by admin | Credit Counseling, Debt Management, Uncategorized
Mixing love and money matters may seem unromantic but finances can have polarizing effects on the most committed of couples.
Surveys reveal that money troubles are the leading cause of divorce. In 2014 a Harris/Decima poll found that, on average, more than four out of 10 marriages in Canada begin in debt of $21,500.
Hence, by talking about your financial matters with your other half early on may save you not only money troubles but, more importantly, it can keep your marriage or cohabitation on the right path.
The big question arises: are you doomed financially if you discover post-nuptial that your significant other is up to his or her neck in debt? While this unpleasant surprise may put your relationship on the rock, the good news is that you are not responsible for your other half’s pre-nuptial debts.
However, if during your marriage or cohabitation you open a joint account, assume a joint debt such as mortgage or co-sign a debt with your spouse or partner, add your spouse as an authorized user of your credit card or line of credit, you are responsible for the full debt amount.
A couple years ago, TD Canada Trust surveyed persons in committed relationships and found 79% of Canadian couples have joint finances with the top three personal finance products being a joint bank account (64%), a mortgage (60%) and a joint credit card (50%).
Although, joint finances may be convenient for day-to-day transactions of both partners and as a token of mutual trust, you need to be aware that Joint bank accounts lay open to debt collection, Judgments or garnishments, liens and divorce consequences.
It is also to be noted that a bad credit history of your partner and an existing debt will have an adverse effect on your mortgage or loan application when you decide to buy a house, car or any other assets jointly with your partner.
Money talk should not be taboo in a blossoming romance. Talk about your personal finance sooner than later. Create safety with financial responsibility leaving no blind spots that could wreak havoc to your relationships.
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, Debt Management, Uncategorized
Can the debt go away with the death of the debtor? Unfortunately, you can’t skip debt even when you are dead. After your death, your debt is not passed on to your family members until and unless there is some kind of legal documentation present. Your relatives will only be accountable for your debt if they were a joint debtor or a guarantor.
So, if a person who is self-employed dies without paying the complete installment, then that money is collected through the estate, if the individual’s family members haven’t intervened yet and made the necessary payment. However, here, we will talk about the future of other debts such as credit cards, mortgage, and insurance.
Car Loan and Mortgage
If the dying individual was married, then they might have signed up for mutual agreement mortgage. In this case, after the death of one of the spouse, the other spouse is lawfully responsible for paying off the rest of the mortgage. However, there are circumstances when the partner is incapable of paying the debt without the income of the dead spouse. In this case, if you have a proper insurance plan beforehand, it will protect your spouse and other family members who are involved.
If your partner is unable to pay that money, traditionally, lenders go after your property to get the complete payment of the debt. The loans and bills are paid with the remaining assets and the proceeds of the deceased’s estate go to the trustees. Moreover, the creditors are informed about the person’s death, and are provided with a copy of the death certificate for the closing of the accounts.
Credit Card Debt
After your death, all debts on credit cards issued under your name will be disregarded and the lending company will bear the loss. But, if the credit card is issued and co-signed with a spouse, then they are accountable for making the remaining payments. Additionally, make sure to add a clause in your will about the removal of your name from different accounts to avoid any deceitful activities.
Insurance
You don’t want to die and leave your family buried under a mountain of debts. For this purpose, a proper insurance plan is necessary. There is the option of credit card insurance, life insurance, and mortgage insurance available. However, you need to assess their pros and cons and then decide on which is the better option for you.
The distribution of the property cannot take place until and unless all the debts, loans, and bills are paid. After the payment, you can pass on the assets as mentioned in the will. However, if the funds are not enough, they are dismissed as long as there is no co-signer, guarantor, or joint creditor.
To get information regarding the debts you are supposed to pay and which are dismissible, you can get the help of the best counselor and make sure your family doesn’t suffer because of the debt you owe.
by admin | Credit Counseling, Debt Management, Uncategorized
As we get closer to tax time, many start to think about the tax breaks offered by a registered plan but many may be confused about what they are looking for, what with all the acronyms.
The two most notable are TFSA and RRSP. They aren’t the same, nor do they serve the same purpose.
The Tax-Free Savings Account (TFSA) is a flexible, registered, general-purpose savings account that earns tax-free interest. Canadians can contribute up to $5,500 annually into a TFSA and can withdraw the money in the account at any time. The money contributed to the TFSA is not tax exempt, though, as it is with an RRSP. The benefit of a TFSA is that you can save up for anything and collect interest that you can put toward whatever you decide to spend it on.
An RRSP is a retirement savings plan into which you or your spouse or common-law partner contributes to a set limit, dependent on your income for that year. RRSP contributions can be used to reduce the income tax you pay and the interest accrued is also sheltered from tax. You do, however, pay tax on the withdrawal at the time of withdrawal. The RRSP is a great retirement savings tool because you can contribute to it in your high-income earning years to reduce your tax owing, and then use the money as income in the future when your earnings may put you in a lower tax bracket.
RRSPs help you meet long-term financial objectives such as comfortably living in pension years, while TFSAs allow you to save for short to long-term goals.
Both allow you to top up what you may have missed putting away in previous years, but you have to be careful with a TFSA that you don’t over-contribute per year, which would incur fees. Say you contribute $5,500 on January 1 and take all of that money out by the time you receive your tax refund. You cannot simply put the refund back into your TFSA because you would overstep your contribution limit. You have to wait until the following January to add it along with the $5,500 for that new year (so, you could add $11,000 on January 15, for example).
