by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Uncategorized
Just as every action has an equal and opposite reaction, bankruptcy too has repercussions. Rebuilding your life after declaring bankruptcy may seem like a daunting task- starting anew on building your credit ratings, finances and emotional stability; but it can prove to be tremendously rewarding at the same time.
If you have recently filed for bankruptcy, it is essential for you to know that life after bankruptcy does not have to be about being a financial recluse. Rather, it is about a second chance at reforming your life and protecting yourself against future financial disasters. The following three steps will help you speed up your financial recovery.
No Shame No Guilt
Berating yourself in the aftermath of shame and guilt will only make matters worse. It will hinder your progress towards a new reformed life. People are forced into declaring bankruptcy often enough, be it due to unemployment, medical bills, or other personal setbacks.
A positive approach to the issue would be to make peace with your situation, making reforms, and moving on without self-pity or any negative thoughts.
Realistic Budgeting and Existing Bills
After bankruptcy, you need to be more watchful of your funds. Start off by listing down your cash inflows and outflows. Doesn’t matter if you have made one before or not; now is the time you need one more than ever. Plan your spending in a way that you do not end up stacking needless debt. Set aside an emergency fund which could come in handy if, God forbid, a calamity strikes out of the blue. Also prioritize paying your bills on time. You might want to consider setting up automatic bill payments, and of course, do not forget to pay your rent on time. Paying your current dues on time is the single most important step towards restoring your finances and credits.
Rebuild Your Credit with a Secured Credit Card
Improve your credit rating after bankruptcy by getting a secured credit card. This card will limit your credit to the amount you deposit in the account. Aim to progressively rebuild your credit by restricting your spending to minimal amounts as you work on paying off your existing debts as agreed. One thing to remember is that you stay away from secured cards that charge high fees.
It is particularly important to also keep yourself surrounded by the right kind of people. Friends, family, members of the church or others- people who encourage you, support you and guide you to a financially and emotionally stronger future.
You can always seek advice and counsel from professionals like the ones employed by GTA Credit Solutions to have a sound plan for rebuilding your finances and credit after bankruptcy.
by admin | Bankruptcy, Uncategorized
With bankruptcy increasing at a disturbing rate over the past few decades, it is important for you to know potential pitfalls that might lead you to falling prey to it too. People often overlook alarming issues that can leave them insolvent; listed below are some of the most common reasons that lead to one having to file for bankruptcy.
1) Unemployment
Unemployment resulting from termination, resignation, or layoff results in loss of income. This could prove equally disastrous as most people are not fortunate enough to receive dismissal packages, neither are they given proper notice. With little or no income in hand for daily transactions and emergencies, the situation only worsens; piling up credit card bills to pay will only result in the consequences worsening.
2) Excessive Spending
The urge to spend is often irrepressible in some people – be it shopping, payments on car loans, credit card bills – they just don’t stop, piling up stupendous debts which they are unable to pay back. Further, if they lack access to funds from other sources like debt consolidation loans or friends/family- a bankruptcy declaration is the only solution they have.
3) Divorce
Marriage termination brings about major financial burden for both partners-ranging from the legal fees (that can be sky rocketing), division of the couple’s assets, verdict on alimony, to the chronic costs of maintaining two separate households after separation. The legal costs single handedly can force most people into filing for bankruptcy, whereas paying for child support and other household expenses just furthers the distress. Spouses who are not able to pay the agreed child support and alimony often leave the other partners destitute too.
4) Unforeseen Losses
Events like theft, natural disasters, death, or other unexpected ones may result in loss of property and finances. As these situations are unanticipated, they are not usually covered in a normal bankruptcy claim. Most people do not know that these events need to be separately insured for insurance companies to reimburse the resulting losses. These losses, if not insured, have to paid for by the bearer himself, which may not be possible.
Do be mindful of the above mentioned financial pitfalls as possible indicators of bankruptcy. You might want to obtain personalized credit counsel from qualified professionals at GTA credit to work out comprehensive credit management plans for you.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
One of the most frightening jolts you can get financially is to go into a bank account to see if you have enough to cover off a payment only to find a zero balance.
