by admin | Bankruptcy, Consumer Proposal, Uncategorized
Q: What about my income tax debt?
A: Personal income tax debt is just like any other unsecured debt. Once you’ve filed for bankruptcy or submitted a consumer proposal, Canada Revenue Agency (CRA) can’t take any further action against you, including wage garnishment or freezing your assets. Your trustee will notify CRA once you file, and instruct it to stop any further action against you to collect your debt.
Q: I used to be able to meet my obligations, but my income has dropped. What can I do?
A: An income reduction because of a job change or job loss isn’t unusual. If you fall behind on your debt repayment and your creditors are threatening to put you into collections, you may want to consider filing a proposal, which would allow you to reduce your payments. If you don’t have enough income to consider a proposal, you may have to consider filing an assignment in bankruptcy.
Q: If I have to file, what assets will I lose? And what will I keep?
A: A consumer proposal doesn’t have any effect on your assets, unless you choose to liquidate them to fund the proposal. Check out our “What We Do” page for a list of those assets that are exempt under provincial law should you file for bankruptcy. In many cases, you can make arrangements to allow you to keep even those assets that might normally be sold. Q: What’s a credit score? A: A credit score is a number value assigned by credit bureaus to represent your credit record. It’s kind of a shorthand way of summing up how you’ve handled credit and debt repayment in the past.
Q: What happens to my credit score if I file a proposal or for bankruptcy?
A: Your credit score is affected whenever you don’t pay your bills on time, even if you haven’t filed a proposal or for bankruptcy. When a credit bureau is notified of a proposal, they will drop your score to “bad debt,” which is the same rating you would get if your debt went to a collections agency, until the proposal period is over, which can be up to five years. It’s called “R9.” After that, it becomes an “R7,” which means you are making regular payments through a special arrangement to settle your debts. After three years, the R7 is taken off your file. In bankruptcy, your credit score goes to R9 for the nine months it takes for your bankruptcy to be discharged (assuming it’s your first time), and stays that way for seven years or more afterwards.
Q: Will closing unused credit card accounts help my credit score?
A: Closing unused credit card accounts can actually hurt your score, either by making your credit history appear younger than it is, or by reducing the total credit available to you, which can affect your debt utilization ratio very badly. Your debt utilization ratio is the total amount of credit you have available (add up all the credit limits on your cards and lines of credit) compared to the total amount of debt (add up all your balances). As a general rule, you never want your debt utilization ratio to go higher than 20% (or a one to five ratio of balance carried to limit available). Closing an unused credit card account has a bad effect on your debt utilization ratio if you are carrying a lot of debt on your other cards.
by admin | Uncategorized
What are my options when dealing with my creditors? A: You can try to get a consolidation loan to pay off your creditors while lowering your monthly payment (and often your interest rate too). A bad credit history or the inability to meet the loan payments may mean this isn’t an option for you. In that case, the next step may be to try to negotiate a settlement or new payment terms with your creditors. This option is more successful when you have only a few creditors. It’s more difficult to get many creditors to agree to payment terms that are favourable to you. A more practical option may be to submit a consumer proposal with the help of a GTA Credit consultant. Our consultant will help determine how much you can afford to pay and what payment may be acceptable to your creditors. As a last resort, you may have to consider getting a trustee to help you file for personal bankruptcy.
Q: What’s the difference between personal bankruptcy and a consumer proposal?
A: Basically, with a consumer proposal you get to keep your assets and you will still pay off (at least a percentage of) your debts. The terms of the proposal may last as long as five years, at which time you will be legally released from your unsecured debts. In Ontario, a consumer proposal stays on your credit history for three years. In personal bankruptcy, you may be able to keep some of your assets; those that are not exempt under law will be sold and any proceeds distributed among your creditors. Once all the conditions of your bankruptcy have been met, you are then legally released from your unsecured debts. A first bankruptcy with no unique issues or surplus income takes nine months; it stays on your credit history for seven years or more. Each consumer proposal and bankruptcy is unique, so talk to your trustee about your particular situation.
Q: If I declare bankruptcy or submit a consumer proposal, do I get to keep my cell phone, internet service and things like that?
A: Yes, as long as you are current with your payments.
Q: Will declaring bankruptcy affect my ability to sponsor my family for immigration?
