by admin | Consumer Proposal, Credit Counseling, Credit Repair, Uncategorized
Dealing with debt can be a nerve-wracking situation for most people. When we find ourselves face to face with our debts we assume that bankruptcy may be the only option we have which could possibly save us. However, if you are a resident of Canada you just may be in luck because you have an alternative to bankruptcy: A Consumer Proposal.
Despite the Consumer Proposal being one effective solution of reducing debts, most Canadians have never heard of the term. What is it? How does it work? And why it is better than bankruptcy, are just a few of the questions that may be going in your head.
Consumer Proposal vs. Bankruptcy:
We say that a Consumer Proposal is a far more powerful solution to settling your debts than bankruptcy and we say this with good reason. By filing for a Consumer Proposal you can take the debt which for some reasons you cannot pay at the moment, reduce the debt by two thirds or possibly even more than that, stop all the interest that may be charged on the money you owe and get five years time to pay back the owed amount.
During these five years you are safe in the sense that nobody can take you to court or sue you for not being able to pay your debt. The five year period that you are allotted takes off some of the pressure as it is a good amount of time in which you can arrange for money to pay back.
It is better than bankruptcy also because you would not be required to surrender any assets while agreeing to a Consumer Proposal. If you are still not convinced, here’s another reason why Consumer Proposals are a way better option to handle your debt than bankruptcy: when you opt for a Consumer Proposal you get an R7 credit ranking which is basically indicating that an agreement has been made between you and your creditors about how the debt would be settled. This R7 rating remains on your report for three years only. On the other hand when you file for bankruptcy, an R9 credit rating is assigned to your credit report which is the worst rating anybody could have and to make matters worse it remains on your credit report for about seven to fourteen years.
While we now understand why Consumer Proposal may be a good option for an individual in debt, but what is in it for the creditors? When a person in debt files for bankruptcy, the creditor gets nothing out of it whereas when he files for a Consumer Proposal the creditor gets something out of it. For example, you owe 20,000 dollars and you file for a Consumer Proposal which reduces the amount by some percent, consequently you have to pay back some amount of money, let’s say 200 to 300 dollars per month to the creditors, whereas in bankruptcy you just straight up cannot pay anything at all at the moment. This is why most creditors are more than willing to accept a Consumer Proposal.
by admin | Credit Counseling, Credit Repair, Debt Management, Uncategorized
We often here experts on finance and banking coming up on various talk shows telling us about the various option we can avail if we are facing debt. Several books and articles too have been written on the same subject. It does get one wondering that if getting into debt is such a huge deal that you need so many people, and not just ordinary people, but experts, tell you how to deal with it, why not tell us about how to not get into debt to begin with?
Many people make the mistake of seeing a credit counselor only when they have hit rock bottom; that is they are about to file in for bankruptcy. If you want to do better financially, you need to prepare for it likewise as well. Do not pay debt by avoiding getting into it. Following are some of the things you could do that would help you avoid debt:
The Importance of Personal Finance:
Honestly, it would be very difficult to do anything for too long if you are bad at managing your personal finances. The importance of personal finance should be taught as a subject to all students so that once they enter into the practical field, they have the discipline and the steadiness that is required to manage money matters.
The Importance of Budget Planning:
Another thing I believe should be taught to all is how to effectively plan your budget in a manner which would not have you over spending on things. People should be taught to devise somewhat more sensible ways of spending their money. For example, rather than paying the retail prices for furniture or some new electronics that you may need, consider going for wholesale prices because they are way lesser than the retail prices.
Avoid Using Credit Cards:
Most people believe that the main source of debt is the plastic money you carry with you: your credit cards. For starters, they have very high interest rates and secondly, carrying them around with you just further tempts you to buy things that you do not necessarily need. So, if you cannot completely avoid using them, try not to carry them with you whenever you go out.
