A Consumer Proposal is a formal agreement between you and your creditors that is submitted on your behalf by a Licensed Insolvency Trustee (LIT). It includes an offer to your creditors to settle your debt for an amount that is normally less than the total amount owing. This can result in as much as a 80% debt saving. Most important, it allows you to retain assets, such as your car and your home. A Consumer Proposal allows you to get out of debt faster and easier, as compared to other debt relief solutions, and can be paid down quicker if you can do so.
A very common question is whether a Consumer Proposal or Bankruptcy can help with Provincial or Federal student loan debts. This depends on how old the student loan debt is. According to the Bankruptcy and Insolvency Act, you can eliminate student loan debt through bankruptcy or Consumer Proposal if your loans are more than seven years old from the date you finished at the post-secondary institution you attended.
Therefore, if you’ve been out of school for more than seven years and are struggling to pay down your debt, you could find relief by speaking with a Licensed Insolvency Trustee and reviewing your options.
If it has not been seven years since you completed your schooling, your student loan cannot be eliminated or settled in a Consumer Proposal or Bankruptcy. However, a Consumer Proposal or Bankruptcy can still provide legal protection for any student loan debt for the duration of either process. The federal and provincial government may also provide some hardship programs that we can further explore.
Keep in mind that while a Consumer Proposal or Bankruptcy will not specifically reduce or eliminate your student loan debt if this debt is less than seven years old, these processes provide legal protection, as mentioned above, and can help reduce or eliminate all of your other sizable debts (like credit cards with high interest rates), freeing up money in your monthly budget to cover the student loan repayment without further financial stress.
The good news? A Consumer Proposal does not ruin your credit rating forever. In fact, it puts you in a position where repairing your credit is very achievable.
After you have successfully completed your Consumer Proposal, there will be a note on your credit report at the credit bureau (TransUnion or Equifax) for three years. That three-year period will not prevent you from improving your credit score over time. One of the most important factors that is used to calculate a credit score is your payment history. Showing the credit bureaus that you can borrow money and successfully pay it back will improve your credit.
It makes sense to start small when it comes to credit rebuilding. After your Consumer Proposal has been completed, take out a small loan or apply for a credit card. You may wish to choose a secured credit card (where you put down a small deposit and the card issuer grants you a slightly larger credit limit) since this will likely be easier for you to obtain. Then it’s up to you to make responsible and regular payments on this card. Try to avoid a Prepaid Card as those cards do not report to the credit bureaus like a Secured Card would, and won’t help you in your rebuilding efforts.
It’s very important to be aware that rebuilding credit after a Consumer Proposal takes time. It is not an instantaneous process. Avoid companies that promise to be able to “fix” your credit rating quickly or automatically. Other than the correction of errors, no one can change the information that is listed in your credit report. The only way to repair bad credit is by having responsible and consistent credit behavior over time.
After a Consumer Proposal, you will need to show that you can borrow money responsibly. Showing this will allow you to rebuild your credit score.
You may have seen some of the Payday Loan companies scattered around your neighborhood. There are usually a few in every community and they are designed to make it easier for cash-strapped employees to borrow against their future pay cheques (another name for a Payday Loan is a cash advance). These are small, short-term unsecured loans that are tied to your pay cheque. The Pay Day Loan store advances you some funds against your next pay cheque. Once you get paid you go in and pay back the loan, as well as a chunk of interest.
The big problem with most Pay Day loans is they usually turn out to be anything but low-interest OR short-term. They are the loan of last resort (where we go when all other loan sources, such as banks, friends and family, have turned us down).
Once caught in the web of Pay Day loan repayments, a borrower will often find themselves heading to a second or a third Pay Day loan store to borrow funds to cover the growing debt on the first Pay Day loan – with often disastrous financial results.
Payday Loans are the worst form of revolving credit and are hopelessly unaffordable for most people. The best way to deal with a Pay Day loan is not to use one at all.
Luckily, there is hope thanks to the Bankruptcy and Insolvency Act. If you’re already caught up in a frustrating Pay Day loan cycle, a Licensed Insolvency Trustee can help you put a stop to the nightmare once and for all.
Getting a car loan in Canada while currently in (or coming out of) a Consumer Proposal is possible if you apply through certain reputable auto lenders, show your proof of Consumer Proposal documents and can ensure that your debt-to-income ratio is low (the amount of debt you hold versus your net monthly income).
There are lots of terrific car dealers across the country whose business models are designed around assisting people who are in a Consumer Proposal. And since financing or leasing an automobile is a secured debt, it’s a safe debt to take on (both for the lender, who could repossess the vehicle if you fail to make the required monthly payments on time, and for yourself since you will be able to start rebuilding your credit once the lender reports your on-time monthly payments to the credit bureaus), while in a Proposal or even in a Bankruptcy.
We would be happy to make some introductions to these great dealers and lenders in your area.
One of the most frequent questions a Trustee hears is “will I be able to buy a home one day?” or the alternative “will my bank renew my mortgage if I am in a Consumer Proposal?” Both excellent questions that deserve some explanation. Luckily, the news is positive on both.
For you to get the best deal on a mortgage either during a Consumer Proposal or afterwards you need to ensure a few things are done properly, including:
Pay down your Consumer Proposal quickly – it will be much easier for you to qualify for a brand-new mortgage and get that home you are eager to buy if you don’t still have Consumer Proposal payments on your monthly expense list. Pay it down faster than required (you can pay a proposal off early by speaking with your Administrator) and then go apply for that mortgage. Plus, without the Consumer Proposal payments you’ll probably qualify for a better mortgage rate, thereby saving yourself a lot of cash over the years in unnecessary interest payments.
Save towards a larger down payment – a lot of folks put down 5% and then qualify for a mortgage. By offering a much larger down payment (some lenders will be looking for at least 15% down, more likely 20% down) you can negotiate a better interest rate on the mortgage you are getting. And that means less money spent on interest and a faster pay-off time for the mortgage over the years.
Don’t just focus on the banks – consider alternative lenders as well — many alternative lenders will consider approving your application for a mortgage soon after your discharge, if your past debts are fully cleared, and you are starting to re-establish credit. If you’re looking to re-finance your existing mortgage, it’s even possible that you could use part of the funds to pay off the proposal
Try to make your credit rating as perfect as you possibly can. Your goal is to get your credit rating above 700. But the rating isn’t the only thing that’s important. Mortgage lenders want to see at least two significant “clean” credit facilities on your credit bureau. This includes major credit cards such as a Visa or MasterCard, as well as a car lease or loan, or sometimes even an RRSP loan (if it reports to the credit bureau). With your current “clean” credit cards, your balance should never exceed more than 30% of the limit.
