by admin | Bankruptcy, Consumer Proposal, Uncategorized
If you’ve come to the decision that you simply can’t continue in your current financial state, you may be looking at another important decision — consumer proposal vs. bankruptcy.
There isn’t a one-size-fits-all answer; you need to make the choice that suits you best. Both could be an appropriate course of action for someone whose debts are beyond their ability to repay. Here are some key features of each:
Consumer proposal
– In a consumer proposal, your Trustee/Credit Counsellor will contact your creditors on your behalf and try to negotiate an agreement under which you will repay all or (usually) a portion of your debts through one pre-set monthly payment.
– A majority of your creditors must agree to the proposal for it to move forward; the good news is that they generally do, understanding that if you must declare bankruptcy, they will be repaid very little if at all.
– Consumer proposals generally include only unsecured debt, such as credits cards and lines of credit, not secured debts, such as homes or cars.
– You get to retain your valuable assets.
– One approved, your consumer proposal becomes a legally binding agreement.
– A consumer proposal will be removed from your credit report three years after your consumer proposal is fully paid, and if your income does substantially increase, you can repay your debts sooner than your agreement calls for.
Bankruptcy
– Once the necessary duties have been completed, an uncomplicated bankruptcy will take nine months to discharge, but will stay on your credit report for seven years.
– Once discharged, all of the debts included in your bankruptcy will be erased.
– You will be obligated to attend two credit counselling sessions.
– You may be permitted to keep certain personal assets, but only up to a certain amount; for example, in Ontario, you can keep furniture and appliances up to $11,300, clothing up $5,650, and one motor vehicle needed to get to your job, up to a value of $5,650.
– In Ontario, your principal residence is not exempt from bankruptcy, which means you may be required to sell it and remit the value for disbursement to your creditors.
– Other assets may also be subject to seizure and sale.
Here is some guidance on which choice might be the most appropriate for you.
A consumer proposal may suit you best if …
– You have a regular income, but are simply unable to meet your monthly payments.
– You believe your income will increase considerably before a bankruptcy would be discharged.
– You have certain valuable assets, such as a luxury car, a house, or certain RRSPs.
– You have declared bankruptcy before; a second or subsequent bankruptcy is more complex and takes more time to discharge than a first.
– You have debts that a bankruptcy will not discharge, such a student loan or income tax debt.
– You own and operate a limited company.
– You wish to maintain ongoing relationships with secured creditors, such as a mortgage company.
Bankruptcy may suit you best if …
– You are unemployed or your income is irregular and unlikely to increase.
– You have a steady income but have a number of dependents and/or high non-discretionary obligations (such as support or health care).
– You have few assets or they are of little value.
In either case, you must meet certain criteria, and be prepared for your decision to reflect negatively on your credit score. This is by no means a comprehensive analysis, and every case is different. Neither decision should be taken lightly.
If you’ve come to the point where your best options for resolving your financial issues are to file a consumer proposal or declare bankruptcy, get personalized advice from a qualified Credit Counsellor, like those at GTA Financial. Take the first step towards peace
by admin | Bankruptcy, Uncategorized
Most people look at the declaration of bankruptcy as an absolute last resort when they’re looking for a way to ease their financial problems. In many cases, it’s a simple matter of morality — most of us want to honour our commitments and feel very badly when we can’t. Who want to feel like a deadbeat? Bankruptcy can also mean the loss of assets, and will mean having to rebuild your credit slowly, over time.
So why do people do it?
When people become insolvent — that is, they have more debt than they can afford to repay — it can mean sleepless nights, harassing phone calls from creditors, and the continuing accumulation of debt if you find yourself using credit to pay for necessities like groceries or utilities. Bankruptcy can take care of all of these problems in a few simple steps and a few months of accountability to a trustee.
Bankruptcy offers a clean slate and a fresh start, and for some people, that’s what it will take to get them back on their feet and in the right frame of mind to face the future.
