by admin | Bankruptcy, Credit Counseling, Uncategorized
Before you and your credit counsellor decide that bankruptcy is the right option for you, you need to know which of your debts will be erased following your discharge.
Unsecured debts
Unsecured debts are those obtained with no collateral, such as a house or a car the lender can seize and sell should you fail to repay the debt as agreed. It commonly includes credit cards and lines of credit. You can’t go out and buy a new motorcycle on your credit card, declare bankruptcy the next day and keep your new toy (which is likely to constitute fraud), but for the most part items that you purchase on a card or line of credit remain yours even after bankruptcy. Utility bills, medical bill, phone bills and taxes are other examples of unsecured debts. There are some exceptions —always fully disclose all of your debts to your prospective bankruptcy trustee to find out for sure what is eligible — but most unsecured debts are discharged in bankruptcy.
Secured debts
Secured debts are those on which the lender continues to hold some sort of title or lien that lets them seize and sell the asset to recover their money should you fail to repay as agreed. The biggest secured loan most people have is a mortgage on a home. Secured debts are not discharged in bankruptcy. Again, you should discuss the particulars of your individual case with a qualified professional, but in general negative equity (if the security is worth less than the outstanding balance of the loan) means that you can simply default on the debt and surrender the asset, while if you do have equity (if for example your home is worth more than the amount of your mortgage), the amount will be included in your bankruptcy estate to be divided among your creditors, and you may have to sell the asset.
Student loans
Discharge does erase your obligation to repay your student loans if it has been more than seven years since you stopped being a full-time student when you file for bankruptcy. If you’re cutting it close, make sure you check the federal or provincial legislation applicable to your loans to find out the official date on which you stopped being a full-time student. A court may decide to reduce this time period to five years if you can prove repaying the loan will cause you “undue hardship”; you’d have to apply for an early discharge of your student loan debts that may be granted if you have acted in good faith with regard to repayment and are experiencing financial difficulty that prevents you from repaying them. To determine good faith, a court will look at how you spent your student loan funds, whether you made efforts to complete the education for which you borrowed the funds, whether you’ve made sufficient effort to repay them, and whether you have first made use of any available government repayment assistance programs.
You should always discuss your finances honestly and completely with a qualified credit counsellor before making any decisions about declaring bankruptcy. There may be other solutions available
by admin | Consumer Proposal, Uncategorized
For many people, a consumer proposal as a solution to financial difficulties is preferable to declaring bankruptcy because it causes a little less damage to their credit scores and/or lets them keep their assets. It also lets people honor their debts by repaying them over time, but has the added benefit of generally requiring them to repay only a small percentage of what they actually owe.
You can file a consumer proposal that includes all your unsecured debts through a trustee. From the date your proposal is filed, you stop making payments on your debts directly to your creditors, and any actions in effect against you such as a garnishee of wages or a lawsuit also stop.
From the date of filing with the Office of the Superintendent of Bankruptcy (OSB), your creditors have 45 days to respond. If a majority of your creditors by dollar amount accept the terms (i.e. 50% of your debt, plus $1), the proposal is accepted and all creditors must abide by its terms.
If creditors totaling at least 25% of your debt request one, a meeting of creditors may be held within 21 days of filing. A Trustee office can also call a meeting if desired. Your creditors will then vote at the meeting. If a quorum of creditors fail to show, the proposal is accepted.
Most reasonable consumer proposals don’t require a meeting of creditors. Although it usually means only some part of the total debt will be repaid, creditors know that if they don’t accept a proposal, it could drive the debtor to bankruptcy, in which case they get nothing.
If your proposal is approved, you will then make agreed-upon payments through your trustee to your creditors over a period not longer than five years.
If you think you may be headed for financial trouble, talk to a qualified credit counsellor about your options as soon as possible. The sooner you act, the sooner you can put those troubles behind you.
by admin | Bankruptcy, Credit Counseling, Uncategorized
In a perfect world, we would all live within our means, save responsibly, pay cash for everything except our home, support worthwhile charities, invest wisely, and carry sufficient insurance. We seldom, do, though. Many of us have some bad spending habits that can be hard to break.
An honest assessment of your own habits should start to paint a picture of your money management capabilities. It doesn’t mean anyone else gets to decide your priorities — if you’d rather eat out every night than have a new car every couple of years, that’s entirely up to you. But if you’ve can’t afford both but have both anyway, or if you’ve budgeted for $250 a week for dining out and are spending more than $1,000, you have developed some very bad habits.
