In the News: Woman Decides to File a Consumer Proposal to Conquer High Interest CitiFinancial Loan

When stuck in a financial rut, with credit that may be less than stellar, many Canadians choose to turn, often out of necessity, to the alternative lending market, or payday loan companies, to meet financial obligations. Donna Border is just one example of this - and her story has made it to the Huffington Post.

According to a recent article, Borden’s story was brought to light thanks to a lender’s predatory behaviours which seemingly took advantage of the single mom. According to the article, thanks to her credit history, “Borden couldn’t qualify for a line of credit from a bank, which typically charges less than 10 per cent interest. She was forced to turn to the alternative lending market, where lenders operate outside of regulated financial institutions. She settled for a 28.99 per cent interest rate.”

This eventually resulted in Borden paying $25,000 on a subprime, $10,000 loan, at which point she said enough was enough and decided to fight back. Read all about her story here: http://www.huffingtonpost.ca/2015/07/31/predatory-lending-canada_n_7898598.html.

Unfortunately, Borden’s situation is not uncommon. Lenders price to risk, and this means that once there is more risk, rates go through the roof. So what happens when your financial obligations become too tough to handle and you think a loan is the only way to regain control?

As Borden and the thousands of others like her have learned, borrowing your way into more debt and higher interest credit products until you pop is not the best way to deal with debt.

Strong initial signs that you are running into credit problems:

-          You are making only the minimum monthly payments to your credit cards

-          You are getting payday loans to avoid having your credit pulled and to make ends meet

-          You owe more debt than you could reasonable afford to pay in full within 4 years

Filing a consumer proposal is a viable option for dealing with debt now – you don’t have to wait until everything is in default and collectors are harassing and humiliating you. It also has the added benefit of halting any enforcement action that has already been levied against you, and puts a stop to sky high interest.

As the article notes, predatory lending will not go away. The government has regulations in place, but they don’t make interest illegal until it reaches 60% and payday loans can charge up to a 21% fee to borrow for only 2 weeks. As long as there are people who are vulnerable because they have had financial problems and have fewer options, these lenders will continue to gouge consumers who believe they have no other options.

Filing a consumer proposal is an important debt relief option to consider when it comes to getting a fresh financial start. If your credit is making it hard to find relief, and you find even paycheque to paycheque living has become difficult, a consumer proposal may just prove to be your best bet.

To find out more about how filing a consumer proposal can help you rebuild, call DebtCare Canada today at 1-888-890-0888.

What is a Canadian Bankruptcy Trustee’s Role in a Consumer Proposal?

A Canadian Bankruptcy Trustee’s role in a consumer proposal can be very confusing for consumers largely because of the advertising done by Canadian Bankruptcy Trustees. These Trustees advertise a way out of debt and offer to help you out of your financial problems, almost as though they represent you and your best interests through the process.

Full stop. This is not the case at all.

Trustees need you in order to stay in business. No bankruptcies and consumer proposals = no need for the Trustee. In fact, while in a bankruptcy they are bound by pre-defined tariffs, in a consumer proposal they are compensated based on the amount of the consumer proposal. Bigger proposal = more fees for them. While they advertise the benefits of a bankruptcy or proposal and are the only ones who can administer one, they in no way represent you.

In order to be able to understand their role in the consumer proposal process, let’s look at what the duties of a Canadian Bankruptcy Trustee actually are.

Consumer proposals and bankruptcies are both very powerful tools you can deploy to put a stop to debt that has become unmanageable. Because the process to file both is legislated under the Bankruptcy and Insolvency Act (BIA), both must be administered by a Trustee appointed by the Superintendent of Bankruptcy. This Trustee is the Bankruptcy Trustee. Their role is to ensure that a consumer proposal or bankruptcy is administered fairly and in accordance with the BIA – to the benefit of you AND your creditors.

When you meet the Trustee in Bankruptcy you may see no harm in divulging personal information to them because you feel that you are with your representative. However, that information may be considered in whatever proposal scenario they put forward. Once you disclose information to the Bankruptcy Trustee, this information can now be relayed to your creditors.