There’s often more to their situation than just badly handled credit. Many people are forced to consider bankruptcy because they lost their jobs, got divorced or separated, lost property that was insufficiently insured, needed legal counsel, or any one of a variety of legitimate reasons why otherwise responsible people find themselves insolvent.
The bottom line is that the decision to declare bankruptcy is a very personal one, one that needs to be made only after careful consideration and consultation with a professional credit counsellor. If, after careful consideration, you and your counsellor decide that bankruptcy is the right option for you, proceed without beating yourself up. The option exists for a reason. Use your bankruptcy as a lesson, and learn the skills you need so you never have to face financial problems again.
by admin | Bankruptcy, Uncategorized
Should your financial issues result in a declaration of bankruptcy, one of the conditions to which you’ll have to adhere is to advise your bankruptcy trustee of your household’s income each month, and then remit half of any “surplus income.”
Monthly net income thresholds for singles and families are set by the government, based on what they’ve decided it takes to maintain a reasonable standard of living. Every dollar over that is subject to a surplus income payment of 50% until your bankruptcy is discharged.
So, the basic formula then is:
Net income – government threshold = surplus x 50% = amount you must remit
You will be required to submit to your trustee proof of your income, for example your pay stubs. If you’re in a career where your income fluctuates, you may pay more some months than others.
To determine net income, taxes are subtracted, as are spousal support, child care, medical bills, and whatever other expenses you would normally deduct when preparing your income taxes.
If you are married, your spouse’s income is included in the household net income. Once net income is determined, the amount each must remit is based on each partner’s percentage of the total.
Failing to remit surplus income payments will result in the delay or denial of your discharge.
Normally, a first bankruptcy is discharged in nine months, but if your surplus income exceeds $200 each month (so that you would be paying more than $100), your discharge will be extended for 12 months, which means you will pay that surplus income charge for 21 months in total. Remember to tell your trustee if you anticipate any bonuses or overtime over the course of your bankruptcy — they will increase your average monthly pay and could extend your bankruptcy; likewise, five-paycheque months (if you’re paid weekly) or three-paycheque months (if you’re paid bi-weekly) will increase your average monthly income and could affect the length of your bankruptcy.
The amount of the government thresholds (which, for a single person is only about $2,000/month) and potential amount of remittance over a long period of time are two more reasons that bankruptcy is a last resort for most people. If you’re faced with insolvency, consider filing a consumer proposal instead. Regardless whether your income increases, your payments in a consumer proposal stay the same. Talk to your GTA Credit professional today about what is the right choice for you.
by admin | Bankruptcy, Uncategorized
If you’ve exhausted all options and need respite from the overwhelming stress of unpaid debts, you and your credit counsellor may decide that your best option is to declare bankruptcy.
Take heart — while it is a serious matter, it isn’t the end of the world. You will recover, and so will your credit, as long as you work to make good decisions and to change the habits that led you here.
Bankruptcy in Ontario provides legal protection from your creditors. It is available to anyone who owes more than $1,000 in unsecured debt and is insolvent, meaning that your debts outnumber your assets and you are having trouble repaying them.
To claim bankruptcy, you must meet with a certified credit counselor or licensed bankruptcy trustee, who will review your finances and file on your behalf.
While the vast majority of uncomplicated first-time bankruptcies are automatically discharged nine months later (meaning that your creditors are legally prohibited from any further action to collect or offset your debt to them, and you are free to start rebuilding your credit and accrue assets — your debts are permanently erased), sometimes things get a little more complicated. A creditor can object to your discharge if they think that you should have filed a consumer proposal instead, or that you have lied during the process or are hiding assets. As long as you complete your duties, it’s rare for a creditor to object. Once discharged, you’re free to start fresh. (Subsequent bankruptcies take longer to discharge.)
Your duties in bankruptcy, simply put, are to disclose to your trustee all of your assets and the details of your income, as well as supplying the trustee with required income tax returns; hand over your credit cards for cancellation; disclose the sale of any assets within one year of declaring bankruptcy, as well as any valuable gifts you bestowed within five years of declaring; attend the initial meeting of your creditors; and attend two sessions with a credit counsellor. Failure to fulfill any of these or other required duties could delay or prevent your discharge.