You’re in financial hardship; you’re juggling payments to make sure one doesn’t get too far behind; you’re trying to pay as best you can and in one fell swoop, you’re left with zero and you don’t know if you’re going to be able to pay the rent or make the car payment. What happened?
In all cases, it’s because one of your debts is to your bank (a mortgage, loan, credit card or line of credit) and they have the right to take what they can to pay off some or all of the amount owed to them, even if it leaves your bank account empty. And pleading your case won’t do you any good because their payment is more important than all the other payments you may have.
When you borrow money, there are two types — secured and unsecured. Secured debt is a loan that is borrowed against some property — a house, a piece of furniture or a car, for example — and the creditor has the right to seize your property and (with notice) sell it off to pay off your debt. A mortgage is the best example of a secured contract — if you don’t make your payments, the bank can repossess your house and sell it to pay off the amount owed. A financed car purchase is another example, where the dealership technically owns your car until the last payment is made.
A credit card is unsecured debt. Even though you fill out an application that indicates you have a mortgage (maybe with the same bank) and/or a car, the credit card company can’t seize your house or your car to pay off the amount outstanding to them. What they can do, is take money directly out of an account you may have with that bank.
And if you get wise to this and don’t leave any money in that account until such time as it’s needed to make other payments, they may get wise to your ways and garnishee (or freeze) your account, in which case deposits are allowed but withdrawals are not (whether those are cash withdrawals or automatic transactions).
Banks don’t have to notify you before this happens because they don’t have to get permission from a court to do this. Neither do government agencies (if you owe back taxes or support), but other creditors have to sue you in order to gain access to your accounts.
They usually send you notice that they are considering the action and if you don’t act on it, they will file a suit to recover what is owed, including gaining access to your accounts. If you are sued, you have to go to court in your own defence and if judgment is awarded to the collector, you will have to pay all fees and costs, in addition to the debt and related penalties.
It should be noted that there is a statute of limitations on owed debt, which in Ontario is two years after the last payment was made. If you have unsecured debt and haven’t made a payment in two years, and your creditor hasn’t sued you to recover the money, the threat of a claims suit is not valid. If they do attempt to sue you, you may still have to go to court in defence and plead the expiration of the limitation on your unsecured debt.
It is important to note, though, that if you make a payment (regardless of whether it’s a bluff) — even a small one — the two-year clock resets and they can then initiate a suit for all the money owed.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
Everybody dreads calls from collection agencies, but there are certain guidelines collection agencies must follow in dealing with debtors and there are certain things consumers can do to protect themselves from the harassment some collection agencies employ.
First of all, let’s understand why collection agencies do what they do. They have been hired by creditors to get payment as quickly as possible from debtors. For their efforts, they get a fee or commission from the company whose debt they’re collecting. As such, the best way to get collection agencies out of your hair is to pay off your debts as quickly as possible.
Collection agents are allowed to contact you in order to make you aware of the debts you owe and are allowed to use reasonable means to collect. They don’t have to explain your rights to you, and if you’re ignorant to those rights they may overstep the boundaries within which they are required to operate.
Collection agents are required to send a physical letter explaining who they are, who they represent and the debt they are attempting to collect. Six days later, they are allowed to contact you in person or by phone. After making contact with you (in person by email or through a voice mail — a physical letter is not considered contact) an agent must limit contact with you to three or fewer times in any seven day period, without your consent.
The glitch is that if you don’t answer the phone and if they don’t leave voice messages, it doesn’t count as contact. In that case, you could have the same number ring up to several times a day as often as they want.
Collection agents cannot contact you at all on holidays or on Sundays except between 1 and 5 p.m. They also cannot contact you between the hours of 9 pm and 7 am on any other day.
And they can’t contact your family members, relatives, neighbours or friends except to ascertain your address and phone number. And, they can’t contact your employer except one time to get your employment information. The exception in all cases is if the other person has guaranteed your debt, in which case they are subject to the same collection contact protocols, or if you have given the agent permission to contact them.
Collection agents are also not allowed to use threatening, profane, intimidating or coercive language, to put undue, excessive or unreasonable pressure on you to pay off your debt, harass you about your debt and obligations, or to give out false or misleading information about you to others.
