by admin | Bankruptcy, Uncategorized
The lack of awareness among people regarding bankruptcy and its process creates greater problems for them in the future. It is therefore essential that you know what you are getting yourself into before filing for it. There are also a number of myths attached to bankruptcy that most of us unconsciously believe. Below mentioned are some of the myths you need to steer clear of.
Bankruptcy Incorporates All the Debts
Bankruptcy does not clear all your debts. However, debts that are unsecured, such as: utility bills, credit card debt, medical bills, and any other loans can be cleared through bankruptcy. Nevertheless, secured debts that have a particular property, such as a house or car loan cannot be cleared by filing for bankruptcy. Moreover, if you have stopped studying for less than 7 years, your student loan is excluded from bankruptcy.
Financial Irresponsibility Causes Bankruptcy
It is natural to think that people filing for bankruptcy were not responsible enough to manage their finances. However, this is far from the truth. Serious medical conditions, divorce, and losing the job can get anyone under debt. This is because if the person stayed unemployed for too long, at one point, the individual will run out of money. Similarly, the legal fees that go in handling the divorce and high medical bills can take a toll on the income of even the highly paid person.
Bankruptcy Can Be Filed By Anyone
Unlike popular believe, not all individuals are capable enough to file for the bankruptcy. There are fees and other costs that even this process demands. Your income and assets will be examined, and on that basis, you can decide whether the process is expensive for you or not. You do not want to solve your financial problems by getting into one.
You Lose Everything
Going bankrupt is not synonymous to losing all your possessions. There are limits set by the provinces on the basis of which you can keep certain household furniture, clothing, and health and medical apparatuses under your name. Additionally, you can also keep your vehicle, equipment that help you earn your living, and home, as long as there is no high equity on them, and they are modestly priced. In Canada, you do not have to face mortgage foreclosure either, if you go bankrupt. So you need to know these details to ensure that bankruptcy will be a safer option for you.
Your Credit is Ruined Forever
To be honest, if you are left to consider the option of bankruptcy, then your credit score is already very low. When you file for bankruptcy, you will see an increase in your credit score if it was way lower. However, the credit report may suffer from the blow, but you will be getting the credit card offers in your mail in no time. You will be able to get a secured credit card, which will assist in improving your credit score if you make the payment on time and after about a year, you will be eligible for the regular credit card as well.
Married People Can’t File for Bankruptcy Alone
Do not worry about your spouse if you want to file for bankruptcy while you are married. There is an option to apply for bankruptcy alone. Although information regarding the income of your spouse will be asked in some areas, just to make certain they are not multi-millionaires, they will not be involved in the matter because of you.
So, there you have it, six myths you need to steer clear of before you opt for the bankruptcy alternative.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Credit Repair, Uncategorized
Declaring bankruptcy will free you from the unsecured debt, and give you a discharge, but it will remain on your credit history for up to 7 years, 1st bankruptcy. However, it does not mean you cannot improve your credit score during this time span. If you live in Canada, and are looking for ways to improve your credit ratings in order to get a car loan or secured credit card, then follow the steps mentioned below to enhance your chances.
Paying Bills on Time
After declaring bankruptcy and getting a discharge, the bank monitors the spending habit and other finances of the individual to ensure that they do not fall in the same pattern again. In order to show them that you are responsible enough, and also to improve your credit ratings, you need to pay all your bills on time. Whether it is water, internet, gas, or cable bill – all this could really have an impact on your credit ratings, and will inform your lender that you are managing your finances well. This will later help you in scoring a secured credit card in around 6 months.
Contract Cell Phones
The best part of contract cell phones is that you have to pay the bills on the monthly basis. Once you apply for a contractual cell phone, your payment details will be sent to the credit bureaus on a monthly basis. If you are paying all the bills in a timely manner, you will be portrayed as a responsible individual, which will automatically boost your credit score.
Wait for Some Time to Apply for a New Credit
Gaining the trust of credit lenders is essential, if you want to get a new credit. However, it is not an easy process. It is normal for the lenders to reject your new credit application even if you are paying your bills on a timely basis every month. So if you are rejected once, do not lose hope and patience. Make sure you are not applying for a lot of credit, and also that there is a gap of minimum of 6 months between applications. If you do not follow this, your credit report will bear the consequences, as the result. The longer you wait, the better outcomes you will get.
Secured Credit Card
Once you get the secured credit card, you initially have to deposit the sum of $1,000. This will secure your credit limit, so that if later, you are not able to pay the money, this money will be used to make those payments. Since the reporting of your credit to the agency is also taking place during this process, you will be reestablishing the credit score by paying the entire amount of credit card bill on time.
Save Money and Don’t Overspend
If you properly budget your money and save it, you will not be needing loans if an emergency strikes. Therefore, saving plays a really important role in rebuilding the credit score. You can use this money as a security deposit or down payment, and face the problem without getting into debt. Moreover, while spending from your credit card, know your limit and do not end up spending more than you can afford.
Follow these 5 tips, and your credit score will improve in no time!
by admin | Credit Counseling, Debt Management, Uncategorized
Mixing love and money matters may seem unromantic but finances can have polarizing effects on the most committed of couples.
Surveys reveal that money troubles are the leading cause of divorce. In 2014 a Harris/Decima poll found that, on average, more than four out of 10 marriages in Canada begin in debt of $21,500.
Hence, by talking about your financial matters with your other half early on may save you not only money troubles but, more importantly, it can keep your marriage or cohabitation on the right path.
The big question arises: are you doomed financially if you discover post-nuptial that your significant other is up to his or her neck in debt? While this unpleasant surprise may put your relationship on the rock, the good news is that you are not responsible for your other half’s pre-nuptial debts.