A: The sponsorship application does ask if you are bankrupt, since you are stating that you will be financially responsible for your family. Filing a consumer proposal is a better option in this case.
Q: If I am bankrupt or have filed a consumer proposal, can I still rent an apartment?
A: Yes. Q: Will declaring bankruptcy get rid of my student loans?
A: There is specific legislation that deals with student loans in a bankruptcy. Ask your GTA consultant about the particulars of your situation.
Q: How will filing bankruptcy or a consumer proposal affect my future employment?
A: Sometimes, a job application will ask if you have ever filed for bankruptcy. They don’t usually ask about consumer proposals. In some professions, bankruptcy can mean a restricted licence.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
Q: I read on one of your other pages where you talk about “secured” and “unsecured” debts. What’s the difference? A: “Secured” debt is backed up by some kind of collateral, which reduces the risk for your lender. Your mortgage, for instance, is a secured debt because the value of the house itself means the lender’s risk is minimized. To oversimplify things a bit, if you fail to pay the loan, the lender takes the house, and they lose nothing. A credit card is an example of “unsecured” debt. There is no “lien” on your property; that is, the lender has no right to take your property if you don’t meet your repayment obligations. Secured debt usually carries a lower interest rate because of the lesser risk for the lender.
Q: Harassment from my creditors is ruining my life! How do I make them stop? A: When you file for bankruptcy or submit a consumer proposal, your creditors are prohibited from contacting you.
Q: My wages have been garnisheed! What can I do about it? A: When you file for bankruptcy or submit a consumer proposal, any further garnishment stops too. It’s part of the “stay of proceedings.
Q: My credit is pretty bad. Can I still get a bank loan? A: If you already know your credit is bad, you shouldn’t even apply. Just applying can make your credit score even worse. Let us help you fix your credit first.
Q: If I come to see you, what are you going to be looking at? A: We’ll look at your assets and liabilities, and figure out your net worth, even if it’s negative. In other words, we’ll take what you own and subtract what you owe. We’ll take what’s coming in and subtract what’s going out. And that way we’ll have a clear picture of your situation. We’ll check out your credit report, too. Then we’ll get you set up with a monthly budget to get you started on the right track. Remember, a trustee represents your creditors, but we work for you!
by admin | Bankruptcy, Credit Counseling, Uncategorized
If you’ve ever been late or defaulted on a payment, you may have found yourself at the mercy of a collection agency — and you know how awful it feels.
Basically, if you fail to pay a lender, that lender may sell your debt to a third-party collection agency. They then use whatever tactics are at their disposal to get you to pay them.
A collection agency’s first move, by law, is to send you written notice through the mail (not by email) advising you of the name of the creditor to whom you supposedly owe money, the amount they say you owe, and the name of the agency and its authority to demand payment.
Just six days after sending the notice, you may find yourself on the receiving end of harassing calls or additional letters, and just trying to avoid them can make you dread opening the mail or answering the phone. The law allows collection agencies to send letters without restriction, and to contact you up to three times in seven days. (Contact means that they speak to you, leave a message, or send an email.)
If you think the agency is in error, advise them by registered letter of the mistake or have your lawyer do so. They must then stop trying to contact you until the matter is resolved.
While they can be intimidating, there are some restrictions placed on them by government regulations. Collection agencies are prohibited from calling on Sundays, except between 1 p.m. and 5 p.m., or any other day between 9 p.m. and 7 a.m. They can’t contact you on stat holidays. The law also prohibits the use of threatening or profane language, as well as undue, excessive or unreasonable pressure.
While the agency can contact your employer once to find out your employment status, they cannot contact your employer again unless your employer has guaranteed the debt, they are making contact with regard to a court order or wage assignment given to a credit union, or you have provided them written consent to make such contact. They can’t contact your spouse or a member of your family or household, relatives, or neighbours except to get your address or phone number unless the person has guaranteed the debt or you have given your permission. They cannot give out false information about you, nor can they recommend to a creditor that they pursue legal action without notifying you first.
They are also prohibited from levying additional charges — they are allowed to attempt to collect only the amount of the original debt (although it may continue to accrue interest).
