by admin | Consumer Proposal, Uncategorized
Understanding consumer proposals
A consumer proposal is a formal, legally binding document. When filing for a consumer proposal, you will need the assistance of a Credit Counsellor or trustee who will help you develop a proposal that offers all your creditors a percentage of what you owe them in a set amount of time, usually a five year period in which you have to repay.
When is a consumer proposal appropriate?
In order to ensure that filing for a consumer proposal is really the best option in your situation, set up a meeting with a certified and registered credit counselor.
1. What a consulting firm would do for you is help you evaluate your financial circumstances and explain in detail all the pros and cons of each options so that you can solve your financial problem more efficiently.
2. Not only that, the consultancy firm or trustee will allow follow through with you all the processes involved in filing a consumer proposal, its requirements, submissions and then later develop a proposal plan that works best for you and your creditors.
Consumer Proposal Default
There may come a point where you may feel you will not able to continue your monthly payments to your creditors as promised in the proposal you chose, so will your consumer proposal default? And how will you know if it has defaulted? Your consumer proposal will be in default if:
You miss a total sum of three monthly payments that you required to make as per your consume proposal terms and conditions, or
Your required payments are overdue or in arrears for a period of more than three months, your consumer proposal will go in default.
If you fell victim to any of the two conditions, your consumer proposal will be deemed or annulled and your creditors will once again be able to implement collection to recover their debts and with interests from the date when you filed the proposal and not from the annulment date. Also if you went bankrupt at the time of filing a consumer proposal, you will automatically become a bankruptcy again if your consumer proposal defaults.
Consumer Proposal Revival
In cases when your consumer proposal is deemed or annulled but you weren’t bankrupt, it may be a possibility to revive your consumer proposal and make up all your missed payments. In order to do so:
1. Contact your credit counselor or trustee to notify all your creditors within a period of 30 days of annulment that the consumer proposal will be revived automatically after 60 days from the date of annulment unless any of them objects to it.
2. In case the creditors don’t file an objection or notice, the consumer proposal is automatically revived, but is there are any objections; there will be no automatic revival.
3. But you still want to revive your consumer proposal after objections have been made by your creditors, as a final resort; Talk to your credit counselor, who will help you to make an application to the court.
by admin | Consumer Proposal, Uncategorized
Consumer proposal and its impact on credit rating
Overwhelmed with debt and looking for relief? Wondering if bankruptcy is your only option? Well the good news is that it’s not. Individuals struggling with debt issues are often looking at consumer proposals as a solution with benefits like a reduced impact ton their credit rating as compared to when filing for bankruptcy.
Understanding possible Credit ratings
In order to understand credit rating in Canada, there is a sequence of numbers raging form 1 to 9 represented by the alphabet R. Each creditor you owe money to assigns you a specific score on your credit report. Here is what each of these ratings mean:
1. R1 means you pay loan on time.
2. R2 means your payments are 30 days late.
3. R3 means your payments are 60 days late.
4. R4 means your payments are 90 days late.
5. R5 means your payments are 120 days late.
6. R6 means typically not used.
7. R7 means you are in a consumer proposal, debt management plan or a consolidation order.
8. R8 means that a secured creditor has taken steps to realize on their security (e.g. repossessed your car).
9. R9 means bad debt placed for collection or considered un-collectible, or you are bankrupt.
This means the credit ratings you want on your credit report is R1 and pray that matters don’t go to R9.
One of the most common questions that comes up during initial consultations is how will my consumer proposal impact my credit rating. This apprehension in people generally is due to the misconception that once you file a consumer proposal you might not be able to attain loans.
Well, this is not the case.
Imagine you get into a minor car accident. In financial terms, it means you will not be able to pay your creditors in the promised time. Now imagine the same person gets into a second accident (or files a consumer proposal) few months after the first accident. Will he be able to get a loan or car insurance, maybe yes; but with higher insurance interest rates.
