by admin | Uncategorized
The process of bankruptcy is lawfully designed to help sincere individuals, and offer them a relief from their debts. When this procedure is over, the person who was in debt is no longer obligated to repay the debts, which they had at the time of filing for the bankruptcy, with certain conditions applied.
Types of Proposals
There are two different kinds of proposals. These proposals include a particular amount of money, and the time period till which the debt should be repaid to the creditor. The proposal is put forward by the debtors, however the creditors can vote against or in favor of it, accordingly. The two proposals are:
- Consumer Proposal
- Commercial Proposal
Consumer Proposal
If you owe the amount of $250,000 after leaving out the mortgages, then you can utilize this proposal. It is usually for single individuals and spouses.
Commercial Proposal
On the other hand, this proposal is more feasible for businesses as well as individuals owing greater debt than $250,000. There is no debt limit set in this proposal. It is also called Division I proposal.
CCAA Proceedings
These are specifically for insolvent companies who are in debt of more than $5 million. The companies under this act request for protection in order to plan or arrange the offer for the creditors in the form of a payment. Moreover, the court is responsible for supervising these proceedings.
The debt relief is provided as soon as all the requirements of the selected proposal are met.
Why Bankruptcy Protection is Necessary?
When you are unable to pay off the money, your creditor is permitted to take the necessary legal actions that will force you to repay the debt you owe. This authorized action basically involves filing of the law suit against you, which will lead to freezing of your bank account, and confiscation of your assets and the wages, if it is passed.
According to the Bankruptcy and Insolvency Act section 69, once you have filed for the bankruptcy, the creditors cannot take any official action. Moreover, this also puts a stop to the proceedings that have already started. This state is called as the ‘stay of proceedings’ according to the act. Moreover, the lawful process under the BIA is time consuming and prevents creditors from taking away your assets or income. Additionally, through bankruptcy or consumer proposal, you can get rid of your unsecured debt such as credit card loans, personal loans, and student loans.
Exemptions
Declaring bankruptcy or filing a consumer proposal may be the silver lining for you. However, there are some exemptions that these do not cover. This includes the alimony, secured debts, child support, etc. Secured debts include your vehicle loan and house mortgage. So if you want to keep your house and car, you need to pay for it.
If you are still under stress, and searching for ways to protect yourself from the creditors, you can get the help of counselors who deal with bankruptcy and consumer proposal matters. They will facilitate you in opting for the best alternative so you can start fresh.
by admin | Bankruptcy, Uncategorized
The initial goal of any person who is facing debt is usually to ensure that their family won’t face any trouble if they file for a bankruptcy, particularly their spouse. The question regarding the impact of a bankruptcy on the partner is also commonly asked by those who are suffering from a debt, and looking for the right options. Let’s see what the law has to say about it.
Joint Debt
It is assumed that since you are married to that individual, they are logically responsible for your debts as well. However, this is not how it works in Canada. Your spouse is only accountable for your debt if it was acquired jointly under your names.
So, if the wife signed for a credit card before marriage, the husband is not lawfully responsible for the debt on those credits just because he married her. But if there is a mortgage or a joint credit card that you have signed together after the marriage, then both of you are liable to repay the debt.
One Filing Without the Other
The option to file for bankruptcy without the other partner is also provided. If a wife files bankruptcy without her husband, it means that the wife has discharged her debts. However, the husband still owes money in a jointly held debt. The credit report of the wife will show bankruptcy in it, while the husband’s credit report will remain the same.
In case where the husband’s credit report is damaged with bad ratings because of the wife’s bankruptcy, the responsible agency should be informed, and the issue needs to be resolved on an immediate basis. In conclusion, the credit report of the spouse who is not filing for bankruptcy should remain the same, and changes will only take place in the credit rating of the spouse who is filing for the bankruptcy.
Non-Joint Debts
As the name suggests, these are debts that you haven’t co-signed with your partner, therefore it will not affect the credit report or the rating of your partner, nor will they be in debt because of your debt. The balances are entirely your responsibility; however it may concern your spouse indirectly later on.
If you and your spouse are considering buying a house after the discharge from the bankruptcy, you might face difficulty in qualifying for the mortgage. The reason is that bankruptcy is visible in your credit report; therefore it will be challenging to buy a house together.
Supplementary Credit Cards
When an individual applies for a credit card, they also get a credit card for their partner. If your husband or wife signs up for that card, then they are also legally responsible for the complete balance owed. It doesn’t matter if the account is in your name. Hence, it is essential to check your debts to make certain that your spouse is not in any of the joint accounts, before declaring bankruptcy.
Divorce or Separation
Just like marriage cannot make the other partner liable for the non-joint debts, the divorce doesn’t remove the joint debts either. You can divide your property, but you cannot divide the debt. Both the parties will be equally responsible for repaying that debt, irrespective of the legal separation or divorce agreement.
To understand the complexity of the matter where spouses are involved, you can look for the best counselors, who will inform you about the other alternatives to make the process of bankruptcy simpler for you.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Uncategorized
People struggling with debts are usually under a lot of anxiety and stress from just thinking about how they will repay them. Well good news: there are more than a few options that might work for you. Each of these options will vary for each person with different situations therefore it is only wise that you take the time out and consult a licensed insolvency firm or consultancy to discuss all your options first and then plan your repayment options accordingly. Your options include:
1. Bankruptcy
When discussing all debt repayment options, it is only wise to start with the most basic one: bankruptcy and work our way through. This type of debt repayment method involves minimum obligations and money that the creditors are likely to receive once the person files for bankruptcy. Usually people have to repay a very little amount of money to attain relief from their debts.
2. Consumer Proposal
The No.1 alternative to bankruptcy, consumer proposals allows a settlement offer with the creditors to repay a portion of your debt over a fixed period of five years. Once you pay off that fixed portion of your debt to your creditors, you are a free man; the remaining debt will be released. But the creditors must be offered or be able to receive much more than they would have received in a bankruptcy. If majority of the unsecured creditors approve of your consumer proposals, others too have to comply with it in case of few exceptional debts.
3. Debt Management Plan
Debt Management plan (DMP) is a viable option to repay debts. You simply need to consult your certified non-profit counselor if you can keep up with a budget with reduced interest rates. Debt Management Plan will help you pay all your debts in a period of a five years with reduced or no interest at all. In case your debts are tax debts, DMP will be of no help.
4. Consolidation
Consolidation may seem like a good idea if you are overburdened with debt. In consolidation of debts, the bank usually lends enough money so that you can combine all your debts into one with lower interest rates. This means reduced monthly payments, making the debt more affordable than before and additional repayment duration. However, this may not be an option for those who already have a bad credit rating.
5. Sell Assets or Liquidate
You may have sufficient assets to sell to pay off your debt but you may not be willing to do so, especially if it means selling your house and uprooting your family. Not only that there are other things to consider when selling assets such as home since there are possible tax consequences and their long term impacts on your retirement plan. So be sure if you want to go that way.
6. Budget
If you can make a budget work for you, you can easily repay your debts over time. If a person believes that just be reducing his spending he will be able to repay all his debts in a given amount of time, it is better to consult a credit counselor to kick start your budgeting plan. But once you do, stick to it.
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.
