by admin | Credit Counseling, Credit Repair, Uncategorized
Perhaps the best reason to protect your credit is that good credit will help you obtain a mortgage when it comes time to buy a house, and at the best possible interest rate.
If you’ve decided it’s time to get on the property ladder, you need to be realistic about your financial management abilities and your employment stability. Remember, too, that a home costs much more than its price tag: you must also factor in property taxes, condo fees, utilities, insurance, maintenance and repairs, and all the other costs of ownership — they quickly add up.
When you’re deciding how much home you can afford, first take a good look at your household expenses and your reliable income. As a general rule, your total housing costs for mortgage repayment, taxes, condo fees and utilities shouldn’t be more than about 30% of your gross (before tax) monthly income.
Ideally, you want to save for a down payment 20% or more of the price of the house you want. You can under some circumstances in Ontario obtain a mortgage for 95% of the value of the home, but you’ll have to pay insurance fees to Canada Mortgage and Housing Corporation (CMHC) that could cost you thousands.
Before you shop, visit potential lenders and get preapproved for a mortgage. Your lender will decide how much home they think you can afford. Canadian mortgage laws are pretty strict, but it’s still possible to become overextended. It’s in the bank’s best interest to loan you as much money as they can; since they have your house as collateral and you’ll pay thousands in interest before you even begin to pay off the principal amount, they can’t lose. Don’t give into the temptation to buy more home than you really need.
Remember you’ll also need to have several thousand dollars put aside for title searches, lawyer’s fees and the like.
It can be daunting, but real estate has a reputation for outperforming the stock market in the long haul, and it’s about the only investment you can use while it appreciates. If you own your home outright, it could be a substantial part of your retirement savings. This all makes owning a home one of the smartest financial moves you can make.
If your debt load is preventing you from owning a home of your own, there are steps you can take to pay off your debts faster. Call a qualified Credit Counsellor for help today.
by admin | Bankruptcy, Credit Counseling, Uncategorized
It’s an unfortunate truth that by the time most people admit their finances are in trouble, they’re already in deep. Learning to identify a few financial red flags in their earliest stages can help you stay on top of your debt.
If any answer yes to any of these questions, you may be headed for financial trouble. Stop spending, and make an appointment with a qualified Credit Counselor.
- Am I making only monthly payments on my unsecured debts?
If payments to your credit cards and lines of credit are consistently minimum-only, you are in danger of paying nearly the principal in interest before you pay off your debt. For instance, if you owe $10,000 at a rate of 16%, with an initial minimum payment of $200 and making only the required minimum monthly payment thereafter (remember that the minimum will go down as the balance goes down), it would take you 36 years and cost you an additional $18,659 in interest charges!
- Do I pay my bills late?
If you are habitually late in making payments, it’s a sign you’re mishandling your money. It will begin to reflect on your credit rating, and will accrue additional interest as well.
- Have I been turned down for credit?
If you’ve been denied a new loan or a credit card, it means the potential lender took a look at your credit history and your credit score, plus some additional factors like how much of your total available credit is currently in use, and decided you were a bad risk for timely repayment. If you’re overextended, it’s time to stop charging and start tackling your balances.
- Am I charging monthly expenses?
If you find yourself using credit to pay for groceries, gas, prescriptions or other necessities, it’s a sign your spending is outstripping your earning. The solutions are simple: make more or spend less. If you can’t pay your credit card bills in full each month, put them away and go cash-only.
Of course, the key to effectively managing money is as simple as living within your means. Stop spending, pay off your debts, set up some savings for emergencies, for big-ticket items, and for retirement, and you’ll be amazed at how quickly your nest egg grows. Call GTA today and let us help you stop trouble in its tracks.
by admin | Bankruptcy, Credit Counseling, Uncategorized
Are your debts making you sick? There’s a growing mountain of research that says it sure can. The journal Social Science and Medicine, for example, released a study that found individuals with higher debt had higher blood pressure, higher stress levels, and poorer general health — and this was in young people, aged 24 to 32. In a 2008 AP-AOL study at the height of the US mortgage crisis, those reporting high levels of debt stress suffered from stress-related illnesses including ulcers, migraines, back pain, anxiety, depression and even heart attacks.