Obtain some solid advice from a mortgage broker. Not only does a mortgage broker have a much better overview of all the options available to you, you will also get someone who will help you by looking at your credit and making specific recommendations for improving it, give you feedback on any other aspects of your financial picture that you need to give attention to, and provide you with a game plan for getting a great mortgage, both short- and long-term.
We would be happy to make some introductions to reputable mortgage brokers who provide excellent service.
The good news: Your home is safe. These assets remain your property. The lender usually takes some form of security such as a mortgage, to secure the amount you owe in the event you do not repay the loan. So, your home should be safe if your mortgage payments are up to date and you are current on your property taxes.
In most cases, you do not lose your assets when you file a Consumer Proposal if your offer is enough to satisfy your creditors. This means that, if you continue to make your payments, you will most likely be able to keep your home. Speaking with a Licensed Insolvency Trustee can clarify this for your situation. However, a Consumer Proposal does not usually involve the loss of assets.
A mortgage lender cannot change the terms of your mortgage because you have filed a Consumer Proposal. The only way that a lender can foreclose on your home is if you have missed payments. As mentioned, if you continue to make your payments on time, you should have no problems.
In a Consumer Proposal situation, you typically make a payment to your trustee each month. The trustee then distributes this payment to your creditors. Having a standard monthly payment each month makes it easier to budget so you should be able to fit your mortgage payments and your proposal payments into your household budget.
It is important to note that a Consumer Proposal is filed to all unsecured creditors. Unsecured debts include credit card debt, personal loans, unsecured lines of credit, bank overdraft fees and other such debts. Secured loans such as automobile loans and mortgages are not included in a Consumer Proposal, unless these loans are burdensome and you wish to surrender the home or car. If this is your situation, we can explore the options with you.
If you need to renew your mortgage after filing a Consumer Proposal, you should generally not have an issue with doing so, dependent on whether you have made all your mortgage payments in the past and you can show the mortgage lender that you will be able to continue to make your payments in the future. However, a Consumer Proposal can make it more difficult to switch mortgage lenders. It can also make it more difficult to get a favorable interest rate when you do renew.
It’s important to remember that a Consumer Proposal remains on your credit record for three years after it is completed – some lenders will see this as a negative and either reject your renewal or ask for a higher interest rate during the time that Consumer Proposal remains on your credit report. It’s also important to remember that, since you were more than likely in a difficult financial situation before filing your Consumer Proposal, getting a favorable interest rate might have been difficult anyway. You may have to endure the short-term pain of a 1, 2 or 5-year higher interest renewal and then negotiate a much lower renewal interest rate the next time you apply to renew the mortgage. Short term pain = long term gain.
It can be more complicated to get a brand-new mortgage after filing a Consumer Proposal. This is because a Consumer Proposal negatively impacts your credit rating. However, depending on your circumstances, you may still be able to get a mortgage.
To increase the likelihood of getting a mortgage after a Consumer Proposal, here are a few guidelines to follow:
- Take steps to rebuild your credit. Rebuilding your credit rating after a Consumer Proposal is not only possible but pretty much mandatory if you hope to have usable credit again. The first step? Consider applying for a secured credit card and then using the card for small purchases. Paying the card off in full and on time each month can then help restore your credit (You will be required to take two financial counselling sessions as a part of the Consumer Proposal process. These sessions will provide you with guidance on how to restore your credit).
- Look for a shorter-term mortgage. Since the interest rate on the mortgage will likely be higher than you’d like, consider getting a one- or two-year mortgage term and then re-negotiating the interest charged when you renew the mortgage with your lender (and your credit is better than it was the first time around). This strategy will help you avoid paying higher rates for longer than necessary.
- Offer a much larger down payment. Saving money so you can slap down a larger down payment can help you get a better mortgage rate. Most mortgage lenders like to see a 20% down payment (or more).
- Be realistic about what you can afford – try and choose a property that is affordable, both in terms of physical upkeep and monthly payments (including mortgage, property taxes, utilities or maintenance fees, etc.). That may mean buying a small condominium unit to start, then moving up to a small home later, once your credit and ability to earn income improve.
By following these guidelines, you increase your chances of getting a mortgage, even if you have filed a Consumer Proposal.
Your credit rating isn’t damaged forever once you file a Consumer Proposal. This is a common misconception that is often reinforced by creditors and collection agencies, who are trying to scare you into paying them before you file the proposal.
There is most-certainly an impact on your credit rating, however. But if you are in a position where filing a Consumer Proposal makes financial sense for you, your credit has likely already been damaged by prior missed payments or late payments (though many people who file a Consumer Proposal have been successfully making small minimum payments for years before they file, and their credit scores appear quite robust). Ultimately, filing a Consumer Proposal and dealing with your rising debt load will help you in the long run. But it won’t happen overnight.
One of the best things about a Consumer Proposal is that, once filed, it puts you onto the right path and in position to start rebuilding your financial life. Rather than continuing the same minimum-payment dance that you’ve already been doing month after month, you will put that nasty debt behind you once and for all and be financially free to acquire new credit in a responsible manner.
One of the best ways to ensure you get on-track is to attend the two mandatory financial counselling sessions that are part of your Consumer Proposal process. These sessions teach you about money management as well as monthly budgeting and provide you with information that will help you manage your financial life going forward – one of the major components of the two sessions is a discussion of how you can rebuild your credit rating following the successful completion of the proposal.
When it comes to rebuilding your credit rating, it’s important to consider what actions are considered important by the credit bureaus (normally TransUnion and Equifax). One of the most important factors is your ability to repay your debts on time. This means that for you to dramatically improve your credit you will need to show your creditors (and ultimately the credit bureaus) that you are able to responsibly borrow money and pay it back as it becomes due.
However, you may find it difficult to acquire new credit if you have a low or poor credit rating. One solution to this problem is to apply for a secured credit card. This is a card that allows you to put down a small one-time payment that is then secured against the credit issued to you for the card by the lender. For example, if you put down $500, your credit card could have up to a $500 limit. You can then use this card for purchases in-person and online, such as groceries, gas or a hotel room or plane ticket. Paying the bill on this card as it becomes due will show credit bureaus and lenders that you are able to responsibly use credit, and this will help improve your credit report. They may even boost your credit level over time, as well as convert the secured card into a more traditional non-secured card once you’ve proven yourself a responsible borrower.