As unpleasant as those calls and letters can be, avoidance isn’t the answer. Once the debt goes to collections, it no longer belongs to the original lender, and you have little choice but to deal with the collections agency. Of course, the simplest solution is to pay the debt. Once the debt is paid, the harassment stops. If you can’t pay the entire debt, try to make arrangements to pay it off over time.
Failure to make arrangements could result in a negative report to the credit bureau or even legal action that could end up in court, in the seizure of your property, or a claim on your pay cheque.
If you think you’ve been mistreated by a collections agency, send them a letter telling them why and that you expect them to comply with the law. If the behaviour persists, file a complaint with Consumer Protection Ontario.
If you’re feeling the pressure of debt collection, contact a credit counsellor to find out your options.
by admin | Bankruptcy, Consumer Proposal, Uncategorized
At no point in history has credit been more readily available. It’s only a few decades ago that there was no such thing as credit card debt — if you wanted to drive a car, go on vacation, or buy a new shirt, you had to have enough cash. Now it seems like there are a dozen ways to get into serious debt, from don’t pay a cent events on furniture to zero-down car financing. If you find yourself in serious financial trouble, your credit counselor’s job is to help you sort through your options, but the best case scenario is to take steps to avoid getting in too deep in the first place.
Here are some tips to help you avoid debt.
Watch for the warning signs
Pay attention to signs that you’re in imminent danger of becoming a slave to your credit card debts. If you transfer balances from one card to another to keep from having to make a payment, make only minimum payments, are charging necessities like groceries or utilities, or have stopped even looking at your credit card statements, you may be in danger.
Stay away from cash advances
When you put a purchase on your credit card and don’t pay off the balance in full before the due date, you start to incur interest. When you use your credit card for a cash advance, you start paying interest the moment you take it. This usually extends to the cheques many financial institutions issue with their credit cards as well. Cash advances are a danger sign that can lead to a cycle of borrowing and repaying it can be difficult to escape.
Be prepared
Make it a priority to save up enough to see you through an emergency. Whether it’s a car repair or a major health crisis that prevents you from working, life’s twists and turns can lead to financial hardship when you have to use a credit card to bail yourself out. Experts recommend you have enough aside to take care of three months’ worth of expenses.
Avoid temptation
The more credit you have, the more you may be tempted. If you know you have trouble handling credit, help yourself stay out of trouble by limiting the number of cards you have, and their credit limits.
If you’re starting to suspect you’re in over your head, call a credit counselling professional and start taking the steps necessary to free yourself from the burden of debt.
by admin | Credit Counseling, Credit Repair, Uncategorized
Store credit cards can be useful — and they can also be a trap.
On the downside, they generally charge greater interest (sometimes far greater) than a non-store-specific card such Visa or American Express. They’re relatively easy to get, and a store will often entice prospective borrowers with promises of discounts — “Apply for credit today and take 15% off your purchase right now!” People who don’t handle credit well can end up with a card that doesn’t allow them to shop around for the best prices (because it can be used only at one store, or at a couple of stores owned by the same company) and if they can’t pay it off right away, they’re stuck with exorbitant interest charges.
If you’re good with credit, you may think it’s harmless to apply for every card that’s offered to you, just to get the discount on that day’s shopping. But not only will open accounts you don’t really use take a potential toll on your future credit (if you’re spread too thin with too much available credit — even if you don’t use it — you may have trouble obtaining credit you really want, like for a house or a car), but also every time you apply for credit, an inquiry appears on your credit history; too many inquiries in too short a period of time can also make it hard to get the credit you really want.
And let’s face it — there’s irony in forcing you to shop at their store while repaying your loyalty with higher interest. Doesn’t sound like a fair way to treat a good customer!
The upside is that because they are relatively easy to get, store cards can play a useful role in re-establishing credit for those who have declared bankruptcy or made a consumer proposal.
If you can stick to them, a few guidelines can help you get the most out of store cards without paying too high a price.
If you do decide to take advantage of discounts for applying, wait until you’re buying something substantial, like appliances or furniture, to make the potential impact on your credit worthwhile. If the store has special card-holder appreciation nights or similar promotions, take advantage of them too, but don’t let the card become an excuse to buy things you don’t need.
If you can’t pay off the balance before you start to accrue interest, consider transferring your balance to a card with a lower interest rate, or paying it off with a line of credit.
Remember that once the interest starts piling up, the cost can far outweigh the discount you wanted in the first place.