Going to a Trustee in Bankruptcy directly would be the same as being charged with a crime and meeting with the prosecutor without a lawyer. Prior to making contact with a Trustee you should sit down with a trusted financial advisor who has experience with insolvency to work through different financial scenarios – one of which may be a proposal. Because this individual is your representative, you are able to openly discuss all of the issues and then they can advise you on which options are relevant to bring forward.

Earlier in the blog we mentioned that the Bankruptcy Trustee is the only professional who can administer a bankruptcy or consumer proposal, and this is true, but it is never wise to meet with one without your own representation.

Protect yourself and your financial assets - contact DebtCare before you go to a Trustee. Call us today at 1-888-890-0888.  

Myth vs Fact: Consumer Proposal vs Bankruptcy

Consumer proposals and bankruptcy are often confused with one another because they both involve a Trustee in Bankruptcy. In Canada, the government introduced legislation to protect people who have reached a breaking point with their debt. Over time that legislation has been amended and re-worked to simplify processes and to make the process fair for both creditors and those who owe money.

The Superintendent of Bankruptcy is an entity of Industry Canada, and is the individual who administers the Bankruptcy and Insolvency Act through appointed officers. These officers are Trustees in Bankruptcy. The Trustee in Bankruptcy’s role is to administer a consumer proposal or bankruptcy on behalf of the creditors and the people who owe money.

A bankruptcy and a consumer proposal are both powerful in that, once filed, all collection and enforcement action being made by unsecured creditors stops, interest stops, and in many cases the overall amount of debt is reduced.

That being said, a consumer proposal bears less strings than bankruptcy and should always be considered as option number 1 - bankruptcy is generally a last resort measure.

In a consumer proposal, a proposal is made to your creditors – basically you are offering them a sum of money to be repaid through the Trustee over a term of, typically, 5 years.

·         Your creditors have a specified amount of time to accept or reject the proposal.

·         If no one responds, the proposal is accepted.

·         If the majority creditor(s) accepts, the proposal is accepted.

·         If a proposal is accepted you make a single monthly payment to the Trustee for the term proposed. You can pay off the proposal at any time. You have no ongoing income reporting requirements to your Trustee.

In a bankruptcy your creditors don’t get a choice to accept or reject.

·         You make a monthly payment to the Trustee in Bankruptcy over 9 or 21 months in a first time bankruptcy, depending on your income. There are maximum income thresholds set out and if your income exceeds those thresholds the term of your bankruptcy payment extends from 9 to 21 months.

·         During your bankruptcy you have to report your income and any changes to your financial circumstances to the Trustee.

·         If you come into any significant sums of money you may have to pay surplus income to the Trustee.

A consumer proposal is removed from your credit report 3 years from the date it is paid in full. A bankruptcy remains for 6 years from the date of discharge.

Since the Trustee doesn’t represent you, going to one directly is never recommended. Any financial information you divulge can’t be taken back. Prior to meeting a Trustee you are best served to work with a financial representative who specializes in bankruptcy and consumer proposals – one who will represent you – to review and help you structure your financial information to be presented to a Trustee. Some may even help you negotiate the terms of your proposal or bankruptcy with the Trustee.

Both of these options are viable when it comes to debt relief - just make sure that you are not putting your financial affairs at risk by attending a Trustee before seeking real help.

For more information or to protect yourself before going to a Trustee, please call DebtCare Canada today at 1-888-890-0888. 

Step into Spring with a Smile: Realistic Ways to Get Rid of Credit Card Debt

Is your credit card debt making it hard to get to sleep at night? Are you finding it hard to focus on daily tasks because of the stress? Are collection agencies calling you or your family members in an attempt to obtain what you owe? Are you avoiding opening bills that you know you can’t pay?

If you answered yes to any of these questions, don’t worry, you are not alone. Thousands of Canadians struggle with this financial problem on a regular basis. The ease with which credit companies extend credit and the high interest rates have made credit card debt a national problem, one that continues to plague the average Canadian no matter their income or financial status.

Does this mean that you have to continue to struggle to make those monthly payments or combat the stress? No – there are ways to get rid of credit card debt and stop the calls and finally get a good night’s sleep.

• Firstly, stop using those cards. Right now! Remove the cards from your wallet to help resist the temptation.