The best thing about a Consumer Proposal (aside from the financial freedom it grants you) is that it does not mean your credit rating is ruined forever. By taking the right steps, you can improve your credit and propel yourself back into a strong financial position.
When you file a Consumer Proposal, the two credit bureaus list your existing debt as “R9”. You will likely remain at this rating until you have completed the proposal. When you complete your Consumer Proposal and receive your Certificate of Full Performance from the Trustee, a note is placed on your credit report. This note remains there for three years. This rating indicates someone has made a special arrangement to pay their debts, such as a consolidation plan, debt management plan or Consumer Proposal and has successfully completed the process.
After the three-year waiting period, any mention of your past debts disappears completely from your credit report, as does any related information about the Consumer Proposal you had filed and completed. To any new creditor reviewing your report it will appear as if you never filed a Consumer Proposal at all. Best of all, any new debt acquired since the date the proposal was first filed (such as a secured credit card or a car loan) is the only debt displayed on your credit report at that point.
Consumer proposals come in all shapes and sizes, including the not uncommon “lump sum payment” variety. Many Consumer Proposals are based on a simple monthly payment format but some consumer debtors can offer a lump-sum proposal to their creditors, usually with the help of a family member or friend, by remortgaging an existing home, selling off a specific asset or cashing out an investment (such as a TFSA or a stock portfolio).
The advantages of a lump-sum proposal over a traditional Consumer Proposal include:
A lump sum proposal is only finalized once a simple majority of your creditors (by dollar value of debts owed) vote in agreement to accept the proposal. Once that acceptance is in place, the lump sum is paid by the consumer debtor and the proposal is successfully completed shortly afterwards.
Creditors will accept a lower repayment at the start of the payments, rather than having to wait up to a maximum of five years for monthly payments to accumulate and be distributed to them.
If you feel you have access to a large lump sum, either from a family member, by refinancing your home or by cashing out an investment account, then consider a lump-sum proposal over a traditional Consumer Proposal to speed up the entire process and get back on track faster financially.
For you to successfully complete your Consumer Proposal, your main duty and responsibility is to ensure that you make your proposal payments each month as agreed. These payments will be made directly to your trustee through a pre-authorized withdrawal from your bank account. The Trustee will then distribute the funds to your creditors once the accrual has reached a specific level. It is very important that you make these payments. If you run behind three payments without catching up, your proposal will be annulled. This means your creditors will be free to take legal action against you in order to collect the full amount of debt owing to them, plus accumulated interest from the date the proposal was first filed.
Missing a payment here or there is not a huge problem if you replace the payment as soon as possible by scheduling an additional pre-authorized withdrawal, dropping off a replacement cheque, a cash payment or a money order to the Trustee’s office as soon as you possibly can. Then it will be as if you never missed a payment.
The Consumer Proposals we see annulled are usually the result of job loss or a substantial drop in income (for example, a change of employment to a lower-paying job for a different employer or the need to go on long-term disability due to an injury at work). These types of scenarios can make it extremely difficult for a consumer debtor to keep the monthly payments current. And once three payments are missed, annulment is the next step.
Remember: If your Proposal does get annulled you can always opt to file for personal bankruptcy so there is another option available. Your Trustee can move quickly to prepare the bankruptcy paperwork, and have you come in to sign everything. Once filed with the government your court protection from your creditors would be back in place.
One of the major benefits of filing a Consumer Proposal, rather than a Bankruptcy, is the freedom you can achieve if you can pay if off earlier (a Proposal can be paid down at any time after acceptance by the Creditors and the Court). And unlike some of those expensive loans, a Consumer Proposal has another benefit – there are no penalty charges or interest. In fact, we encourage you to pay down a Consumer Proposal as quickly as possible, so you can receive your Certificate of Completion earlier and use it to improve your credit rating.
Unfortunately, Consumer Proposal payments to the Trustee are not tax-deductible, even though the process is overseen by a government agency, the Office of the Superintendent of Bankruptcy. It is always important to remember that when you make those proposal payments you are paying off a portion of the unsecured consumer debt you owe to your creditors. This is money you have already spent on goods and services. The major benefit of filing a Consumer Proposal is to obtain relief from the stress of having a large debt load and an end to any further interest being charged on your debts.
A Consumer Proposal formally settles almost all unsecured debt, such as credit cards, department store cards, unsecured lines of credit, bank overdraft fees, tax debt (CRA), student loan debt (but only if you have been out of school for at least seven years) and other unsecured debts such as payday loans and personal debts to individuals. Your Consumer Proposal must list all your unsecured creditors. Debts that are not part of your consumer proposal include: mortgages and automobile loans. In addition, child support payments, spousal support payments, court-ordered fines, government overpayments, student loans (that are less than seven years old) and some other debts cannot be included in a Consumer Proposal either. Your Licensed Insolvency Trustee or Proposal Administrator will review and provide you with this information before your documents are filed.
Most Consumer Proposals last from three to a maximum of five years (with 5 years being the norm). You generally make one monthly payment to your Licensed Insolvency Trustee, who disburses the funds to your creditors on your behalf. You have more flexibility in managing your monthly expenses, because the total amount you have agreed to can be paid out over a full five-year period. There are no additional payments other than those being offered under your Proposal. Once accepted, the Consumer Proposal is legally binding on all your creditors. In other types of debt settlements, you would normally need to negotiate a settlement with each creditor individually, and some may choose to opt out. In a Consumer Proposal, once a simple majority of positive votes by dollar value is achieved then all the other creditors are part of the settlement – even if they voted against the proposal during the 45-day voting period (which begins right after protection goes into effect). You are formally discharged from the balance of your debts owing once you make your final payment to the Licensed Insolvency Trustee. The Trustee then issues you a Certificate of Completion and notifies the credit bureaus that you have successfully completed your proposal duties.
To be eligible to file a Consumer Proposal you must be insolvent (i.e. unable to pay your debts as they become due), have a total debt load of less than $250,000 (excluding the mortgage on your principal residence), have a stable source of income (or a friend or family member who is prepared to underwrite the Proposal monthly payments on your behalf) and have no prior Proposal proceedings still active. If you are currently having difficulty meeting your debt repayments (for example, you miss monthly payments or are paying just the minimum payments on your credit cards), a Consumer Proposal may be a far better solution than some other options, such as a debt consolidation or credit counselling. You will normally end up paying your creditors less in a Consumer Proposal than under those other two options, and interest will stop the moment the proposal is filed with the Official Receiver (the Federal government).
