by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Credit Repair, Uncategorized
Consumer Proposal is the answer to serious debt problems in Canada. It is a legal agreement between the lender and the creditor that offers the creditor a chance to payback an amount that is lesser than their debt. Insolvent individuals, who cannot pay off all their debt on time, and do not own any such assets, can qualify for consumer proposal.
There are a lot of advantages of considering consumer proposals over bankruptcy. Some of them are discussed below.
1. Reduced Payback Debts
When an individual, who is under a huge debt, files for consumer proposal, their debt is reduced. This means that after filing for consumer proposal, they only have to pay up to 30% of their debt amount. This encompasses collection debt, credit card debt, income tax debt, overdrafts, and line of credits.
2. Protecting the Assets
Unlike bankruptcy where your assets can be taken away from you, consumer proposal protects them once it gets accepted. These comprise of your vehicle, cottage, house, RESPs, and RRSPs. While you are managing your debt, you need to protect your assets too, because these are the only things you are left with after your retirement. Nevertheless, you just need to keep making payments till the duration that has been accepted by your creditor.
3. Affordable
Not only is the process of filing for consumer proposal less expensive, but also the amount you are supposed to pay to the creditor is decided on the basis of your financial capability. Additionally, it takes around 60 months to pay off the proposal therefore; you can save the debt repayment amount by saving from your monthly expenses and become debt free once the period of 60 months are over. By paying at least a particular amount of your debt, you will feel an ownership and responsibility of doing something about the problem yourself. Moreover, this option is best for people who cannot pay the entire amount, but can pay back some of their debts.
4. No Legal Actions against You
Once the application for the consumer proposal is submitted, you will be protected against any legal actions taken by the creditors, such as garnishment of the wages and harassing phone calls. You will not find these benefits in other debt reduction alternatives. Other debt managements take place through the negotiation between the lender and creditor.
5. Simpler Process
The process to carry out consumer proposal is quite easy and uncomplicated. You can take the help of a counselor to create a proposal that the creditors will agree on, and is also in accordance with your interest and budget. Filing of the proposal is the next step, and lastly, after you have gotten a green light from the creditor, you will make payments on a monthly basis.
If bankruptcy is your least favorite option, then apply for consumer proposal. You can also take help of counselors that are experienced in the field to help you decide on which options you should settle for.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Credit Repair, Uncategorized
A number of people find themselves in a position where they need to get a loan even after they have gone through the consumer proposal. The best part is that you have made it through the consumer proposal, and now you have better control over your finances. Do not feel bad that you had to go through this because these processes were made for us to financially reestablish ourselves.
Now, the question is, can you qualify for mortgage loan in Canada after you have completed your consumer proposal?
Time Duration
During the consumer proposal, the bank will not lend you any money as you are already under debt. The individual has to wait for up to two years after the discharge to be regarded as a candidate for loan. This is because the bank has to make decisions in their interest and many times, people stop paying the consumer proposal amount and declare bankruptcy in the middle of the process.
Bank Requirements
The bank will decide if you are eligible for mortgage after consumer proposal or not. This judgment is made on the following criteria.
a. Low Debt Income Ratio
Your debt income needs to be low, if you have not developed a balance on credit cards after the proposal is complete. You will be at risk because you will be in debt of more money than you are earning.
b. Stable Job
Second thing that the bank will take into consideration is how stable your job is. Your income and the length of your employment will also be verified. If you do not have a stable job, or a steady source of income, then you will have hard time convincing the lenders to provide you with the money.
c. Credit Score
Lastly, your credit score will be examined, which has the power to either grant you with mortgage or not. If you are applying for mortgage just after completing your consumer proposal, your credit score will be low. Therefore, you need to acquire strategies to boost your credit score and credit rating.
Moreover, after you have completed the consumer proposal, you can wait for some additional time and then apply for the mortgage. During that time, you can work on enhancing the credit rating because you will only get the bank’s approval if your credit score is good enough. This is the most important criteria out of the three. Individuals who are not able to meet this criterion will not get the mortgage loan even if they meet the other two conditions.
People can also carry out a credit check on themselves before they make an application on their mortgage approval. The credit bureau should include the right date of the completion of consumer proposal, and the creditor of the consumer proposal must be shown inactive. This way, you will correct the blunders before filing the mortgage application.
You can also take the help of a counselor to guide you regarding mortgage and your eligibility. Even if you do not qualify now, you will be provided with directions that will facilitate you in the future.
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 | 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 | Bankruptcy, Consumer Proposal, Credit Counseling, Credit Repair, Uncategorized
Nobody looks forward to filing for bankruptcy, but it is one of the most common options that people opt for when they are in debt. Things may become even more complicated when you have child support or alimony duties too. This goes for both the cases; cases where you owe child support or alimony as well as cases where you get child support or alimony.
Both these claims (child support and alimony) are not dischargeable even if you file for bankruptcy. So while you may file for bankruptcy and get away with not paying anything for the moment, you cannot be released from these support or alimony responsibilities.
During a bankruptcy proceeding, both child support and alimony obligations are flagged as priority debts; which means you cannot be discharged from them. As general rule priority debts are given quite a treatment in bankruptcy. The child support payments in which you were lagging behind before you even filed your case, you are required to pay them back in full through whatever repayment plan you come up with.
Those who receive child support are often apprehensive of the fact that once they file for bankruptcy, they may not be able to protect the money they get from the support. Luckily, if you are a person who is finding himself in a similar situation, you can relax because the ongoing payments that you do receive as child support will be protected even if you have filed for bankruptcy.
And not just this but you can have the leftover money which you received as child support, marked as an ‘exempt asset’ which would prevent anybody who wishes to use that money for paying back the creditors from doing so.
Alimony money is your ex husband/wife’s money which they give to you so that you can manage some of the finances even after the divorce or separation. Since this too is considered as a ‘domestic support obligation’, you cannot be discharged from paying it and just like with child support, if you have missed paying any alimony money in the past to your ex spouse, you would be required to make up for that as well. If you are at the receiving end of the alimony money, but have to file for bankruptcy due to some financial setback, you also have to option of protecting that money.
Filing for bankruptcy is a big and serious decision. If you are about to file for a bankruptcy case and have child support or alimony duties too, please make sure that you look into the matter with an experienced attorney who can help you make the right decisions, ask him any relevant questions about any concerns that you may have, ask for clarifications for anything that you are not being able to understand. Remember to hash out all your concerns before filing for any legal matter, be it bankruptcy or anything else, so that you do not experience any troubles with the law later.
Consumer Proposal is the answer to serious debt problems in Canada. It is a legal agreement between the lender and the creditor that offers the creditor a chance to payback an amount that is lesser than their debt. Insolvent individuals, who cannot pay off all their debt on time, and do not own any such assets, can qualify for consumer proposal.