Until discharge, you will be required to keep track of your income and expenses, and may be required to pay a portion of your income to the trustee for disbursement to your creditors.
If your debts are overwhelming, it’s time to talk to a credit counselling professional. Even if bankruptcy turns out to be your best option, we can help you cut your expenses, plan your spending, and make better financial choices in the future. Give us a call today.
by admin | Bankruptcy, Uncategorized
In an uncomplicated first bankruptcy, as long as you fulfill certain obligations, your bankruptcy will be automatically discharged in nine months, and you’ll be released from your debts. Any failure or delay in fulfilling those obligations can delay or prevent your discharge. So, what are those obligations?
As per the Bankruptcy and Insolvency Act, bankrupts in Ontario are obliged to:
– Disclose to your Credit counsellor or trustee all property and deliver it to the trustee if required
– Relinquish to the trustee all credit cards for cancellation
– Deliver all titles, policies, tax records etc. that relate to your financial affairs
– Disclose under oath as required the conduct and causes that led to bankruptcy
– Deliver within five days of filing bankruptcy a statement of your affairs including names and addresses of all creditors, as well as other pertinent details
– Assist the trustee in inventorying your assets as required
– Disclose all property of which you’ve disposed in the year prior to filing
– Disclose any gifts or settlement without adequate compensation made in the five years prior to filing
– Attend the first meeting with your creditors and subsequent meetings as required
– Submit to examinations regarding property and financial affairs under oath as required
– Aide to the best of your ability in the distribution of proceeds from asset sales
– Execute powers of attorney, deeds, conveyances etc. as required
– Double-check claims filed if required by the trustee and correct any errors
– Inform the trustee of any changes to your financial situation
– Generally do whatever is reasonably required with regard to your property and distribution of any proceeds
– Keep the trustee advised of your address until discharged
We’ve paraphrased these duties for the sake of brevity, and they are intended just for your general knowledge. If you are considering bankruptcy, you should discuss the particulars of your situation with your credit counsellor or bankruptcy trustee.
If your debts are greater than your ability to pay them, it’s time to talk to a professional. Call us today
by admin | Bankruptcy, Uncategorized
Before you make the decision to declare bankruptcy, you should know what you can expect when the process is over. The very best thing that happens is that after your bankruptcy is discharged, you’re absolved of your responsibility to repay your debts and free to make a new start. No more collection agencies calling you, no more shower of letters through your mail slot, no more stress.
There are, of course, some not so positive consequences too, the most serious of which is likely what a bankruptcy does to your credit rating.
A first-time bankruptcy stays on your credit bureau report for seven years, and will make it hard to obtain credit. That means not only that it becomes much more difficult to buy a car, a house, or other such major purchases, but it gets harder to do simple things like reserving a hotel room.
There are steps you can take, though, to start to restore your credit rating, such as obtaining a secured credit card. This means that you essentially prepay the card by putting money on deposit with the lender to mitigate their risk. That way, if you don’t make a payment, the lender will take enough of the money you’ve put on deposit to cover the debt, and reduce your credit limit accordingly. Making payments as required will reflect well on your credit rating, so don’t let that happen, though. You might also consider borrowing for an RRSP, or applying for a small-limit credit card or line of credit with a co-signer. If you don’t start repairing your credit, you’ll find after seven years have passed that you have no credit history whatsoever, and that can make it as difficult to obtain credit as having a negative credit history.
Even though you are released from your debts, your bankruptcy becomes part of your personal financial history, and as such must be honestly disclosed as the law requires, even after the seven years are up and it no longer appears on your credit report.
Depending on the circumstances that drove you to bankruptcy, you can be susceptible to repeating the same mistakes over again. Not only do you not want to repeat the anguish of becoming insolvent, but subsequent bankruptcies are harder to obtain and take more time to discharge. Make sure you get the help you need from a qualified credit counsellor, even beyond the two sessions required to fulfill your obligations for discharge if you need them, so you can make your financial future brighter than the past.