If you choose to file a Consumer Proposal, the Licensed Insolvency Trustee (LIT) will determine what a fair offer to your creditors will be, based upon your financial situation. Often the amount to be offered in a settlement will be approximately 30% of what you currently owe all your creditors. You will then complete all required legal paper work; the Consumer Proposal will be filed with the Federal Regulator and your offer will be sent out to all your unsecured creditors by the Trustee’s staff.
Like a Consumer Proposal, this is a formal procedure overseen by the Licensed Insolvency Trustee (LIT) under the Bankruptcy and Insolvency Act (the BIA). This type of Proposal is available to businesses and individuals — there is no limit with respect to how much money is owed. As with a Consumer Proposal, in a Division I proposal, you work with a Licensed Insolvency Trustee to construct a fair offer to pay your creditors a percentage of what you owe them, payable over a specific timeframe. And just like a Consumer Proposal, all payments are made through the Insolvency Trustee, and the Trustee holds those funds in trust as they accrue and then uses them to pay each of your creditors.
Because a Consumer Proposal in Canada can only be submitted to your creditors by a Licensed Insolvency Trustee (also known as a LIT), a debt consolidation firm or credit counselor cannot file a Consumer Proposal for you nor can you file a Consumer Proposal on your own. Because the Bankruptcy and Insolvency Act states that only a Licensed Insolvency Trustee can file the proposal, the integrity of the system stands firm. Trustees are licensed through the Federal Government and understand both Provincial and Federal laws. They are required to perform a face-to-face Assessment with you and ensure all unsecured debts, all assets and all other pertinent information (including a detailed household income and expense report) is prepared and signed. This ensures the proposal is being filed properly so it is legally-binding on you and all your unsecured creditors once accepted by a simple majority of your creditors.
In order to be eligible to file a Consumer Proposal you must an insolvent person, be unable to pay your debts as they become due and have total debts of less than $250,000 (excluding the mortgage on your principal residence). You must also have a stable source of income, to ensure that you will be able to make the monthly proposal payments, and have no prior proposal proceedings still open.
You can withdraw an approved Consumer Proposal within the first 60 days of filing the proposal. Any other withdrawal must be completed before the 45th day. This is to preserve the ability to file another proposal. If the creditors are voting against the proposal and you are aware that you cannot meet the request for additional payment or if a meeting of creditors is scheduled and you know the proposal will be rejected you need to withdraw before the meeting. If you are seriously considering withdrawing your proposal, we strongly recommend you first speak to the Trustee that is handling your Consumer Proposal about the alternatives available to you (for example, the filing of a personal bankruptcy as an alternative way of dealing with your debt pressures).
Generally, most employers will not ask if you have filed either a bankruptcy or proposal. However, some industries, specifically the financial or insurance sectors, may require that you disclose this information. By choosing to file a Consumer Proposal, rather than a personal bankruptcy, you can then retain your professional credentials or license (as in the case of an insurance broker, a director of a corporation, a licensed real estate broker, lawyer etc.)
Your Consumer Proposal must be voted on by all unsecured creditors. Once registered with the Official Receiver, a Consumer Proposal is sent out to all your creditors and they have 45 days from the date of filing to vote. Most Consumer Proposals are accepted “as is” but a small percentage require an additional stipulation included (at the request of the creditor, for example CRA) or a slightly-larger settlement amount agreed to by the debtor. The rule of thumb is: The Consumer Proposal must be a better offer, dollar wise, than what the creditor would receive in a Bankruptcy. Once accepted by a simple majority of your unsecured creditors, all of them are bound by the terms of the Proposal agreement. This is the major difference (and sizeable advantage) of a Consumer Proposal as compared to an informal debt settlement, whereas a debt settlement is negotiated with each creditor individually (often a very tenuous process). Consumer Proposals are usually accepted if they are fair and reasonable. This is because creditors know that they will get significantly less money from you in a Bankruptcy scenario.
Are you borrowing from one credit card to pay the minimum monthly amount on another card? Constantly relying on your overdraft to cover monthly bills and debt repayment? Frustrated by the amount of interest being racked up on your line of credit or department store cards each month? Are you cashing your pay check at a cash money store? Then it’s probably time for you to speak with a Licensed Insolvency Trustee. We completely understand how difficult and stressful it can be to speak to a licensed professional about your debt woes. The good news? There are countless debt relief options for you to choose from, each tailored towards a different type of debt or situation. For many Canadians a Consumer Proposal is the ideal solution to their debt worries.
Your creditors will have 45 days to either accept or reject your proposal. Any creditor with a proven claim may accept or object to your proposal. This can be done either prior to or at the meeting of creditors, (if one is held). It can also be done within 45 days following the filing of your Consumer Proposal. A meeting of creditors will be called if one is requested by one or more creditors having at least 25% of the value of the proven claims filed with the Trustee. This request must be made within 45 days of the filing of your proposal. The OSB can also direct your Trustee to call a meeting of creditors at any time within this 45-day period. A meeting of creditors will be held within 21 days after being called by the Trustee. It’s rare for creditors to outright reject a reasonable Consumer Proposal. Some may wish an additional stipulation be added to the Proposal’s wording (as in the case of CRA) or request the debtor increase the settlement offer amount slightly to satisfy a specific creditor. There is almost always a way to obtain acceptance of the Consumer Proposal. And every Consumer Proposal drafted is unique in that it contains a specific list of assets and debts that no other Proposal will contain in just that same way.
Each month you will pay the Trustee an agreed-upon payment that is “locked in” once the Proposal is accepted by your creditors. No surprises. Missing a payment is discouraged but Trustees are aware that the intrusion of the real world tends to result in a missed payment now and again. If you replace the payment within a short period of time, your Proposal will continue unabated. The important thing to remember is the “three month rule”, which is known officially as a “deemed annulment”. This occurs when you miss a third payment over the course of the Proposal and don’t make up the payments in a timely manner.
Withdrawing or cancelling your Consumer Proposal is known as an annulment. The consequences of an annulled Consumer Proposal are severe. First, unlike other debt relief options that get cancelled, you will lose all the money that has been given to your creditors. All funds that have been paid will not be returned to you. After receiving notice of the annulled proposal, some, or all, of your creditors will eventually start contacting you again for repayment. If able to do so, you could try making your own informal offers with your creditors to settle each of your debts on your own (a difficult process at the best of times). Opportunities such as selling your assets to raise funds for debt repayment could be another way to eliminate or reduce a debt amount. Many consumer debtors who withdraw from a Proposal ultimately end up filing for Personal Bankruptcy protection from those same creditors to ease their debt pressures.
