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.
by admin | Consumer Proposal, Uncategorized
An alternative for someone who is unable to pay his debts is full but can pay a small sum of it, Consumer proposal is his best option. It is a legally-binding agreement between the creditors and individual where one negotiates to pay a fixed percentage of money within fixed time duration to settle the debt.
Debts included in your consumer proposal
All unsecured debts are included in consumer proposal such as credit cards; loans from friends and family, store cards etc. However, all the secured debts such as housing and leased vehicles are to be paid in full and are not part of the consumer proposal directly dealing with the creditor.
Benefits of filing consumer proposal
What makes consumer proposals better than any other option? Following are the reasons.
They key benefits of filing a consumer proposal includes:
• Avoiding bankruptcy: consumer proposal saves you from the trouble of filing for bankruptcy. If you already fled a bankruptcy before, consumer proposals will save you from filing a second time consuming one.
• Taking control of your financials: Consumer proposals release you from the stress of multiple debts. With that gone, you are able to concentrate all your efforts into focusing towards the future and making changes to avoid such a circumstance.
• Freezing of more Interest the moment you file: once you file a consumer proposal, all your loans, credit cards and taxes stop accumulating addition interests.
• Your assets are secure: Consumer proposals provide you with the ability to hold on to your saved or invested in assets. With consumer proposals you can be sure of keeping your home, vehicle and RRSPs (Registered Retirement Savings Plan) safe. AS long as your assets have NO equity and RRSP is purchased more than 12 month before filing proposal.
• Time Extension for payments: It is the best way t manage your debts. Consumer proposals provide a time of 5years i.e. 60 monthly payments. You also have the opportunity to pay lumps sum money if you want to. Such elasticity enables one to mange his financials easily.
• Creditors cannot take legal action: It restricts your creditors from the day you filed for a consumer proposal. It puts an end t the stressful calls from collection agencies warning you of taking your assets away.
• Consolidated payments: Filing a consumer proposal means that all your debts have been consolidated and you have to pay only a single payment every month to the Trustee to pay off your debt. This will provide you with a free hand at saving more money. Discuss your options with a trustee if you want to make lump sum payments at a time.
by admin | Consumer Proposal, Credit Counseling, Uncategorized
Debt traps:
The Hidden Expenses Business Dictionary defines debt trap as “An incentive structure that lures individuals into accepting long-term debt obligations under conditions that strongly favor the lender. Victims of debt traps are often prevented from discharging the debt through techniques such as unusually high or variable interest rates, changing payment plans, and unreasonably high penalties for late payments.”
In simpler words, debt trap is a scenario where the debt becomes impossible to pay due to high interests’ payable making it difficult to be paid, thus becoming a trap.
Avoiding a Possible Debt Trap
There are still days left before the month ends? Where did all the money go? There are times when we are left with little or no savings because we spent too much on expenses that we didn’t plan in advance or realize while spending from our monthly budgets. This is when we start relying on credit cards, loans; money-borrowing from friend without realizing we are slowly moving towards a debt trap.
Irregular Expenses (miscellaneous): Irregular expenses are regular expenses that are often forgotten. These may be the reason why you have an infuriating urge to tear down your monthly budget list into pieces as you fall short of money while on a budget. But what did you miss?
• Gifts: Birthdays, anniversaries, baby showers, etc
• Fees: Gym membership, occasional public transport fee, home supplies, etc
• Tax estimates •
Pet expenses
• Lawn maintenance
• Contributions: charity, fundraising Unexpected Expenses (emergency savings): Self explanatory, these are the expenses incurred on emergency basis. You fall, you are taken to the hospital, and the bills and prescriptions payable are unexpected liabilities. Obviously you didn’t plan on incurring these costs.
These may include:
• Vehicle Insurance claims, warranties
• Home insurance
• Repairs: Home, vehicle, appliances etc
• Job lay-off
• Accidents etc
Ideal Budget Planning
The simplest of expenses can be stressful. Your husband invited his boss for dinner; your daughter wants a new uniform for school; your pet falls sick. Irregular expense is always there in the back of your mind. You know that in the next three months your car insurance is due. However we often forget these tid bits. On the other hand, you cannot at any cost avoid the emergency expenses.
Weekly budgets are also a useful tool for planning short term goals. Assign what expenses are to be incurred in the following week and try to save as much as you can on things that are not priority-oriented. This way, you will have money saved up in a piggy bank or a cabinet in your kitchen for emergency or miscellaneous expenses. Now, if any emergency expenses incur, you have enough saved up.Once the month ends, make sure to analyze where most of the expenses went and how much you saved.
So how is budgeting helping me avoid a debt trap?
Let’s say you want to go out for a movie, a ‘miscellaneous expense’. No need to rely on credits cards and worry about the interest rates or payday loans. You will have the money you saved and be free from going into debt. Also, you will feel a noticeable reduction in your stress levels once the money worry leaves your mind.