• Secondly, assess your debt. Make a list of the credit cards, the amounts you owe, and the monthly payments. Follow this up with a monthly budget, including everything you spend money on and all income. Once you’ve done this, establish what expenditures can be cut – and cut them.

• Attack your debt. Once you’ve cut your spending, start applying that extra income to your current debt load. Make sure that you are making at least the monthly minimum payment on each card, and apply any additional savings to the balances owed.

If this doesn’t seem like a realistic approach for the amount of debt you are currently carrying, or if making minimum payments has become almost impossible, some more serious methods may need to be considered. If this is your current situation, our best advice is to speak with an experienced debt specialist right away. Getting rid of your credit card debt might mean a debt consolidation, consumer proposal or bankruptcy – all of which are complex and come with a number of great benefits.

Stop ignoring those phone calls and throwing away those bills. Deal with your credit card debt and eliminate that stress.

For more about getting rid of credit card debt that seems to be holding you back please call DebtCare Canada today at 1-888-890-0888.

Ontario Consumer Proposal – The Ins and Outs

With Canadian consumer debt levels continuing to climb, year after year, it is no surprise that many Canadians are turning to alternative repayment methods in an effort to get out of debt. However, some organizations have taken advantage of individuals without a full understanding of debt, and offer solutions that are less than acceptable.

 

We strive to help individuals with debt problems with honest and realistic options that can eliminate financial stress. In this blog, we attempt to answer some of the most common questions regarding one of these very popular methods - consumer proposals - and provide you with some important information to help you make an informed decision.

Firstly, what is a consumer proposal exactly? A consumer proposal is a legally binding arrangement negotiated between you and your creditors (though an administrator – a licenced bankruptcy trustee) which arranges for a partial repayment of your total unsecured debt. Essentially you promise to repay a portion of your debt, and your creditors will forgive the remaining amount.

What does this mean? After meeting with a consumer proposal administrator and filling out the required forms, a proposal will be presented to all of your creditors (you can’t pick and choose here), who then have to respond and accept the agreement. If more than 50% reject it, you have to amend or adjust and refile. Once the proposal is accepted, you are required to pay a monthly payment to your administrator, who then pays your creditors.

There are a number of substantial benefits of filing a consumer proposal:

1.      Most wage garnishments will immediately stop.

2.      Interest stops accumulating on your current debt from the date you file.

3.      Collection agencies and creditors can’t contact you for payment – it is against the law!

4.      Your home or other assets are protected – creditors can’t touch them.

5.      You are only required to pay back a portion of your debt.

The downside: a consumer proposal does not include secured debts, such as a mortgage – only unsecured debts are covered. Furthermore, once you have filed a consumer proposal, your credit rating is going to be impacted. That being said, if you are in the position that makes a consumer proposal a valuable debt relief option, your credit has likely already been compromised. Consumer proposals typically mean an R rating on your credit report – but in many cases the benefits far outweigh the negatives.

If you are in over your head and are looking for a debt relief option, a consumer proposal can be a very advantageous strategy. They are complex though, and can’t be conducted by anyone but a licenced bankruptcy trustee, and so seeking some assistance is essential. Bear in mind however that it may not be advisable to go directly to a trustee since he by law acts for the creditors as well as the debtor, and his fee is a percentage of the debt being repaid. Accordingly, there is an incentive for the trustee to maximize the amount being paid to the creditors in the proposal. An independent advisor, such as DebtCare Canada, acting in your interests only, can help you to structure your proposal before approaching a trustee.

Want some more information about the ins and outs of a consumer proposal, or any other realistic debt relief method? Call DebtCare Canada today – we can help you out: 1-888-890-0888.

Self Employed? Is a CRA Garnishment Going to Your Clients?

Anyone who is self-employed knows the many challenges that come with owning a business – and one of the greatest is dealing with the many complexities that come with the intricate tax process in Canada. Because of these complexities, many self-employed individuals find themselves owing money to the Canada Revenue Agency (CRA), for numerous reasons, and if unable to pay, face strict enforcement actions as a result. One of the most common of these is a CRA garnishment of your receivables.

Here are some numerical facts when it comes to a CRA garnishment:

The CRA can garnish up to:

·        100% of subcontracted income

·        100% of other income like pension

·        100% of self-employed income

If you are self-employed, the CRA can send a notice to your clients to direct your receivables to the CRA. This can cause significant financial hardship and stress, as well as the negative impact it can have on your client relationships.