However, if during your marriage or cohabitation you open a joint account, assume a joint debt such as mortgage or co-sign a debt with your spouse or partner, add your spouse as an authorized user of your credit card or line of credit, you are responsible for the full debt amount.
A couple years ago, TD Canada Trust surveyed persons in committed relationships and found 79% of Canadian couples have joint finances with the top three personal finance products being a joint bank account (64%), a mortgage (60%) and a joint credit card (50%).
Although, joint finances may be convenient for day-to-day transactions of both partners and as a token of mutual trust, you need to be aware that Joint bank accounts lay open to debt collection, Judgments or garnishments, liens and divorce consequences.
It is also to be noted that a bad credit history of your partner and an existing debt will have an adverse effect on your mortgage or loan application when you decide to buy a house, car or any other assets jointly with your partner.
Money talk should not be taboo in a blossoming romance. Talk about your personal finance sooner than later. Create safety with financial responsibility leaving no blind spots that could wreak havoc to your relationships.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Uncategorized
A Consumer Proposal and a Division 1 Proposal are two different types of proposals as stated in the Bankruptcy Insolvency Act (BIA). While both the proposals can be availed by Canadians, but there are some differences in the two which might give one precedence over the other.
Consumer Proposal and Division 1 proposal:
Before we move on to the differences between the two proposals, let us first have a look at what each of these proposals is actually about.
Consumer Proposals were designed to help people settle their debts as an alternative to filing for bankruptcy. A person having a debt of or under $250,000 can file for a Consumer Proposal. Amount of debt exceeding this limit would mark you ineligible to file for this proposal.
Also known as a ‘Commercial Proposal’ , Division 1 proposals were initially designed for business owners who wanted to deal with their debts without having to sign up for bankruptcy. However, it is available as an alternative option to individuals as well.
Now, we shall discuss the differences between the two proposals. The first and the most obvious difference is in terms of the amount limit each of them carries; as mentioned above the Consumer Proposals have a limit of $250,000 whereas the Division 1 Proposals are limitless.
Another major difference between the two is that if you are opting for a Division 1 Proposal, but have not been able to strike a successful negotiation with your creditors, you are required to file for bankruptcy. There is no such concept in a Consumer Proposal; filing one and not being able to negotiate anything with your creditors simply would bring you back to square one from where you first started, you would not be asked or required to file for bankruptcy unless you make your own call for filing one.
The third difference and probably the most important one is this that Consumer Proposals are a simpler process with Division 1 proposals being more complicated. Once you have filed for a Consumer Proposal, the decision is passed on to the unsecured creditors who have a period of 45 days to vote either for or against the proposal. They may even present a counter-offer of their own. Consequently, if majority of the creditors have voted for the proposal, the proposal is marked as approved 15 days later.
In a Division 1 Proposal things are more formal; within 21 days of filing this proposal, a Meeting of Creditors is held. At this meeting, the Trustee presents a report which covers the person’s business and financial affairs. Consequently the Creditors then decide whether they want to vote for or against the proposal which ultimately decides whether the proposals gets accepted or rejected.
The only thing you need to keep in mind when choosing between the two proposals is this that go for a Division 1 proposal when you have high levels of debt to settle, otherwise a Consumer Proposal may be enough for you.
by admin | Consumer Proposal, Credit Counseling, Credit Repair, Uncategorized
Dealing with debt can be a nerve-wracking situation for most people. When we find ourselves face to face with our debts we assume that bankruptcy may be the only option we have which could possibly save us. However, if you are a resident of Canada you just may be in luck because you have an alternative to bankruptcy: A Consumer Proposal.
Despite the Consumer Proposal being one effective solution of reducing debts, most Canadians have never heard of the term. What is it? How does it work? And why it is better than bankruptcy, are just a few of the questions that may be going in your head.
Consumer Proposal vs. Bankruptcy:
We say that a Consumer Proposal is a far more powerful solution to settling your debts than bankruptcy and we say this with good reason. By filing for a Consumer Proposal you can take the debt which for some reasons you cannot pay at the moment, reduce the debt by two thirds or possibly even more than that, stop all the interest that may be charged on the money you owe and get five years time to pay back the owed amount.
During these five years you are safe in the sense that nobody can take you to court or sue you for not being able to pay your debt. The five year period that you are allotted takes off some of the pressure as it is a good amount of time in which you can arrange for money to pay back.
It is better than bankruptcy also because you would not be required to surrender any assets while agreeing to a Consumer Proposal. If you are still not convinced, here’s another reason why Consumer Proposals are a way better option to handle your debt than bankruptcy: when you opt for a Consumer Proposal you get an R7 credit ranking which is basically indicating that an agreement has been made between you and your creditors about how the debt would be settled. This R7 rating remains on your report for three years only. On the other hand when you file for bankruptcy, an R9 credit rating is assigned to your credit report which is the worst rating anybody could have and to make matters worse it remains on your credit report for about seven to fourteen years.
While we now understand why Consumer Proposal may be a good option for an individual in debt, but what is in it for the creditors? When a person in debt files for bankruptcy, the creditor gets nothing out of it whereas when he files for a Consumer Proposal the creditor gets something out of it. For example, you owe 20,000 dollars and you file for a Consumer Proposal which reduces the amount by some percent, consequently you have to pay back some amount of money, let’s say 200 to 300 dollars per month to the creditors, whereas in bankruptcy you just straight up cannot pay anything at all at the moment. This is why most creditors are more than willing to accept a Consumer Proposal.
