by admin | Consumer Proposal, Uncategorized
If you’ve become insolvent, a Consumer Proposal is perhaps the most desirable option available to you to clear your debts without resorting to bankruptcy.
In a consumer proposal, a qualified administrator will sit down with you and go over your finances, and help you determine what the nature of your proposal will be. They’ll take care of preparing and filing the necessary documents, and getting in touch with your creditors on your behalf — a consumer proposal is essentially a negotiation between you and your creditors so that they see some satisfaction of repayment while you are relieved of your debts.
A consumer proposal means that, if your creditors agree, you get to repay a percentage of your debts over a fixed period of time (no longer than five years), without your creditors’ taking any further action, such as phoning you or selling your debt to a collections agency.
A successful consumer proposal allows you to pay off your debts without losing your assets or incurring further interest; it also allows you relief from some percentage of your debt, so you don’t end up having to pay it off in its entirety. Your wages won’t be garnisheed, and you’ll get help from two mandatory credit counselling sessions to help you avoid future financial problems.
It sounds like a pretty great solution, and it is, but it could still present a few challenges.
Once your consumer proposal has been approved by your creditors and is legally in place, you will be required to meet your payment commitment for five years. Sometimes, if your financial situation changes, that can be challenging. If you default on your payments, your proposal is annulled, and you could find yourself back where you started (although there is the possibility of amending the agreement, as long as you’re forthcoming with your administrator and your creditors agree to an amendment).
Your consumer proposal must be approved by creditors representing a majority of your debt; if, for example, you owe $100,000, credits representing $50,001 must approve of the proposal in order to proceed. If you don’t get majority support, you will have to examine other options.
Like a bankruptcy, a consumer proposal will have a profound effect on your credit rating. Your rating will be lowered, to either R7 (meaning that you are a consumer proposal) or R9 (meaning that you have bad debt that is uncollectible, placed for collection, or that you are bankrupt) and there it will likely stay for the duration, until you receive your certificate of full completion once all the terms of your consumer proposal have been met and the up-to-five-year repayment period has passed. After that, it will be noted on your credit report that you completed a consumer proposal, likely for a further three years. This will affect your ability to get credit, which may prevent you from making certain purchases for which we normally seek credit, such as a car or a house.
If you find yourself having trouble repaying your debts, the best thing you can do is to contact a professional credit counsellor and start the process of correcting past mistakes. Call GTA Credit Solutions today.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
Many graduates find themselves with tens of thousands (sometimes hundreds of thousands) of dollars of debt to go with their new educations. It can make graduation a time of anxiety instead of joy — What if I can’t find a job in my field? I won’t be able to afford a car or a home. How will I ever pay it all back?
If you’re struggling with government-secured student loan debts, the only options available to you within seven years of graduating are to contact the lender and try to negotiate a lower payment or to enlist the help of a licensed administrator to prepare a consumer proposal on your behalf, which is also a negotiation between you and your lender, but one you don’t have to undertake alone. (It has the added benefit of taking into account any other unsecured debt as well.) Any time you’re struggling with debt, it’s a good idea to meet with a credit counsellor to discuss your options.
If you’ve been out of school for more than seven years, though, bankruptcy may be an option. Any less, and your government-backed loan won’t be automatically discharged in a bankruptcy situation like your other debts.
(Remember that it’s always a possibility that any creditor may oppose your bankruptcy or your discharge, and that includes the government.)
Of course, if you have other debts increasing the pressure, reliving them through bankruptcy may still be the best option for you, as it will free up your income to pay off your student loans, but bankruptcy is a serious step that should be undertaken only after sufficient discussion with a qualified professional.
The Bankruptcy & Insolvency Act states that at any point from five years after leaving school, if you are believed to have acted in good faith and are in financial hardship (i.e. if it’s determined that continued repayment of the loan would make you experience financial difficulty), your debt may be eligible for discharge in bankruptcy, but will not necessarily be automatically discharged.
Good faith essentially means that you used the loan funds as they were intended, made reasonable efforts to repay them, and that you took reasonable steps to take advantage of lender offers of interest relief. The court may decide to let you take advantage of the five-year rule especially if you unable to work in your field after graduating (i.e. you are not deriving the economic benefit of your education), or if you left school for medical reasons without graduating.
Even if you successfully declare bankruptcy, you may still be required to make regular payments on your student loan as a condition of discharge.
These rules apply to government-backed loans. Private loans from other lenders abide by the same rules as any other unsecured lender, which means you can include them in a bankruptcy proposal at any time.