So, can you stop a CRA garnishment? It is difficult, but you do have options.

1.     You can try to get the CRA to agree to stop, but know that the chances of this happening are slim to none. As far as the CRA is concerned, you owe the money and their job is to retrieve it. Also important to remember, in the process of trying to cooperate, many who attempt to negotiate divulge information to the CRA that can cause even more problems; providing financial disclosure can prompt further enforcement action, a frozen bank account or a property lien for example. This option should be avoided at all costs!

2.     Consumer proposal. By entering into a consumer proposal you can immediately stop a garnishment – with the added benefits of stopping interest and likely reducing the size of your overall debt. However, there are a few caveats:

o   If you have other creditors they will be included in the proposal too.

o   If the CRA is your majority creditor, they have to agree to the proposal (if they don’t respond within 45 days they are deemed to have agreed).

o   If you own a home and the CRA has a lien on it, this greatly complicates things.

3.     Bankruptcy. Like a consumer proposal, this would immediately stop a garnishment, and is likely to stop interest and perhaps reduce the size of your overall debt. Things to keep in mind:

o   You have to report income and your financial circumstances to a trustee every month – if your financial situation improves you will have extra repayment added which has to be paid before you can get discharged.

o   Your payment to the trustee depends on your income and can change if there is an increase in income.

o   If you own a home and the CRA has a lien on it, this greatly complicates things.

If you are suffering from a CRA garnishment of your receivables, there are options to have the garnishment lifted while keeping yourself protected from further enforcement action. DebtCare has the tools and experience to help. Contact us today by calling 1-888-890-0888.

Will a Consumer Proposal Ruin my Credit?

Many of us have been there – finances are tight, and even making the minimum payments on your credit products has become difficult. Maybe you are opting to make payments on one card each month, or are continually increasing your available limit just to be able to keep your head above water. Whatever the situation, know that there are solutions, one of which is the consumer proposal.

Maybe you have already looked into this option but are asking yourself, ‘will a consumer proposal ruin my credit.’ Among the many things to be considered with this form of debt relief, the impacts are important. That being said, it definitely isn’t the only thing you should be thinking about.

The Process: The process is fairly straightforward. A consumer proposal must be conducted by a trustee in bankruptcy, but it is always smart to have your own representation – someone who can negotiate on your behalf and keep your best interests in mind. A proposal is drawn up that addresses your debt, and this is forwarded to your creditors. Once the majority of your creditors have approved the proposal (they have 45 days to accept or reject it), it is filed and you begin making monthly payments to a trustee, and that is then handed over to your creditors. Most proposals are made over five year terms, but can be paid off in full at any time.

The Benefits: There are many benefits of a consumer proposal. Firstly, it reduces your debt. Since you make a proposal to your creditors with an amount that matches your budget, this can mean a significant reduction in the overall amount that you owe. Secondly, it stops interest. Often, especially with regard to credit card debt, it is the interest that kills you, and so with a consumer proposal the interest is stopped and you can actually make significant payments of the principal, rather than the majority continuing to go to interest. Furthermore, a consumer proposal means a single monthly payment, rather than a bunch of payments on different days (again, a great deal of which goes directly to interest). 

The Impacts: Will a consumer proposal ruin my credit? Firstly, if you are considering a consumer proposal, your credit may not be in the best shape as it stands currently, and so before getting even further in over your head, it is best to gain control of your finances. The consumer proposal, like any credit activity, will show on your credit. It will remain on your report for 3 years following the date it is paid in full (so it is better to pay it off quickly).  Although it is not considered positive credit activity, you can actually start rebuilding your credit as soon as you enter into a consumer proposal.

If you are thinking about a consumer proposal but are worried about the impacts on your credit, please contact DebtCare Canada today for a free consultation:  1-888-890-0888.

Bankruptcy Trustee – Recognizing their Role

If you are drowning in debt and having trouble making even the minimum payment on any of your cards – or worse, not making them - it might be time to admit that you have a debt problem. Ignoring this problem will only end up making things worse, and so avoidance should never be an option. For many in this position the best solution is bankruptcy – but how does one know who to turn to when this is the case – who can you trust? It is very important when making this type of financial decision to understand the role of a bankruptcy trustee and the part they play in your financial future. 