Have a good, hard look at your spending patterns. Do you buy when you’re upset or to alleviate boredom? Do you have no clue exactly what your income is, or how much you spend? Do you live in overdraft or put necessities like gas and groceries on a card, and then not pay it off at the end of the month?
Start keeping a money journal. Track not only what you spend and on what, but also how you felt at the time and any extenuating circumstances that led to the bad spending behaviour. Had you just gotten off the phone with your mother when you spend $100 you didn’t really have on eBay? Pay particular attention to little amounts that add up to a lot but bring nothing of value to your life, like late fees, bank charges, and interest on your debts. When you really, really realize that you’re spending $250/month on nothing, you will absolutely hate doing so.
Here are some examples of bad spending habits:
– Paying for necessities on credit
– Paying for premium brands when other brands will do
– Pay for storage; if you can’t fit all your stuff in your home, you have too much stuff
– If you occasionally come home from a shopping trip only to discover you already own the book/movie/cardigan you just bought, you may need not only better spending habits, but a professional organizer besides.
– You keep buying even when the money’s gone. If you have a certain budget for clothes, once the money’s gone, no more clothes. If that means you have to turn down days out with friends, get in the habit of turning them down.
– Robbing Peter to pay Paul. If you’re using revolving credit to make credit card payments, you’re in trouble.
– Spending what you don’t have for luxuries. Never buy vacations, clothes, jewelry, spa visits, theatre tickets or anything else you know deep down you can live without while you still have debts.
– Spending more than you make. If you are going into the hole even by $20 or $50 every month, find a way to curb some spending to make up the shortfall. Small amounts add up to big debts.
To rehabilitate your spending behavior is not an easy task. As with dieting, you can’t live on willpower alone — white-knuckle budgeting seldom works, at least in the long run. “Make more” and “spend less” are oversimplifications. To really change your bad habits takes replacing them with new, better habits.
– Have only the amount you intend to spend with you, and leave the credit cards at home. If you go out intending to spend $80 on a pair of new summer shoes, take $80 with you when you go shopping.
– If you’re prone to impulse purchases, make yourself leave the store, go home, and then go back the next day if you can’t live without it. Ask yourself: Do I need it? Do I already own something like it? Do I have a place to put it?
– Avoid temptation whenever possible. If you can’t handle a trip to the mall without coming home with three new books, a few highlights in your hair, and a three-course meal in your belly, don’t go to the mall.
– Make a list of your financial goals, including amassing six months in emergency savings, and display it prominently in your den or kitchen. Don’t give up what you want for want you right now — what would you rather have? A new car, a swimming pool or a trip to Spain, or a $4 espresso on the way to work every day?
– Be mindful of the real cost of what you’re buying in the most limited currency we have — time. It’s harder to spend money foolishly when you connect it to how hard-won money really is. Even if you make $100/hour or more, you’re still exchanging your life for material goods. Before you order the surf & turf, ask yourself if the steak and lobster dinner is worth an hour of your life. If it is, go ahead and enjoy it. If the idea of trading an hour of your life for a meal that won’t even take that long to eat makes you a little queasy, don’t do it. If you spend $100/month on gourmet coffee and make $20/hour, ask yourself if it’s worth five hours of your life every month to drink fancy lattes.
– Leave your credit cards at home. If you want to keep an emergency card with you, knock the credit limit back to about $500. At least then if you do get yourself in trouble with it, it won’t amount to much.
The biggest favor you can do yourself when it comes to spending is to become mindful. When you realize what things really cost — once you factor in the time you spent earning the money and the interest you’re going to pay to charge it — you’ll think twice before you buy.
by admin | Bankruptcy, Credit Counseling, Uncategorized
Credit is useful. Without it, few of us would be able to live in homes or drive cars we actually own. It can let us bridge financing in the short-term, let us book a hotel room or car rental, shop online, provide emergency peace of mind, consolidate other debts, track spending, keep our money safe when travelling, and earn rewards, to name just a few ways in which credit can make life more pleasant.
But every coin has two sides. The downside to credit can exact a considerable toll — on your sleep, your family life, your health, your future.
To make sure you get the benefits of credit without the potentially devastating downside, develop some good credit-handling habits that will serve you well all your life. Obviously, the most important of these are to not outspend your income and never carry a balance on your cards, but there are some other ways you can stay in control of your credit.