The good news is that your assets can be protected under a Consumer Proposal. Unlike a bankruptcy, where you could lose some of your assets depending on their value and the province that you live in, a Consumer Proposal allows you to keep what you own if the creditors agree to the amount you have committed to repay. This is particularly important if you own a vehicle, have RESPs for your children or have net equity in your home after selling costs and mortgage repayment. Money invested in an RRSP is generally protected from creditors with some exceptions (any funds contributed within the past 12-month period must be calculated into the value of your realizable assets in some provinces). Provincial government exemptions (which differ from province to province) allow you to protect various assets from seizure by your creditors.
A Consumer Proposal also puts a stop to any wage garnishment and unfreezes your frozen bank accounts. The process also ends civil legal action against you to collect on the debt. However, there are exceptions to this, most commonly wage garnishments and legal action that are a result of unpaid child support or spousal support. These debts cannot be eliminated by a Consumer Proposal and filing a proposal does not stop legal action or wage garnishment in these cases. There are some other debts (fraud, obtaining property or services by false pretenses, court ordered fines or penalties, for example), which may not be eliminated and may still be collectable during the Consumer Proposal. Aside from those debts, when you file a Consumer Proposal all wage garnishments and collection calls cease. This is called a Stay of Proceedings — it means you are protected from any creditors starting or continuing any legal proceedings to collect any debt owed to them.
The Canada Revenue Agency (CRA) can order your bank account frozen if you owe the agency money. If you owe your bank money (through a bank loan or a credit card supplied by the bank, for example) the bank can also freeze your bank account or seize funds from the account without warning if you are behind on your minimum monthly payments on your lines of credit, overdraft, bank loan or credit cards. When your bank account is frozen, you will be unable to withdraw any funds from the account. Instead, the CRA or your bank seizes the funds directly from your account in order to repay a portion, or all, of the debt that is owed. A Consumer Proposal unfreezes frozen bank accounts but cannot get back the funds already seized.
The only way to rebuild bad credit is to replace it with good credit over time. This can often be done by obtaining a secured credit card and using it regularly as well as paying it down each month. A secured credit card is a special type of credit card where you place a small deposit up front and this amount is used to secure the credit limit on the card. For example, some secured credit cards require an initial security deposit of $75 and then an annual fee to use the card. In exchange you are given anywhere from $200 to $2,000 of credit on the card to use as a way of helping you re-establish your credit worthiness. Using this card and repaying the outstanding balance in full each month helps rebuild your credit rating and your Beacon Score and demonstrates to other prospective creditors that you can use credit in a reliable, responsible manner and are a good credit risk.
Many people wonder about the impact of a Consumer Proposal on RRSP investments. A lot worry that they’ll lose the money they’ve worked so hard to contribute to their RRSPs when they file a Consumer Proposal. This is a valid concern. After all, your RRSP contributions are funds that you may have saved for many years to sustain you in your future retirement.
This money is vital to your future because you’ll need to live on it one day. When you file a Consumer Proposal, you generally do not have to give up any assets (or your monthly payment to creditors compensates them for the value of those assets, where applicable). This includes funds invested in an RRSP. Therefore, in most cases, the money in your RRSP will remain untouched when you file a Consumer Proposal.
Also, there are provincial and federal exemptions which may apply to your RRSPs and add an extra level of protection for some or all your contributions.
When you file a Consumer Proposal, you enter a legal process. The terms of your Proposal will detail the payments you are required to make as well as the term of the proposal. Once you have completed these payments and fulfilled all duties associated with your Consumer Proposal, you will receive a Certificate of Full Performance signed by your Licensed Insolvency Trustee. You will then forward a copy of this certificate to the two major credit bureaus (TransUnion and Equifax) in order to let them know that your proposal has been successfully completed. However the credit bureaus will likely also be notified by the Office of the Superintendent of Bankruptcy of your completion. It is recommended that you request a free copy of your credit report once per year to check its status and to ensure all your debts are designated as being resolved through the Proposal process. Sometimes errors can creep into a credit report – by monitoring the report yearly you can request a correction from the credit bureau and keep your credit score from dropping due to errors.
If your debts have become unmanageable and you realize you need to act to resolve them quickly, there are options available to you other than a Personal Bankruptcy. Filing a consumer proposal may be one of these options.
Speaking with a Licensed Insolvency Trustee can help you understand when to file a consumer proposal. The trustee will review your situation, and can explain how to file a consumer proposal, but the choice remains yours. If you decide that filing a consumer proposal in Ontario (or in whichever province you live) is the right option for you, the trustee will administer the process. Filing a consumer proposal can only be done through a Licensed Insolvency Trustee. Under the federal Bankruptcy and Insolvency Act, they are the only ones who can file a consumer proposal.
A Licensed Insolvency Trustee will thoroughly review your financial situation, assist you in obtaining relief from your unsecured creditors, and help you develop the skills you need to begin rebuilding your financial life. The result is a better, more financially-secure future. And, of course, peace of mind.
If you’re searching for “bankruptcy vs consumer proposal” know that both options are designed for people who are unable to pay their debts as they become due. Both consumer proposal and bankruptcy are administered by a Licensed Insolvency Trustee. In deciding between a bankruptcy or consumer proposal, it’s important to understand both processes first.
Consumer Proposal and Personal Bankruptcy are both legal processes that provide individuals with ways to eliminate their debt. Both processes are regulated under the Federal Bankruptcy and Insolvency Act. There is no “one size fits all” solution that works for everyone. Each person’s financial situation is unique and, because of this, different options work better in different scenarios. It is good idea to learn about the two processes in the planning stages and the best way is to do a free consultation with a Licensed Insolvency Trustee.
The Trustee will thoroughly review your situation and professionally advise you about benefits and drawbacks of debt settlement options available to you. It’s important to note that consumer proposal and bankruptcy are not the only two options available to those who are struggling with debt. A trustee can help you understand all your options. In the end, it’s not about bankruptcy or consumer proposal, it’s about finding the right option for you. Licensed Insolvency Trustees offer a free, one-hour no-obligation phone consultation to get started. During the meeting, the Trustee will look over the details of your financial situation (your debts, your income and your assets, as well as your monthly household budget) and then provide you with an analysis of your situation, highlighting the options available for your specific situation.