What is a bankruptcy trustee? Bankruptcy is a legal process and must be handled by a licensed professional, a bankruptcy trustee. This is the individual who will administer your bankruptcy or consumer proposal and manage your assets held in trust. This individual can also provide advice and assistance to make sure both your rights and your creditor’s rights are protected. They are an objective party – their role is to remain impartial throughout the process, acting in both parties’ best interests.

A bankruptcy trustee has several jobs. The first main job is to repay your creditors – this is done by selling your assets. This includes negotiations with your creditors as far as settlements. A bankruptcy trustee may also provide debt counselling or put you in contact with an insolvency lawyer if deemed necessary.  During your bankruptcy, a bankruptcy trustee is the person who monitors your activities and ultimately decides when you can be discharged. For example, if your financial situation changes and your income now leaves room for surplus income, a bankruptcy trustee may determine that a longer term may be necessary before discharge.

Can you trust a bankruptcy trustee? The short answer is yes – they are licensed and regulated by the Superintendent of Bankruptcy, their actions monitored and any questionable behaviour is addressed. Their goal should ultimately be to help get you out of the financial pickle you are in – and most adhere to this. All of this being said, it is sometimes best to visit a professional debt solutions company first – that way you can be sure that all avenues have been examined before entering into bankruptcy, and if the end conclusion is to file, they can put you in touch with one that is trusted and respected.

For more information about bankruptcy and the role of a bankruptcy trustee, please contact DebtCare Canada today at 1-888-890-0888 or visit www.debtcare.ca. 

How Investment Advisors Can Better Protect Clients’ Portfolios in a Consumer Proposal

When we think about making investments there are so many products to choose from. Whole life insurance, segregated funds, TFSA’s, RIF’s, mutual funds and more… Financial and Investment advisors representing clients considering investments know that they are entrusting them to help them best gain a positive yield, balance risk and also consider their long term financial well-being. 

When the economy is great and times are good people are in the mood to invest. Sometimes though the economy can take a turn for the worse and aside from the fact that your clients may not be in the mood to invest for a while, they may find themselves in other financial trouble. 

While the Canadian economy performed well during the last recession it is a known fact that Canadian households are carrying significant debt, in excess of $40k per household, on average. When financial times are tough – someone loses a job, a divorce takes place, etc. - usually unsecured debt is the first thing to be sacrificed – it is easy to stop making payments on these in an effort to meet other financial responsibilities.  

This is one reason why it pays for financial advisors and financial planners to have a strong relationship with companies who are equipped to guide their clients through tough financial times. Most people don’t know that many investments are actually protected through a consumer proposal or bankruptcy. Consumer proposals are an excellent way to gain legal protection for a client who is having a serious financial problem and help them retain their assets, such as their home, vehicle and some investments including RRSPs.

The challenge is that some financial and investment advisors send their clients directly to bankruptcy trustees in these circumstance which can be a huge mistake. Trustees have an obligation to protect the interest of your clients’ creditors. In the case of consumer proposals the fee is earned based on the amount of the consumer proposal. The more that they secure for your clients’ creditors, the better.

When you work with a debt consultant, the debt consultant represents your client. This means that the client receives a safe review of their income and assets and can have things structured before seeing the trustee to sign on the dotted line. This enables your clients to have areas of concern identified and addressed before these issues can impact their ability to get protection.

We all want to ensure the best for our clients so just referring your client to any debt counsellor to help is not necessarily the right answer either. Like your industry, there are good advisors and bad ones. It is prudent to interview and forge a relationship with a debt consultant that you can trust to refer your clients to.

For more information about how you can better protect your clients’ portfolios please contact Michael Goldenberg, president of DebtCare at 416-907-2582 or visit www.debtcare.ca.

School for Debt Relief #2: Bankruptcy vs. Consumer Proposal

This week we are back in the classroom with the second blog in our school for debt relief series, this time to talk about the difference between a bankruptcy and a consumer proposal. These are two very popular forms of debt relief, but before you jump in it is best to fully understand each option. If you feel as though you are drowning in debt and don’t foresee a solution in the future, one of these options may be just what you need. 