If you feel a collection agent has acted inappropriately, send off a letter (by registered mail so you know they’ve received it by signing for it) explaining in detail what you feel the transgressions were and how you expect the agent to comply with the law (in Ontario, according to the Collection and Debt Settlement Services Act). You can also file a complaint with the Ministry of Consumer Services.
Another thing to keep in mind is that there are several websites that recommend how you deal with collection agents, but some of them are obviously created by people who have had bad experiences with agents. As with all things, be informed but get your information from credible sources, such as federal and provincial consumer agencies.
by admin | Bankruptcy, Uncategorized
When contemplating drastic action to resolve your financial woes, it is important to consider what you get to keep and what you have to give up.
One of the first things a trustee in bankruptcy does is figure out if you are insolvent. In other words, if you liquidate assets, are you able to pay off some of your debts and still be able to carry on with some comfort in life. If you are deemed to be insolvent, then you relinquish your assets (except your house) for liquidation and the proceeds pay off a certain percentage of your debts. Then, you pay a monthly amount over a certain period of time to make restitution on the balance owing, until your creditors are satisfied with the amount you paid back in relation to what you owed.
This is where the differences between a bankruptcy and a consumer proposal become important. In a consumer proposal, you do not have to liquidate your assets, meaning you get to keep the money in your Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) while you make a monthly payment to make restitution on your debts. Creditors decide whether they want to accept your payment plan or not, and as long as you continue to follow the payment schedule, you can keep whatever you have.
In a bankruptcy, you may get to keep your RRSPs (except whatever contributions you made in the 12 months leading up to filing for bankruptcy, and even some of those may be exempt from liquidation) but a TFSA is not protected, meaning the money you have in there will be used to pay off some of your debts.
The difference lies in how the two filings behave. In a bankruptcy, you are basically saying “OK, I’m selling all my stuff and here’s what I am able to give you against what I owe you.” In a consumer proposal, you are saying “Let me keep my stuff and although I can’t pay you everything I owe you, I’ll pay you this much a month for the next five years.”
In a consumer proposal, creditors are getting more from you than they would in a bankruptcy; that’s why many don’t want you to go bankrupt and will likely not contest your proposal, if it’s structured properly.
It should be noted that a TFSA holds no special standing and all your bank accounts will be treated in the same way under both a bankruptcy and a consumer proposal. What a TFSA has done for you, though, is allow you to earn interest without paying tax on it, so over the course of contributing to it, you’ve made money you can then use as you see fit … even if that is to help you pay off your debts.
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by admin | Bankruptcy, Uncategorized
One of the consequences of declaring bankruptcy is that the value of your assets is distributed among your creditors. There are some exceptions in limited amounts, such as food and heating fuel, clothing, furniture, and a vehicle you need to get to work (to name a few); their value limits are set by your province.
Fortunately, while RRSPs used to be subject to creditor distribution, a law passed in 2008 now means that you won’t lose most of the funds in your RRSP, even if you declare bankruptcy. Only those funds you contributed in the year prior to declaring will be subject to seizure and distribution, so for example, if you have $10,000 in an RRSP and in the last year contributed $1,500, that amount would be withdrawn and distributed, and you’d and keep $8,500. Taxes are levied when the money is withdrawn, and the net amount distributed to your creditors, rather than you taking a tax hit at the end of the year.
If you continue to make contributions to your RRSP before your bankruptcy is discharged, those amounts become part of your “surplus income,” which may still be distributable to your creditors, so make sure you discuss your RRSP thoroughly with your bankruptcy advisor.
Remember, too, that your assets are assigned to your trustee until your bankruptcy is discharged, so you won’t be able to access those funds. Besides, once you cash them in, they’re no longer protected under any RRSP exemptions.
If you took a loan to purchase your RRSPs, and the loan amount is included in your bankruptcy, the lender may be entitled to take back your investment, so make sure you discuss that too.
Registered Retirement Income Funds (RRIFs) are similarly exempt under Ontario law.
If your debts have gotten out of control, it may be tempting to cash in your RRSP in an effort to repay them, but you may still find yourself headed for bankruptcy, only now without your retirement savings. Don’t do anything that may have long-term consequences before you talk to a credit counselling professional.