It’s important to remember that Licensed Insolvency Trustees are bound by a strict code of ethics (through CAIRP, a member organization of Licensed Insolvency Trustees across Canada) and are required to explain all possible solutions to you and answer any questions you might have. That means that by the time your meeting has concluded, you will have the information you need to make an informed decision about your financial future.
Two debt relief solutions that could be available to you are a Consumer Proposal or a Bankruptcy. While these are both legal processes, they are different in several key ways, which leads to many people searching for terms such as “bankruptcy versus consumer proposal” to figure out the differences. Understanding your own financial situation as well as the two processes can help you make this important decision.
For anyone dealing with crushing debt, harassing phone calls and letters from collection agencies or a wage garnishment, meeting with one of our Licensed Insolvency Trustees is the best way to ensure you have all the facts so you can make an informed decision about how best to deal with your debts.
A bankruptcy is a legal process in Canada legislated under the Bankruptcy and Insolvency Act (BIA) that is designed to give honest but misfortunate debtor a fresh start. A bankruptcy in Canada can only be filed with a Licensed Insolvency Trustee (LIT). This role was previously known as a “Bankruptcy Trustee.”
Bankruptcy law in Canada stipulates that there are two types of personal bankruptcy under the Bankruptcy and Insolvency Act:
- A Summary Administration; and
- An Ordinary Administration Bankruptcy
A summary administration applies to individuals or consumer bankruptcies when the realizable assets (the value of assets when sold) will not exceed $15,000. If you are wondering “which bankruptcy should I file,” know that an ordinary administration bankruptcy applies to both consumers or corporations. If an individual has assets that will exceed the projected realization of $15,000, they will be required to file an ordinary administration bankruptcy. Note that the term “bankruptcy chapter 11” is an American term, not a Canadian one. The rough equivalent to bankruptcy chapter 11 would be a Division 1 Proposal or a CCAA (Companies’ Creditors Arrangement Act) filing.
Pursuant to section 136 of the Bankruptcy and Insolvency Act, proceeds from the sale of assets (after payment to creditors holding the same asset as security) are distributed to repay creditors in the following order:
- Reasonable funeral and testamentary expenses in respect of a deceased bankrupt;
- Administration costs related to the bankruptcy estate such as the expenses and fees of the trustee;
- A levy on dividends paid to secured, preferred and unsecured creditors;
- Various types of unsecured but “preferred creditor” claims, including, certain employee claims, certain types of child and spousal support claims, some types of municipal taxes, claims by landlords, and certain claims for pre-bankruptcy execution fees and costs; and
- Unsecured creditors.
One of the most common questions that trustees are asked is “in a bankruptcy who pays?” This makes sense as you will want to know what your costs will be. The cost of personal bankruptcy in Canada will vary for each individual as it’s based on your monthly income, non-discretionary expenses, the size of your family unit and assets.
It’s best to book a free initial consultation with a Licensed Insolvency Trustee to go over your options and the costs involved. Some believe that a bankruptcy lawyer can assist in these situations, but in Canada, you will need to speak with a trustee. The trustee can help you understand the bankruptcy meaning, the process involved, and compare a consumer proposal vs bankruptcy.
People are often fearful that filing a bankruptcy or a consumer proposal will affect their spouse or common-law partner. When you file a bankruptcy, your debts are only your debts. In other words, your spouse or common-law partner is not responsible for them. However, if you have co-signed any loan agreements with your spouse or anyone else, for that matter, that person will then assume full responsibility for repaying the debt if you file for bankruptcy. Bankruptcy divorce debt, such as outstanding alimony or child support payments, is not discharged through the insolvency process.
One thing that many people want to know about bankruptcy is when to file for it. As you can see from the bankruptcy definition, the process is designed for those who are unable to repay their existing debts. Is this you? Are you borrowing money to make it from pay cheque to pay cheque? Do you find yourself taking cash advances from credit cards or only paying the minimum payments? Are you being constantly harassed by collection agencies or creditors for payment? Are your creditors threatening legal action, or worse, garnishing your wages? If you are struggling with your debt, these are some of the questions you need to ask yourself when considering when to file a bankruptcy.
A common question that people often ask is related to bankruptcy in Canada and how it works.
According to bankruptcy law Canada, there are certain duties and responsibilities on both you and the trustee upon filing bankruptcy.
- Once the paperwork has been signed, the Licensed Insolvency Trustee will submit the information to the Office of the Superintendent of Bankruptcy;
- Upon filing a bankruptcy there is an automatic stay of proceedings in place. In other words, the unsecured creditors cannot commence or continue any legal action or wage garnishment.
- Within 5 business days the trustee will notify all your creditors of the bankruptcy and provide the necessary paperwork and prescribed forms to submit a proof of claim;
- During the bankruptcy, there are duties that are imposed upon you to fulfill in order to receive a discharge:
- Attend a meeting of creditors, if a meeting has been requested;
- Attend an Official Receiver’s examination if requested;
- Attend two credit counselling sessions within a prescribed period;
- Report your income to the trustee each month while in bankruptcy and provide documentary proof of your income; and
- Make monthly payments to the trustee
- Subject to abiding by all duties under the Bankruptcy and Insolvency Act and providing that the trustee or creditors don’t oppose the discharge, you are eligible for a discharge:
- First time filing without surplus income in 9 months;
- Second time filing without surplus income in 24 months;
- First time filing with surplus income in 21 months; and
- Second time filing with surplus income in 36 months.
Keep in mind that only a Licensed Insolvency Trustee (LIT or trustee) can help you with filing a bankruptcy in Canada. The process is not handled by a bankruptcy lawyer in this country. If you are struggling with debt and looking for help, a trustee can conduct a free consultation with you. During this meeting, they will review your situation and provide you with information on consumer proposals, bankruptcies and other debt relief options. They will also answer whatever questions you have, such as explaining the details of a consumer proposal vs bankruptcy.
Upon filing a bankruptcy, a stay of proceedings is automatic. This means your unsecured creditors have no legal recourse against you. Your unsecured creditors cannot commence or continue with any legal proceeding, wage garnishment or contact you for payment.
With bankruptcy filing Canada (regardless of province), you surrender your assets to the trustee for the general benefit of your creditors. However, you do not lose everything when you file a bankruptcy.