 

In Canada, hundreds of people each year choose to deal with their debt through a bankruptcy or consumer proposal. That being said, the two are very different, so we’ve broken things down to help you better understand how these forms of debt relief can help.

Bankruptcy:

Bankruptcy is the legal process that discharges you from most of your debts. This may involve the distribution or selling of some of your assets to pay creditors, but this depends on your own individual situation. The first time you file for bankruptcy, if you do not have any surplus income, you can qualify to be discharged (meaning you have fulfilled your obligations) within 9 months. If there is surplus income, you can be discharged in 21 months. When you file you are required to report to your trustee on a monthly basis, make monthly payments and complete two credit counselling sessions. If, over the course of your bankruptcy, your financial situation changes to the point that surplus income exists, you will be required to pay additional monthly payments until your trustee is satisfied. Once you become discharged, your debts are gone and your obligations are over.

Things you need to know: once you file you can only be discharged by your trustee – it is up to their discretion to decide when obligations have been met. Additionally, attempting to obtain credit after you have filed (and after being discharged) can be significantly impacted. This is because you are now deemed high risk by creditors.

Consumer Proposal:

A consumer proposal is also a legal process which discharges you from your debts, but in a different way. In a consumer proposal, your creditors agree upon a repayment amount, usually significantly less than what you owe, and then you make monthly payments for a set number of months. This pays off only unsecured credit (credit cards, lines of credit, personal loans), but not secured debt (mortgage, car loans).  Once you have fulfilled your obligations (monthly payments), you are debt free and out of the consumer proposal. That being said, like a bankruptcy, a consumer proposal can impact your ability to secure credit in the future.

Both of these options are valuable if you find yourself struggling with debt. Each option has its pros and cons, and so speaking with a professional debt consultant is the best place to start.

For more information about debt relief and bankruptcy versus a consumer proposal please contact DebtCare Canada at 1-888-890-0888 or visit www.debtcare.ca. 

Mortgage Refinancing: A Viable Debt Solution?

Debt in Canada has become a major problem for many individuals. The ease with which credit is granted by many credit companies sometimes makes it tough to avoid temptation, but the aftereffects can be distressing, especially if it gets to the point that it is hard to keep up with or make payments. There are many debt solutions out there, one of the most popular being mortgage refinancing.  

What is mortgage refinancing? When you refinance your mortgage to consolidate debt you are essentially using your home equity to pay off debt. Many people choose to refinance their mortgages to pay off debt because mortgage financing offers flexibility and often you can get a far lower interest rate as well as the convenience of a much more manageable single monthly payment.

Over the past year there have been many changes to Canadian Mortgage and Housing Corporation (CMHC) rules, many of which make it tougher for homeowners to consolidate using mortgage refinancing. Previously CMHC would refinance as much as 95% of an individual’s home, and would offer lines of credit to do so. However, they no longer issue lines of credit to consolidate, and the amount has been lowered to 80%.

The banks have backed these changes. As a general rule, banks will only grant refinancing if your new mortgage will not exceed 75% of your home’s current value (some approve at an even lower percentage). That means that if your new mortgage plus your unsecured debt is more than 75% of the value of your home, approval is not likely.

CMHC insured mortgages are one of many mortgage options for refinancing your mortgage to pay off and consolidate debt. There are so many different types of companies outside of the banks who will compete for your business: credit unions, finance companies, trust companies, mortgage investment firms and even private individuals.

What if your credit isn’t great? If you have less than stellar credit it might be harder to obtain mortgage refinancing for debt consolidation through a bank. Banks and finance companies like to see that those they invest in are not a high risk, and if your credit is bad you may be too risky. With that said, if you have good equity many other lenders may be willing to extend financing to you. If you seek mortgage refinancing as a debt solution but are unable to find approval, an alternative solution might be a better option. Non-mortgage refinancing debt consolidation, a consumer proposal or bankruptcy might be better suited to your situation.

If you are thinking about mortgage refinancing as a possible debt solution, it is best to speak with an experienced debt consultant first, one who will assess you and present you with all of the financial options available to you, the pros and cons, and guide you to the best financial plan.   

For more information about mortgage refinancing please contact DebtCare Canada today by calling 1-800-890-0888.