Stress triggers the same fight-or-flight response that’s plagued humanoids since the beginning of time — the effects of reacting to a shrinking bank account can be the very same as being surprised by a saber-tooth tiger. Your heart races, stress chemicals like adrenaline and cortisol are released into your system, and you’re poised to take on the tiger or run like hell. But when it’s the bank account getting to you, tiger-slaying isn’t an option, and the stress can just build and build. Hearburn, headaches, and stomach knots are all common symptoms of a build-up of stress.
It’s a vicious cycle in the bedroom, too, where anxiety about debts keeps you up, and you can’t heal from the anxiety because you’re sleep-deprived. Your reaction times and creativity are affected, so you’re not performing as well through the day, which makes you worry and stay up at night.
But it’s not the amount of debt that can make your heart race, it’s weather you let it get to you
According to Stanford University researcher Kelly McGonigal, PhD, “Basically, it invades your home, your work, what you’re able to provide for your family, and your fantasies for the future. There are studies that show it’s not how much money you owe that predicts depression and health problems. It’s how much you worry about it.”
If your worries about money and the stress they create are starting to affect your health, here are some ways to cope better:
– Think about the worst-case scenario. This may sound counter-intuitive, but sticking your head in the sand or coping with drugs, alcohol, food, or other crutches are short-term “solutions” at best. Look down the road at the bigger picture and realize that there is no tiger at the door. Your life is not in jeopardy. Your kids are healthy. You are blessed to live in a great country. Even if you lose your house, you won’t end up on the street. You’ll still have your family. If you love your work or your hobby, even better. Concentrate on the positive.
– Write it out. Journalling can be a powerful coping mechanism for stress. Keep a little notebook handy and every time you find yourself stressing about money, jot down the worry, as well as any ideas for something you could do to help alleviate the worry, such as give up your Starbucks coffee in the morning or calling a friend to unload a little of your burden.
– Start doing better. Meet with a credit counsellor, set up a spending plan, and start behaving in a way that will help you get different results in the future.
Remember what Shakespeare said — nothing is either good or bad, but thinking makes it so. Yes, you should take steps to clear your debts and relieve the associated stress by eliminating the root cause, but in the meantime, learning to cope without stressing over things you’re not in a position to immediately change might even save your life.
by admin | Bankruptcy, Consumer Proposal, Credit Counseling, Uncategorized
On of the things that get many people in debt trouble and on the road to bankruptcy, especially self-employed people or small business owners, is non-payment of taxes. Income tax debt can pile up very fast because it never goes away unless you pay it all off (or most of it, under a consumer proposal) or it is discharged in bankruptcy.
The annoying part is that whereas other debts don’t come back unless you don’t learn your lesson and fall back into bad habits, income tax owning keeps accumulating as you work hard (literally!) to meet your proposal or bankruptcy obligations.
There are really three problems in dealing with income tax debt: getting up to date on income tax owing, straightening out your current income tax return and staying on top of future income tax payments.
In a bankruptcy, one of the bankruptcy trustee’s first tasks is to file an income tax return for the year prior to bankruptcy. The trustee must then file a return for the current year up to the time of bankruptcy. And then you must file a return for the remainder of the current year before the tax deadline in the coming year.
The past tax owing gets lumped in with all your other debts, under certain conditions, and it will be eliminated when you are discharged from bankruptcy. However, if income tax debt is your biggest debt (as is the case in most bankruptcies), it may not be automatically discharged when you emerge from bankruptcy (especially if it tops $200,000 or if it accounts for more than 75% of your debt).
However, there are other paths you can explore prior to filing for bankruptcy.
First and foremost is applying to the Canada Revenue Agency (CRA) for debt relief. The CRA may exempt payment of penalties or fines if the financial hardship was caused by extenuating circumstances such a physical duress (an accident or serious illness), emotional stress (such as that created by a death or divorce), natural or man-made disasters (such as floods or fires), or civil disturbances or disruptions of services (such as a lengthy postal strike or government shut-down).
Payment relief may also be available if the cause of the debt stress was related to CRA actions, such as processing delays or errors, not providing information in a timely manner to the individual or providing information later deemed erroneous, or undue delays in processing on the agency’s part.
And lastly, relief may also be granted if you can show an inability to pay due to loss of employment, if the interest penalties are a significant portion of the amount owed, or if repayment would result in considerable hardship to provide the basic necessities of life (food, shelter, medical help or transportation).
In the case of a small business, relief may also be granted if having to repay the outstanding amount might lead operations to cease, cause job losses or somehow influence the well-being of a community.