There are bankruptcy exemptions that permit you to keep certain assets. In a bankruptcy, assets are considered exempt based on the rules set by the province you live in. For example, in Ontario the following assets are exempt from seizure:
- Personal effects (i.e. clothing for you and your family), there is no dollar limit;
- Household furniture and appliances up to the value of $14,180;
- Tools of trade up to the value of $14,405;
- One motor vehicle up to the value of $7,117;
- Equity in your home if the amount is less than $10,783;
- Most life insurance policies and pension plans are exempt;
- RRSPs, except for contributions in the 12 months before the date of bankruptcy; and
- For farmers, up to $31,379 for livestock, fowl, bees, books, tools and implements of the trade.
The bankruptcy process is designed to be rehabilitative rather than punitive. Therefore, each province and territory has its own exemptions to the bankruptcy law that outline which of your assets, and how much equity, you are allowed to retain.
In a bankruptcy, assets are important. Losing a car is a common concern for those considering filing a bankruptcy in Canada. All provinces have laws that exempt one vehicle up to a certain dollar amount from seizure by the trustee. For example, in Ontario, you can own a vehicle up to the value of $7,117 or less and its considered exempt. If, however, the vehicle exceeds the exemption amount, you may still be able to keep the vehicle. You could opt to buy back the non-exempt portion from the trustee during the period of bankruptcy. For example, if you owned a car with a value of $9,000, the non-exempt portion of the vehicle would be $1,883 (being the difference between the fair market value and the exemption amount). You could make monthly payments to the trustee during the bankruptcy to keep the vehicle. If you lease or finance a vehicle and file a bankruptcy, you can keep your vehicle if you are current and remain current on your car loan or lease payments. The leasing or financing company can, however, repossess your vehicle if you default on the agreed terms per the leasing or financing agreement.
For most people, this is their number one concern. Filing a bankruptcy doesn’t necessarily mean you will lose your home. There are many factors in determining how a home is handled in a bankruptcy. In general, if your home has little or no equity and your mortgage payments are up to date, you can keep your home. Many bankruptcy filing Canada cases result in people keeping their homes. As with other assets, there are rules on what you can keep and these rules vary by province. For instance, in Ontario, if the equity available in your home does not exceed $10,783 and you have kept up with your mortgage payments you can keep your home when you file a bankruptcy. If your home exceeds the provincial exemption, you may still be able to keep your home. You would need to make payment arrangements with the trustee to repay the equity in your home. You may also want to consider filing a consumer proposal or selling your home depending on your household budget and the equity that is available. There are several options, but the best approach would be to speak to a Licensed Insolvency Trustee to determine what’s best for you.
Depending on your financial situation, filing for bankruptcy may make sense for you. However, for many people, bankruptcy is not the only option. By meeting with a Trustee, you can understand all of the options that are available to you and make an informed choice for your unique situation. Contact Farber today to book a free debt relief consultation. This can help you become debt free and give you a chance to rebuild your financial life.
Before you can start a Bankruptcy, we have to investigate all the available options for debt relief. In order to do this, please schedule a free consultation. The initial consultation is free of charge. During this consultation, you will speak with one of our debt professionals. He or she will review your financial situation with you, and provide you with information on all debt relief options available to you.
Upon filing a bankruptcy, a stay of proceedings is automatic. This means your unsecured creditors have no legal recourse against you. Your unsecured creditors cannot commence or continue with any legal proceeding, wage garnishment or contact you for payment.
To file a bankruptcy, an individual must have resided or carried on business in Canada within the last year and must be insolvent. Insolvent means that you owe at least $1,000 and are not able to pay your debts in full as they become due.
In Canada, bankruptcies can only be filed through a Licensed Insolvency Trustee. There are various steps to filing bankruptcy and the first step would be to book a free initial consultation with a trustee. The trustee will review your financial situation, provide you with information on the options available to you, and help with bankruptcy if this is the process you choose.
If you are struggling with debt and can’t afford to pay your creditors back, it may be time to speak with a professional. For instance, when you file bankruptcy, medical bills and other unsecured debts can be eliminated. However, whether you should file bankruptcy in Ontario or whatever province you live in will depend on your specific financial situation. A Licensed Insolvency Trustee will assess your situation and provide you with options to help you to deal with your debt. Doing nothing and continuing to struggle with pay day loans, credit cards, etc. is not the best option. A free initial consultation with a Licensed Insolvency Trustee will provide you with better alternatives and give you some peace of mind.
Filing a bankruptcy is a legal process and cannot be done on your own. Bankruptcy can only be filed by a Licensed Insolvency Trustee under the Bankruptcy and Insolvency Act (BIA).
While filing a bankruptcy will eliminate most debts, student loans are subject to special treatment under the Bankruptcy and Insolvency Act. If you have been out of school for seven years or more, filing a bankruptcy will eliminate student loan debt. If, however you have attended school in the last seven years, filing a bankruptcy will not automatically discharge the debt. A Licensed Insolvency Trustee can explain all your options for dealing with student debt.
It is possible to file another bankruptcy, but you need to carefully consider the following implications beforehand:
- A second-time bankrupt is eligible for an automatic discharge and forgiveness of the debt (which means without a court hearing) in 24 months providing there is no surplus income or opposition;
- A second-time bankrupt with surplus income will be eligible for an automatic discharge and forgiveness of the debt (which means without a court hearing) in 36 months and providing there is no opposition;
- In rare instances, where a person needs to file a third bankruptcy – the bankrupt is not eligible for an automatic discharge. The trustee will need to apply to the Court for an application of discharge hearing;
- A second bankruptcy will remain on your credit report for 14 years; and
- Filing another bankruptcy can be very costly when surplus income applies.
If you are considering claiming bankruptcy for a second time, a Licensed Insolvency Trustee will explain the merits and consequences of filing a second or third bankruptcy and provide you with additional information regarding consumer proposals as an alternative to your financial situation.
Consequences of Filing for Bankruptcy
Although there are advantages to filing a bankruptcy, there are also negative consequences to filing. When you file a bankruptcy, credit card debt and other unsecured debts are eliminated, but not all debts are dischargeable in a bankruptcy. This includes child support, alimony, fines and some student loans. You will still need to make these payments. Bankruptcy will also affect which assets you will lose or be able to keep. A lot of people wonder if it’s possible to file bankruptcy but keep their car, and this will depend on your specific situation. There are options available that will help you keep your vehicle, depending on its value. Losing assets is a possible risk when you file a bankruptcy in Ontario or in any other province. The same is true for your home. If you wish to file bankruptcy but keep your house, it will depend on several factors, including how much equity you have in your home. A trustee will give you all this information before you file and ensure that your exempt assets are protected from creditors. Filing a bankruptcy will also have a negative impact on your credit report for a minimum of 6 years from the date of discharge. If you are looking for help with bankruptcy or wish to understand more about the process, speak with a trustee.