Say No to Borrowing:
Another way of avoiding debt is to stop borrowing money for something that you cannot afford at the moment. Say yes to saving and no to borrowing. While it is easy o apply for a loan and get one and then buy whatever it is that you wanted to buy, it can be difficult to pay the loan back consequently, you run the risk of running into debt.
Avoid Impulse Buying:
Just because there is a latest model of the phone that you already have, does not mean you should get it, especially since yours is working perfectly fine. In addition to this, what most of us do not realize is that while you may very gladly spend $200 on this new phone today, but it is not going to be worth that much in a couple of days. Electronics especially phones, drop down in their values very quickly.
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.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Uncategorized
People struggling with debts are usually under a lot of anxiety and stress from just thinking about how they will repay them. Well good news: there are more than a few options that might work for you. Each of these options will vary for each person with different situations therefore it is only wise that you take the time out and consult a licensed insolvency firm or consultancy to discuss all your options first and then plan your repayment options accordingly. Your options include:
1. Bankruptcy
When discussing all debt repayment options, it is only wise to start with the most basic one: bankruptcy and work our way through. This type of debt repayment method involves minimum obligations and money that the creditors are likely to receive once the person files for bankruptcy. Usually people have to repay a very little amount of money to attain relief from their debts.
2. Consumer Proposal
The No.1 alternative to bankruptcy, consumer proposals allows a settlement offer with the creditors to repay a portion of your debt over a fixed period of five years. Once you pay off that fixed portion of your debt to your creditors, you are a free man; the remaining debt will be released. But the creditors must be offered or be able to receive much more than they would have received in a bankruptcy. If majority of the unsecured creditors approve of your consumer proposals, others too have to comply with it in case of few exceptional debts.
3. Debt Management Plan
Debt Management plan (DMP) is a viable option to repay debts. You simply need to consult your certified non-profit counselor if you can keep up with a budget with reduced interest rates. Debt Management Plan will help you pay all your debts in a period of a five years with reduced or no interest at all. In case your debts are tax debts, DMP will be of no help.
4. Consolidation
Consolidation may seem like a good idea if you are overburdened with debt. In consolidation of debts, the bank usually lends enough money so that you can combine all your debts into one with lower interest rates. This means reduced monthly payments, making the debt more affordable than before and additional repayment duration. However, this may not be an option for those who already have a bad credit rating.
5. Sell Assets or Liquidate
You may have sufficient assets to sell to pay off your debt but you may not be willing to do so, especially if it means selling your house and uprooting your family. Not only that there are other things to consider when selling assets such as home since there are possible tax consequences and their long term impacts on your retirement plan. So be sure if you want to go that way.
6. Budget
If you can make a budget work for you, you can easily repay your debts over time. If a person believes that just be reducing his spending he will be able to repay all his debts in a given amount of time, it is better to consult a credit counselor to kick start your budgeting plan. But once you do, stick to it.
by admin | Consumer Proposal, Credit Counseling, Uncategorized
Debt traps:
The Hidden Expenses Business Dictionary defines debt trap as “An incentive structure that lures individuals into accepting long-term debt obligations under conditions that strongly favor the lender. Victims of debt traps are often prevented from discharging the debt through techniques such as unusually high or variable interest rates, changing payment plans, and unreasonably high penalties for late payments.”
In simpler words, debt trap is a scenario where the debt becomes impossible to pay due to high interests’ payable making it difficult to be paid, thus becoming a trap.
Avoiding a Possible Debt Trap
There are still days left before the month ends? Where did all the money go? There are times when we are left with little or no savings because we spent too much on expenses that we didn’t plan in advance or realize while spending from our monthly budgets. This is when we start relying on credit cards, loans; money-borrowing from friend without realizing we are slowly moving towards a debt trap.
Irregular Expenses (miscellaneous): Irregular expenses are regular expenses that are often forgotten. These may be the reason why you have an infuriating urge to tear down your monthly budget list into pieces as you fall short of money while on a budget. But what did you miss?