With an RRSP, the government tells you what you can contribute for the following year based on what you earned that year. It also factors in what unused contributions have carried over. Say your allowed contribution is $5,500; you put $3,000 into your RRSP and on your tax assessment and the government tells you that you can contribute $6,000 next year PLUS the $2,500 carried over from the previous year for a total of $8,500. You can put your tax refund toward the following year’s contribution. Say that’s $1,000, which means you can contribute another $7,500 until the deadline for the next year’s contribution. Withdrawals from an RRSP are taxable, so you cannot simply replace the money you take out (with a few exceptions, such as using it as a down-payment on a house) without it going against your allowance for the tax year.
One last important thing: on death, the RRSP is counted as income on the deceased’s final income tax return and added to the estate. The other alternative is to roll it over into the RRSP of a spouse, common-law partner or dependent, where the transfer is tax free and continues to grow tax free until such time as the new owner cashes it in or forwards it along to dependents on passing away.
On death, the amount in the TFSA of the deceased is generally passed along to the spouse or common-law partner.
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by admin | Bankruptcy, Consumer Proposal, Debt Management, Uncategorized
You’ve filed for bankruptcy and are on your way to having your debts eliminated. Now what?
If you’re one of the 70,000 Canadians who file for bankruptcy every year, you go to work every day, submit your income statements to your trustee every month, and meet your payment obligations in order to be discharged from bankruptcy and move on with your life. However, you may be one of the 15 percent who file bankruptcy for a second time, or in the 1 percent who are doing it for a third time.
So how can you avoid multiple bankruptcies? Learn the lessons accorded by your first (and hopefully final) bankruptcy.
In bankruptcy (after you’ve liquidated your assets and filed your required forms and statements), you’re basically required to attend two credit counselling sessions, submit monthly income and expense statements to your trustee, and make income surplus payments (if applicable). You are not able to accrue more debt.
That last part is mostly taken care of, as most companies offering credit will not consider you until you have been discharged from bankruptcy. However, when applying for credit, you don’t have to reveal that you’re in bankruptcy if you’re applying for $500 or less, which could be taken advantage of by the bankrupt person’s shopping at various rent-to-own outlets or by merchants who are more interested in making a sale.
After bankruptcy, you can begin building up your credit profile again and 85 percent of people will learn from the experience, live within their means and accrue credit wisely. However, sometimes life gets in the way and people get downsized from their salaried positions, illnesses force the erosion of savings, or children need help with post-secondary educations.
As a means of avoiding a second bankruptcy, it may be beneficial to look at a consumer proposal instead. With the help of a trustee, a person makes a proposal to creditors and, if the consumer proposal is accepted, makes an established monthly payment for dispersal to said creditors. It takes longer to discharge than it might in a bankruptcy where the bankrupt person has to make surplus payments, but the payments may be smaller (allowing the person to live within their means over the course of repayment).
If you want to avoid both those alternatives (both of which can seriously affect your future borrowing needs), live on cash during your bankruptcy (you’re more reticent spending cash), stick to a budget, and find cheaper alternative products and services.
And most importantly, pay your taxes. Tax debt accrues very quickly (due to fines and penalties) and is one of the major reasons for bankruptcy filings.
by admin | Bankruptcy, Consumer Proposal, Debt Management, Uncategorized
Most of the 70,000 Canadians who file for bankruptcy each year do so honestly and carry through with their obligations during the bankruptcy in order to be discharged from it with a clean financial bill of health.
However, there are those who file for bankruptcy under fraudulent reasons, and those who commit fraud after the filing. To weed out those individuals, the Office of the Superintendent of Bankruptcy (OSB) carries out case investigations to ensure that creditors receive just payment for the bankrupt’s accrued debts.
The government lists several ways in which a bankrupt can be held accountable for misleading behaviour. The primary reason is the neglect to fully disclose property (which includes buildings, land and other assets, such as cars, business tools and artwork) or debts to the trustee in bankruptcy, or by making false statements to the trustee. Or, the bankrupt may have sold off property prior to the bankruptcy (usually to a relative or business partner, in order to shelter it from disposal during the bankruptcy), or following the filing (if it had been hidden from the trustee).
Another prime example of fraudulent behaviour is the acquisition of credit through misrepresentation. After filing for bankruptcy, the person turns over all credit cards to the trustee for cancellation and must notify potential creditors of the bankruptcy or past ones when attempting to obtain credit. Failing to do so constitutes fraud, but it should be noted that applications for credit less than $500 do not require the bankrupt to reveal the bankruptcy.
The person can also be found guilty of fraud leading up to the bankruptcy, if he/she acquired credit with the full knowledge of the inability to repay the amount borrowed, and/or demonstrated behaviour (such as living an extravagant lifestyle) indicating he/she might have been planning to file for bankruptcy.
The penalties for fraudulent behaviour in, or leading up to, a bankruptcy are considered on a case by case basis and are judged by criminal or civil courts. They are punishable according to the severity of the crime and the level of intent demonstrated by the individual in committing the offence. A person who obtains an exorbitant amount of credit in a short span of time, or by misleading creditors, and/or with the knowledge that he/she will be unable to repay the debts, may face jail time in addition to having to fully pay the debts they were seeking to have annulled.
Other offences, such as neglecting to fully disclose the history of accrued debt or filing false information, are usually punishable by conditional sentences, house arrests, community service, probationary sentences, making supplementary payments to the trustee and/or delaying the discharge from bankruptcy.
