What if there’s a mistake on my credit report?
A: You can dispute it with the credit bureau. Q: Is there a limit to how many items I can dispute?
A: No, but if you try to dispute too many items, you may not be taken seriously by the bureau.
Q: How does making a late payment affect my score?
A: Badly! 35% of your credit score is based on your payment history. Credit bureaus don’t make available to the public their exact formula for calculating the points on your credit score, so it’s hard to say exactly how one late payment might affect you. Better to just be on time.
Q: So how does the rest of my credit score break down then?
A: Well, 35% comes from your payment history, 30% is your debt utilization ratio (sometimes also referred to as a credit to debt ratio), 15% is your credit history, 10% is new credit, and 10% is the types of credit you have in use.
Q: How do I get a credit score if I’m new to Canada?
A: If you have a short credit history – or none at all – you may not have a credit score. You need to have at least one active account within the last six months. The best thing you can do to start establishing credit is to apply for a secured credit card.
Q: How do I rebuild my credit after filing a proposal or for bankruptcy?
A: It will take some time, but you can do it. Your GTA consultant will help.
Q: Will filing for bankruptcy affect my spouse?
A: Not directly. But we do recommend that you come see us together to talk about both your options for solving your financial problems. Q: Will my personal information be kept private?
A: In the case of credit counselling and informal arrangements, absolutely. For formal proceedings like a proposal or bankruptcy, the Office of the Superintendent of Bankruptcy keeps a record of your filing. A trustee is required to file your income tax return for the year in which you declare Bankruptcy, so Canada Revenue Agency will also have a record of it. Your creditors will also receive notice once it has been filed with the Office of the Superintendent of Bankruptcy.
Q: How long does a proposal or bankruptcy stay on my credit record?
A: In Ontario, a consumer proposal stays on your record for three years after it’s completed; a first bankruptcy stays for up to seven years or more.
Q: My employer just informed me my wages had been garnished! Nobody even told me! Can they do that? How do I make it stop?
A: Unfortunately, yes, they can do that. Your regular creditors can get your wages garnished by up to 20% of your gross; government creditors by up to 50%, such as for back taxes or child support. A creditor can go to court and obtain what’s called a “garnishee summons,” and your employer does not have to inform you until the garnishment begins. The creditor gets his payment from your gross wages directly from your employer.
The faster you call us, the faster we can help stop the garnishment, either by helping you file a consumer proposal or for bankruptcy. If you’re under threat of garnishee, we can help you approach your creditors with an alternate arrangement, such as post-dated cheques. Once a garnishment of your wages has begun, it’s very difficult to get a creditor to stop without the legal protection of a proposal or bankruptcy.
Q: I don’t understand my credit rating. What do these numbers mean?
A: The most common ratings, called North American Standard Account Ratings, being with “R,” which indicates “revolving” credit, such as credit cards or lines of credit. They’re coded from 0 to 9, with zero being the most desirable, best score and 9 being the least desirable, worst score.
Here’s what Equifax, one of Canada’s two major credit bureaus, says:
R0 Too new to rate; approved but not used
R1 Pays (or paid) within 30 days of payment due date or not over one payment past due
R2 Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two payments past due
R3 Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due
R4 Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due
R5 Account is at least 120 days overdue, but is not yet rated "9"
R7 Making regular payments through a special arrangement to settle your debts
R8 Repossession (voluntary or involuntary return of merchandise)
R9 Bad debt; placed for collection; moved without giving a new address
TransUnion, our other big credit bureau, uses a number system that encompasses payment history, outstanding debt compared to credit available (balances above 50% of your limit harm your credit score), credit account history, recent inquiries, and the types of credit you use (a healthy profile uses a mix of credit accounts and loans). A score of more than 650 means you will likely qualify for a standard loan; under 650 means you may have trouble getting credit.
Q: How long does a bad credit score stay with me?
A: It depends on how bad, and on which credit bureau. With Equifax, delinquent transactions, judgments against you, collections efforts, secured loans and bankruptcy stay on your record for six years; consumer proposals and credit counselling for three. At TransUnion, judgments against you and bankruptcies stay on your record for seven years, delinquent transactions and collections efforts for six, secured loans for five, consumer proposals for three and credit counselling for two years.
Q: How will bankruptcy affect my spouse?
A: Assuming the debts are yours and yours alone, bankruptcy does not necessarily have to affect your spouse. If he or she co-signed or guaranteed any of your debts, then they’re not yours alone, and your spouse will become liable for repaying them if you declare bankruptcy.
Any holder of a supplementary credit card on your account becomes responsible for that debt if you default or declare bankruptcy.
If you divorce, you are both equally liable for the entirety of any joint debts, so you can’t split your debt 50/50. You must both do your part to ensure joint debts are fully paid in the event of divorce or legal separation. If you default on the debt, the creditor can take action against your spouse, and vice versa.