• Gifts: Birthdays, anniversaries, baby showers, etc
• Fees: Gym membership, occasional public transport fee, home supplies, etc
• Tax estimates •
Pet expenses
• Lawn maintenance
• Contributions: charity, fundraising Unexpected Expenses (emergency savings): Self explanatory, these are the expenses incurred on emergency basis. You fall, you are taken to the hospital, and the bills and prescriptions payable are unexpected liabilities. Obviously you didn’t plan on incurring these costs.
These may include:
• Vehicle Insurance claims, warranties
• Home insurance
• Repairs: Home, vehicle, appliances etc
• Job lay-off
• Accidents etc
Ideal Budget Planning
The simplest of expenses can be stressful. Your husband invited his boss for dinner; your daughter wants a new uniform for school; your pet falls sick. Irregular expense is always there in the back of your mind. You know that in the next three months your car insurance is due. However we often forget these tid bits. On the other hand, you cannot at any cost avoid the emergency expenses.
Weekly budgets are also a useful tool for planning short term goals. Assign what expenses are to be incurred in the following week and try to save as much as you can on things that are not priority-oriented. This way, you will have money saved up in a piggy bank or a cabinet in your kitchen for emergency or miscellaneous expenses. Now, if any emergency expenses incur, you have enough saved up.Once the month ends, make sure to analyze where most of the expenses went and how much you saved.
So how is budgeting helping me avoid a debt trap?
Let’s say you want to go out for a movie, a ‘miscellaneous expense’. No need to rely on credits cards and worry about the interest rates or payday loans. You will have the money you saved and be free from going into debt. Also, you will feel a noticeable reduction in your stress levels once the money worry leaves your mind.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Uncategorized
How heavenly would it seem if all our bills were paid on time and loans and money borrowing went out of the equation? Sounds ideal, yet of course hypothetical, at the same time. Financial troubles often come with ringing warning bells. Spotting them early with a proactive approach will always minimize repercussions later.
Lack of a planned budget: Ask yourself, have you ever ordered food in a fancy restaurant without looking at the menu? “No, never, why would I?” must be your top answer.
This is exactly why you need to plan a monthly budget wisely. Budgets are like gate keepers; they keep hold of your spending and navigate your financials accordingly. It is a way of seeing forward by staying in the present. It is wise to plan in advance so you have a better idea of how much you need to spend and how much to save up. Start by making a priority list. Identify the regular and irregular, or emergency expenses. That way, eventually, you will be able to eliminate financial worries later on.
Relying on Pay day Loans: A financial nightmare takes root the moment you start relying on pay day loans for your payments.
These short-term loans may help you in your desperate times, but they always come with a major catch. With higher interest rates, these loans will create hurdles for you in the future. Opting for loans from banks or using credit cards, is a much safer way to counter financial needs in the longer run.
Little to no emergency savings: Save for a rainy day! This is the first thing every parent teaches a child when teaching money value. If you listened, good for you; if you didn’t, pity.
You are on the road to financial disaster, if you are out of your emergency savings or worst, you have no savings at all. Emergencies don’t come with signboards. Remember that! One can’t simply ignore the costs for medical or automobile troubles when they come. Borrowing loans will only be a burden with added costs of interests. Saving up for them should be the first priority in life.
Not only that, make sure you are saving up for your retirement too.
Routine expenses via Credit card: Frequent use of credit card for day-to-day expenses is not any ideal way if you want to avoid financial bumps. It will ultimately result in higher interest rates which you obviously must be aware of, causing you to fall behind on money for the future when you need it.
Making Minimum Payments: It may seem at times that paying minimum payments is no payments at all. But don’t stop. Making small payments will save you from collection companies suffocating you with phones calls and bankrupting you. Don’t rely on what the bill statement says; try to pay as much as you can, when you can.
The bottom line
If reading this article made you think harder about your financial situation, then surely you need to start making wiser choices. It would be advisable to sit down and start visualizing your options to cut down on the unnecessary baggage and save more money.