A bankruptcy that includes student loans can get complicated, especially if you’ve returned to school since graduation, so it’s always a good idea to talk to a qualified professional, like those at GTA Credit Solutions.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
If used responsibly and properly, credit cards are wonderful tools. Prudent use can help you establish such a stellar reputation, you’ll have no trouble obtaining the significant credit required to buy a home, finance a business, get a degree, and all sorts of other wonderful lifestyle options for which borrowing is likely the only option. They can help you over occasional hurdles and take the pressure off during emergencies. Without a credit card, you’ll have trouble reserving a hotel room or an airline ticket. They can take the stress out of your holiday shopping by allowing you to do all your buying online from the comfort of your couch. Many credit cards come with benefits, like points accruals that help you get membership awards or cash back, or they come with travel insurance or provide extended warranties or other perks. They also protect you from the vulnerability of carrying cash.
As positive and useful as they can be, though, they can be equally negative and destructive if they aren’t used properly.
Credit card interest is compounded, which means that if you fail to pay your balance off each month in full, the following month you’ll pay interest on the interest; for example, if you pay off a balance of $10,000 at 17.99% APR (annual percentage rate) by making only a minimum payment of 3% of the balance each month, it would take you more than 17 years and cost $9,487 in interest — that’s almost as much as the principal! (Your minimum payment will typically be anywhere from 1% to 4% of your balance.) To really appreciate the effect of credit card interest, before you charge something you can’t pay off immediately, ask yourself how much more you’d be willing to pay.
for it. A $90 movie night doesn’t seem like such a deal when you realize it’s actually going to cost you $180 by the time you pay for it.
In some cases, banks will let you make interest-only payments on a line of credit, which means you could conceivably carry the debt for years and never even touch the principal! Obviously, this arrangement is beneficial only to the lender.
Make sure you always read the fine print. Sometimes, a reasonable interest rate will jump considerably if you are late on even one payment. Another way lenders attract users to their credit card is to offer an APR that is low initially, but increases considerably after six months or a year.
Stay away from cash advances; while convenience cheques can be handy for transferring balances from higher-interest cards, be wary of them too. While interest on a credit card purchase usually doesn’t start to accrue until after your payment due date, giving you a chance to pay it in full without accruing any interest at all, cash advances are charged interest from the day you take them, and often at a higher rate. Low introductory rates won’t apply to them either.
Using credit cards to meet basic needs, like paying rent or buying groceries, transferring balances around to keep up with payments, failing to open your credit card statements, consistently making late payments or paying only the minimum, and having credit cards that are maxed out to their limits are all signs that you’re headed for financial trouble. If this sounds like you, call a qualified credit counsellor today.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
When you and your credit counsellor discussing whether bankruptcy, is the right solution to your financial problems, you’ll need to know the difference between secured and unsecured debts.
Your repayment of a secured debt is essentially guaranteed by the asset for which you took the loan. A home mortgage is a very common type of secured loan — the loan to pay for the home is secured by the value of the home itself. If you fail to meet the terms of your repayment agreement, the lender can terminate the agreement, and seize and sell the home. For the duration of the mortgage they have a lien on your property that restricts what you can do with it. A car loan is another example. The lender maintains a lien on the vehicle until the debt is repaid.
By contrast, unsecured loans are essentially granted on the strength of your work history and credit score, and “guaranteed” by no more than your signature and good reputation. A credit card is the common example of an unsecured loan. The credit card company has no claim on the items for which you used your credit card to pay. Most
of your bills, including taxes and medical bills, are unsecured debts. You will usually pay a higher interest rate on unsecured debt, because the lender is taking a greater risk than if it were secured debt.
It’s only unsecured debt that is discharged in bankruptcy. If you have secured loans for an asset and wish to keep the asset, you’ll have to continue to make your agreed-upon payments. Secured debts are treated differently in a consumer proposal, too. It can get a little complex, so you should definitely talk over all of your debts with your bankruptcy trustee or credit counsellor.
(And remember that if you charge a significant amount just prior to declaring bankruptcy, your credit card lender will likely consider that fraud, and demand payment, although that still doesn’t make it a secured debt, even if you bought something seizable, like furniture.)