In such a scenario,once you fully paid off your consumer proposal, will only impact your credit rating for the next three years, before they consider approving your loans. Financial institutions will scan through your two year repayment history and then make judgment whether you are eligible for a loan or not. Numerous lending institutions (secondary) might lend you money shortly after you filed the consumer proposal. Although, the interest rates may be higher, an individual may be able to rebuild his credit rating over time and as a result get approved for credit borrowing from financial institutions.
Will I have to wait three years to apply for another loan?
The ability to borrow once you are done with your consumer proposal depends on many factors like your current income, amount you are borrowing and the value of assets you will be pledging as security.
It is best that you consult your credit counselor or list of lenders who will be able to lend you money upon your consumer proposal completion. Provided that you have sufficient income and appropriate down payments,with two credit cards with minimum limit $1,500 ; it is possible that you may qualify for new mortgage as soon as two years after completion of you consumer proposal.
by admin | Consumer Proposal, Uncategorized
Filing for bankruptcy may seem like your last resort but it is not always the best option. Consumer proposals conversely seem a more suitable alternative. In order to understand why it is a better alternative, continue reading to find out how consumer proposals apply to your personal status quo.
Paying off your hard earned money
When filing for bankruptcy there are set rules delegated by the Federal government as to whatfixed amount you can earn as income before you have to start paying off creditors with that hard earned money as a penalty.
A consumer proposal on the other hand, has no such legal binding and also comes with ease of small monthly payments over longer periods.
Homeownership
The first question on everyone’s mind is, “if I consider debt relief, will I able to keep my house?” This question can only be answered by your trustee who after thorough analysis decides how much equity you have on your home. The analysis looks at the realistic value of the house, outstanding mortgage and other property tax charges. Then expected selling expenses such as of lawyers, real-estate agents commission is deducted and the final equity on the house is estimated. Although the creditors will not force you to sell your house, they would still demand to be paid. This means you need to come up with money you obviously don’t have to pay off your debts.
In such a case, filing a consumer proposal is ideal since it provide a good solution to pay monthly payments out of your equity to the creditors.
Gambling or Other Addictions
You will not be eligible to an automatic discharge if the debts were the result of addictions such as gambling. This means unlike other bankruptcies this will not end automatically. Not only will you have to present your case before the judge and prove that you have taken remedial steps to overcome this addictions but also some additional penalty will be imposed on you to repay a portion of the debt.
Consumer proposal saves all the hassles of court. A consumer proposal acceptable by your creditors will ensure some certainty of the payments you will have to make monthly.
Prior Bankruptcy
Any previous bankruptcies filed will have different consequences. “If this is your first bankruptcy you are entitled to an automatic discharge after a period of nine months. If this is your second bankruptcy, the period is extended to 24 months (two years) and vice versa.
In case you had already filed for bankruptcy and looking for a debt relief, filing a consumer proposal is your best option. Monthly payments are usually smaller and can last up to 5 years with the option to pay it off faster if you have the right financials.
If you are facing one of the explained situations, your professional adviser or credit counsellor will surely suggest you and advice you to opt for filing a consumer proposal.
by admin | Bankruptcy, Uncategorized
Going bankrupt is a shameful state to be in. Having to file for bankruptcy is a thing we all hope never to face in our lives. There are a number of repercussions to go through when you consider filing for a Bankruptcy. But it doesn’t mean that your life, career or financials can never be recovered. There are a number of ways one can recuperate from the setbacks caused by bankruptcy and plan ahead of time to never be in that position again.
Bankruptcy Paperwork
It is of great importance that you keep copies all the documents, paperwork, bankruptcy petition, order of discharge as a record for future. These may come handy if you go bankrupt the second time.
Check Your Credit Report
It is also recommended that you keep a check of your credit card report every few months after you receive your bankruptcy discharge. A free copy of the report can easily be retrieved from the credit reporting agencies. This will help you keep note of all the discharged debts and check for any discrepancies.