If relief cannot be had from the CRA, the next step to explore would be a consumer proposal. As in dealing with other debts, the trustee would file a proposal for repayment of a portion of the outstanding debt to the CRA, which may choose to accept the proposal.
If either of those avenues fails, then bankruptcy would be the final option. But remember, as you keep working under your new financial freedom, income tax keeps accruing, and if you’re not getting taxes deducted off a paycheque, then there is the chance you may not be able to pay off the accumulation at the end of each year and that would be considered new debt for which you are responsible.
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by admin | Bankruptcy, Credit Counseling, Uncategorized
Before you and your credit counsellor decide that bankruptcy is the right option for you, you need to know which of your debts will be erased following your discharge.
Unsecured debts
Unsecured debts are those obtained with no collateral, such as a house or a car the lender can seize and sell should you fail to repay the debt as agreed. It commonly includes credit cards and lines of credit. You can’t go out and buy a new motorcycle on your credit card, declare bankruptcy the next day and keep your new toy (which is likely to constitute fraud), but for the most part items that you purchase on a card or line of credit remain yours even after bankruptcy. Utility bills, medical bill, phone bills and taxes are other examples of unsecured debts. There are some exceptions —always fully disclose all of your debts to your prospective bankruptcy trustee to find out for sure what is eligible — but most unsecured debts are discharged in bankruptcy.
Secured debts
Secured debts are those on which the lender continues to hold some sort of title or lien that lets them seize and sell the asset to recover their money should you fail to repay as agreed. The biggest secured loan most people have is a mortgage on a home. Secured debts are not discharged in bankruptcy. Again, you should discuss the particulars of your individual case with a qualified professional, but in general negative equity (if the security is worth less than the outstanding balance of the loan) means that you can simply default on the debt and surrender the asset, while if you do have equity (if for example your home is worth more than the amount of your mortgage), the amount will be included in your bankruptcy estate to be divided among your creditors, and you may have to sell the asset.
Student loans
Discharge does erase your obligation to repay your student loans if it has been more than seven years since you stopped being a full-time student when you file for bankruptcy. If you’re cutting it close, make sure you check the federal or provincial legislation applicable to your loans to find out the official date on which you stopped being a full-time student. A court may decide to reduce this time period to five years if you can prove repaying the loan will cause you “undue hardship”; you’d have to apply for an early discharge of your student loan debts that may be granted if you have acted in good faith with regard to repayment and are experiencing financial difficulty that prevents you from repaying them. To determine good faith, a court will look at how you spent your student loan funds, whether you made efforts to complete the education for which you borrowed the funds, whether you’ve made sufficient effort to repay them, and whether you have first made use of any available government repayment assistance programs.
You should always discuss your finances honestly and completely with a qualified credit counsellor before making any decisions about declaring bankruptcy. There may be other solutions available
by admin | Consumer Proposal, Uncategorized
For many people, a consumer proposal as a solution to financial difficulties is preferable to declaring bankruptcy because it causes a little less damage to their credit scores and/or lets them keep their assets. It also lets people honor their debts by repaying them over time, but has the added benefit of generally requiring them to repay only a small percentage of what they actually owe.
You can file a consumer proposal that includes all your unsecured debts through a trustee. From the date your proposal is filed, you stop making payments on your debts directly to your creditors, and any actions in effect against you such as a garnishee of wages or a lawsuit also stop.
From the date of filing with the Office of the Superintendent of Bankruptcy (OSB), your creditors have 45 days to respond. If a majority of your creditors by dollar amount accept the terms (i.e. 50% of your debt, plus $1), the proposal is accepted and all creditors must abide by its terms.
If creditors totaling at least 25% of your debt request one, a meeting of creditors may be held within 21 days of filing. A Trustee office can also call a meeting if desired. Your creditors will then vote at the meeting. If a quorum of creditors fail to show, the proposal is accepted.
Most reasonable consumer proposals don’t require a meeting of creditors. Although it usually means only some part of the total debt will be repaid, creditors know that if they don’t accept a proposal, it could drive the debtor to bankruptcy, in which case they get nothing.
If your proposal is approved, you will then make agreed-upon payments through your trustee to your creditors over a period not longer than five years.
If you think you may be headed for financial trouble, talk to a qualified credit counsellor about your options as soon as possible. The sooner you act, the sooner you can put those troubles behind you.