If your debts have become unmanageable, call a qualified credit counsellor today.
by admin | Consumer Proposal, Credit Counseling, Uncategorized
It’s amazing what we can convince ourselves we “need.” When in truth we need to look after our families, sleep indoors, eat nutritious meals and drink clean water, we convince ourselves we need a cell phone, a gym membership — and new furniture. We work hard, and certainly in theory we do deserve to have the things we want, not just the things we need. When the springs start to poke through the couch cushions and the mattress has more lumps than grandma’s gravy, we convince ourselves we need new furniture, even when we can’t afford it. At least furniture, unlike a vacation, is around for a while, but except for your house and your car, you should start working towards habits that let you pay cash for everything else. If you can’t quite bring yourself to do that, at least be very careful not to fall into the rent-to-own furniture trap. The allure of rent-to-own retailers is that you can make small monthly payments — smaller than you would pay if you financed the furniture through your bank. The downside is that payment often stretches over so long a length of time and at such a high interest rate, by the time you actually own the furniture you could have paid off a bank loan twice. In addition to interest rates that are substantially higher than the going bank rate, there is always a lot of fine print. If you decide to return the item early, you’re out whatever you’ve already paid on it. Of course, if you miss a payment, the company will repossess it, and quick. They don’t report timely payments to credit bureaus, but they don’t report missed payments either, because technically it’s not a loan. Rent-to-own prices are much higher than other retailers, often shockingly so. We did a quick check on one rent-to-own website and found a 32” Toshiba LED TV for $10 x 156 months, or $1,560. We found the same TV at an electronics retailer for $275. A certain Acer laptop was $549.99 at the electronics store; it was $1,976 ($19/week for 104 weeks) on the rent-to-own site. If that’s not enough, rent-to-own retailers are often under fire for complaints to the Better Business Bureau and consumer advocate groups. The bottom line is that these companies exist to serve
customers with poor or no credit who can’t get traditional financing. With today’s rampaging consumer debts, rent-to-own furniture, electronics and appliances retailers are more popular than ever, but they’re seldom a good idea.
by admin | Consumer Proposal, Credit Counseling, Uncategorized
Money is a great tool. Properly managed, it can enhance your quality life, give your children a great start, and help your friends, family and favorite charities do good in the world. Mismanaged, it can become a source of stress and conflict, harassing phone calls from lenders and garnisheed wages.
One of the keys to getting a handle on your finances is to prepare a manageable budget, and use it to help keep you from living beyond your means. It may help to think of your budget as a spending plan instead — it shouldn’t be about deprivation. A good budget flexes with changes in your circumstances, and lets you predict how much you’ll need each week, month and year to meet your obligations and build a financially viable future.
It doesn’t matter whether you use a fancy spreadsheet or a piece of paper, just get started. First, write down your income, and remember every source, including interest and dividends, government assistance, even birthday money from Mom and Dad.
Then make a list of all your fixed and variable expenses on a monthly basis. Fixed expenses are those that don’t vary, such as mortgage payments, child support and car insurance.
When you’re writing down variable expenses (those that fluctuate from week to week or month to month) don’t forget the small stuff, like trips to the drive-through and bank charges, and the stuff you’d really rather ignore — like $158 a month in interest charges on your line of credit!
If don’t know what you spend, keep track for a couple of weeks. Finding out what you actually spend on groceries, clothes, visits to the salon and meals out can be a real eye-opener.
Also include in your plans at least some small savings, aiming for at least 5% of your income. If you can’t save that much now, put in some tiny amount anyone can scrape up, like $25/month
Remember that all your annual expenses need to be accounted for in your monthly budget. If you blow $500 on gifts at Christmas, put down $50 in your monthly budget. Remember debt repayment too, and always aim for more than minimum payments.
Once you have a clear picture of your spending and your income, it’s a simple game of pluses and minuses. If you’re spending more than you make, you have two options: make more or spend less. Preferably both. Just don’t live in denial. Be prepared to cut back on variable expenses and give up some luxuries. Whatever it takes, your budget needs to balance. Getting further and further into debt each month is no longer an option. If you have to give up eating out, colour your hair yourself, or live without a vacation this year, it’s a small price to pay for lasting solvency. Most importantly, when there isn’t money to spend, stop spending.
To stay on track, stop looking at your budget as a static tool. It’s like being on a diet: if you tell yourself you can never have ice cream again, you’ll eventually lose your resolve and eat seven pounds of ice cream in a day. If you are desperate to have a weekend away, adjust your spending for the few weeks prior; brown-bag your lunch, take the bus, do whatever you have to pay cash for your getaway. If you overspend one week, cut back the next.
Finally, get real with yourself. Distinguish needs from wants. You need food and shelter. You want a cell phone, magazine subscriptions and satellite television.
Once you get the hang of it, being in control of your finances offers a much greater feeling of accomplishment than stopping at the drive-through ever could.