Payment of Non-dischargeable debts
In case you have any in-disposable debts such as student loans(less then 7 years) you may need to make arrangements with the creditors on how to pay them. Student loans usually receive forbearance for the time you were insolvent. Other programs such as income-based repayment can also be opted to lessen the burden of debt.
Rebuild your Credit
If you want to rebuild your credit rating, obtain a secured credit card. It uses the money deposited in a bank as surety for the credit card. It is much easier to attain as some creditors don’t even require a credit check before offering a secured card.
But keep in mind not to use more than 10% to 20% of your available credit. This means that if you have a limit of $1,000, don’t use more than $200 at one time. The purpose is to rebuild your credit rating so be responsible. If you plan to buy a house and paying less 20% down-payment, CMHC required two credit cards with minimum $1,500 limit.
Timely payments for house
Simply continue to make them monthly mortgage payments if you didn’t reaffirm your home mortgage loans and plan to keep it. But remember, the bank still has a lien on your home; meaning it can foreclosure if you fall back on your mortgage payments.
Timely payments for vehicle
If you wish to keep your vehicle along, keep paying the monthly installments. The lender can reclaim if you fall behind on your payments.
Update Your Will
It is advisable that you review your will after the whole bankruptcy episode has finished. In case you don’t have one yet, consult credit counselor or Trustee
Savings plan
Pay yourself first. Even if it is a matter of few dollars per day, keep it saved for unanticipated emergencies. It may seem insignificant or worthless at the moment but even the smallest amounts can add up to cover expenses in the longer run.
These may seem like things easier said than done, but if you keep an account of all these details you are ensuring yourself a secure financial future.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
While most consumer proposals are filed individually, it is also a possibility to file for a joint consumer proposal. When two people have nearly substantial debts they are eligible to file a joint consumer proposal, legally referred to as “commonality of debt”. Debts however don’t have to be identical but as a general rule of thumb more than half of your debts must be common.
But whether it is a good idea or not depends on the circumstances at hand. Here’s what you need to know before considering your options.
Advantages of a Joint Proposal
Reduced Total Payments
Joint consumer proposals can be filed even with less offering to the creditors’ altogether. For example if you were to file two separate consumer proposal you may have to give 50 cents per dollar (25 cents on each). In a joint consumer proposal banks may also accept 35 cents per dollar offer, making them less expensive.
Combined Debts
A separate proposal limit is usually up to $250,000 excluding the mortgage, whereas when co-filing a joint consumer proposal the limit exceeds to $500,000.
Easy management
It is obviously easier to manage payment per month than two separate payments. This is less stressful than taking care of individual payments.
Disadvantages of a Joint Proposal
Although joint consumer proposal may seem like your best option, here are some of the cons that you simply can’t neglect.
Creditor votes ‘no’
A creditor may be willing to accept a proposal from one person but due to prior difficulties of the other ask for a lot more money to accept his proposal. In under such a circumstance there are chances that the creditors will say no. This would not have happened if both the parties had filed the consumer proposal individually.
Divorce or separation
Suppose the husband and wife had filed for a joint consume proposal and then went through a divorce, then that could be a potential problem. If one spouse kept making half payments while the other rejected to do so, the whole proposal will be nullified. So the key to remember is consider all the pros and cons beforehand and make sure that if such a time comes, you both will fulfill your obligations.
Credit Rating Impact of Filing a Joint Proposal
In most cases joint or individual consumer proposals have similar substantial impacts. All your debts are reported as an R7 and after you make all the payments the proposal remain for three years on your credit report.
The only difference can be observed if one spouse pays off all his debts before the other. For example one spouse paid off debt in two years and the other in 4 years. Proposal on the second spouse will obviously remain longer on his credit report.
However, if one spouse wants to rebuild credit faster, it will be more sensible to file two separate proposals and devote all the additional funds into paying one off first. But it is always wise to pay off all the debt as soon as possible which is why joint proposals present a preferable option.