– Should you find yourself in financial trouble, don’t hide. Be honest with your creditors and ask for their advice. Most creditors would rather offer some guidance and help you pay what you owe than risk not being paid at all. The best time to negotiate a solution is before you get too far off track.
– Keep an eye on your credit report. To make sure it’s accurate and current, periodically check your credit report online through a site such as Equifax.ca. You are legally entitled to see your credit report periodically for free, although you can pay for monthly monitoring services or instant online access. If you do spot mistakes, contact the credit bureau with details of the transaction in question, and find out how to rectify the situation.
– Prepare a workable spending plan and keep track of where your money goes. Trim areas you don’t need, such as daily trips to the coffee shop drive-through, and be aware of those things that are easily overlooked but that can add up to a lot of money, such as debt interest and bank charges. Writing down everything you spend is a great way to discover some hard truths.
– Stay away from high-interest payday loans and store credit cards.
– Start saving for emergencies. Experts recommend having three to six months’ worth of expenses banked, starting with putting away 10% of your net. If you happen on extra money, from an inheritance or a raise for example, add it to your savings. You won’t miss it if you don’t get in the habit of having it.
– Pay more than the minimum monthly payment on lines of credit and credit cards. It’s the only way to get ahead — paying just the minimum can add years (yes, years) to your repayment schedule and add thousands in interest.
– Never make late payments. Not only will late payments be reflected negatively on your credit report, but you risk losing low promotional interest rates or incurring extra charges.
With some care and common sense, credit can be a good friend. Without them, it can be your worst enemy.
by admin | Bankruptcy, Uncategorized
Q: What are the advantages of declaring personal bankruptcy?
A: Your unsecured creditors must stop any collection actions against you, including legal actions, and any garnishment on your wages or bank account stop. You are released from unsecured debt and free to make a new start.
Q: Can I go to jail for declaring bankruptcy?
A: Honest but unfortunate debtors who file truthfully don’t go to jail. There are no criminal charges associated with filing for personal bankruptcy.
Q: Will people find out about my bankruptcy?
A: It will be on public record, and all your creditors (secured and unsecured) will be notified. Your employer will only be notified if the trustee is required to stop your wages from being garnisheed.
Q: Will I lose my house?
A: It depends on the amount of equity you have in the property. You may be able to pay the value of the equity to your trustee to be distributed to your creditors. As long as you are able to keep current with your mortgage payments, you may be able to keep your home. Talk to GTA Credit advisor or your mortgage lender about your unique case.
Q: Will I have to sell my assets?
A: Not necessarily. GTA consultant will advise you about which assets may need to be sold or distributed. If you have assets in which there is no equity (if you owe more on a secured loan for an item, a car for
example, than the item is worth) and your trustee agrees, you may be able to negotiate with the lender to keep the asset.
Q: Does declaring personal bankruptcy cover all my debts?
A: No. Personal bankruptcy covers only unsecured debts, and some unsecured debts aren’t covered, such as child support, alimony, court fines and penalties, or debts that are found to be fraudulent. Student loans may be covered if you stopped being a student more than seven years ago, and can meet some other requirements. Secured debts such as mortgages are car loans are not covered by bankruptcy unless you relinquish ownership of these assets. Always discuss your unique situation with GTA Credit consultant.
Q: What happens if my bankruptcy doesn’t get discharged?
A: Once the trustee has completed the administration of your case and been discharged, if your bankruptcy isn’t discharged, you will remain responsible for your debts and your creditors can resume their collection actions.
Q: Why wouldn’t my bankruptcy be discharged?
A: Your trustee or your creditors can prevent your bankruptcy from being discharged if you don’t perform your obligations during the nine months after you declare, such as not showing up for credit counselling sessions or not provideng monthly income & expense report or failing to make the required monthly payments to your trustee.
Q: I have to leave the country for work. Can I declare bankruptcy first?
A: Talk to GTA consultant about your unique situation.
Q: How long does bankruptcy take?
A: From filing to discharge, a normal first bankruptcy takes nine months or more (if you have surplus). There are some factors that will affect that, such as if this isn’t your first bankruptcy, you have surplus income, your creditors dispute your bankruptcy or you fail to meet your obligations. Talk to your trustee about your unique case.
Q: What happens if a creditor I forgot to include in the bankruptcy contacts me after I’m discharged?
A: In most cases, as long as the debt was incurred before you filed for bankruptcy and is a provable debt, your trustee will send notice to the creditor and it will be cleared. Talk to your trustee..