As mentioned, the specifics surrounding the personal bankruptcy rules and regulations aren’t commonly known and understood. If you’re wondering exactly what bankruptcy is, concerned about personal bankruptcy and your assets, or looking for more details on the types of bankruptcy, you’re not alone.
Simply put, personal bankruptcy is a legal process through which an individual who cannot meet their financial commitments can have their debts eliminated. The goal of the process is to provide a person with a fresh start and a chance to rebuild their financial life.
Bankruptcy is not designed to be a punishment. The vast majority of people who find themselves searching for “personal bankruptcy Ontario” or information on the bankruptcy process in any province are “honest yet unfortunate debtors” who can no longer afford to pay their debts. Punishing people who have experienced financial trouble doesn’t make sense and that’s not what bankruptcy does. Bankruptcy gives people a fair way to eliminate their debts and restart their financial lives.
The decision to file for personal bankruptcy will depend on your financial situation. While bankruptcy is typically the last debt relief option considered, it can be the right choice in certain circumstances. Speaking with a Licensed Insolvency Trustee can help you determine if filing for bankruptcy is the right choice for you.
The trustee will also help you understand the personal bankruptcy rules and regulations and how filing for bankruptcy will affect you. Many people are concerned about what will happen to their financial life if they file for bankruptcy. That’s why learning about the process is so important.
A trustee will help you understand the situation involving personal bankruptcy and your assets, for instance, as this can be an important point for many. The facts about the personal bankruptcy credit score affects and how filing for bankruptcy could impact your credit are also important to learn and understand. Sometimes filing for bankruptcy can help put you in a better financial position, something we cover more in-depth in our piece on bankruptcies and foreclosures.
Licensed Insolvency Trustees will answer any questions you have. Once you know the facts, you can then make the right decision for your financial future.
As mentioned, while in some countries you can file for personal bankruptcy with an attorney bankruptcy in Canada must be administered by a Licensed Insolvency Trustee. If you decide to file, the trustee will inform your unsecured creditors.
Only unsecured debts can be included in a bankruptcy. These are debts that are not tied to assets. Examples of unsecured debts are credit card debt, tax debt, lines of credit, personal loans, and other such debts.
Secured debts (such as mortgages and automobile loans) cannot be included in a bankruptcy unless you wish to surrender these assets to the creditor.
Only a small list of certain debts are not discharged (eliminated) with a bankruptcy. Examples are spousal and child support payments, recent student loans, debts due to fraud, and court fines.
The trustee will ensure that all forms are completed correctly and tell your creditors about the filing. They will communicate with the creditors as needed. The trustee will also inform you of your duties during bankruptcy, such as the requirement to attend two financial counselling sessions.
If you are concerned about personal bankruptcy and belongings, it’s important to know that you do not lose all of your assets when you file. Each province and territory in Canada has a list of assets that are considered exempt and these assets can be kept. In general, you are able to keep assets that are needed to live a basic lifestyle and to earn an income.
Maybe people have questions about specific aspects of the bankruptcy process, such as personal bankruptcy and marriage. An important point here is that, if your debts are your own, your bankruptcy will not affect your spouse and it will not appear on their credit report. In the case of joint debts, your spouse or anyone who co-signed a loan for you will be responsible for the debt.
Once you have filed, you are required to update the trustee if you move, change your phone number, or change workplaces. You are also required to attend two financial counselling sessions. Licensed Insolvency Trustees hold these one-on-one sessions to help people learn about budgeting and how to use credit responsibly. The goal of these sessions is to give people the information they need to avoid future debt problems.
The process of filing for personal bankruptcy typically happens quite quickly. While in some countries you may need to speak with an attorney, bankruptcy in Canada is handled by a Licensed Insolvency Trustee who follows a process outlined in the federal Bankruptcy and Insolvency Act. The trustee will ensure that the proper forms are completed and will file them. Today, this process happens electronically.
Once you file, your unsecured debts will be effectively frozen and you will receive legal protection from your creditors.
In most cases, someone who has filed for bankruptcy for the first time will be automatically discharged in nine months. However, if you earn more than a level set by the government for your family size, you will need to make surplus income payments that will be distributed to your creditors. The trustee will inform you if this is required.
If you need to make surplus income payments, it will be 21 months before you are discharged, if it is your first bankruptcy.
In a second bankruptcy, it takes 24 months to be discharged if you are not making surplus income payments and 36 months if you are required to make these payments.
Personal bankruptcy is an insolvency process that is available to individuals who are unable to meet their financial commitments. Both individuals and companies can file for bankruptcy, but only individuals can file for personal bankruptcy. If you are wondering about bankruptcy and your business, know that there are different types of bankruptcy for small businesses and for larger corporations.
A major concern for many people is situation regarding personal bankruptcy and belongings. There is a common misconception that you lose everything you own when you file for bankruptcy. This is not true. If you are wondering about personal bankruptcy and your assets, know that you are able to keep certain assets that are considered exempt in your province or territory.
For instance, if you file for personal bankruptcy Ontario, you are able to keep:
- All necessary clothing;
- One automobile, valued up to $7,115;
- Household furnishings and appliances, valued up to $14,180;
- Tools of the trade (items that are required to earn a living), up to $14,405;
- Certain types cash or investments at a life insurance company;
- All RRSP, RRIF and DPSP (Deferred Profit Sharing Plan) savings except contributions made in the 12 months before your bankruptcy;
- Your principal residence if the equity in your home does not exceed $10,783;
- Company pension plans if they are “locked in” until retirement
The assets that are considered exempt will vary, depending on where you live. The trustee will inform you of what will happen to your assets before you file. Any non-exempt assets can be seized by the trustee and their value will be distributed to your creditors, unless you can compensate the trustee for their value.
When many people discuss the types of bankruptcy, they are referring to the differences between personal bankruptcy and business bankruptcy.
However, there are two types of bankruptcy detailed in the Bankruptcy and Insolvency Act that could apply to individuals (though one is considerably more common for individuals).
Summary Administration Bankruptcy
This refers to bankruptcies where the value of an individual’s assets when they are sold does not exceed $15,000
Most personal bankruptcies in Canada are summary administration bankruptcies
Corporations cannot file these bankruptcies.
Ordinary Administration Bankruptcy
These bankruptcies are ones where an individual has assets that are projected to be valued at more than $15,000
Most of these bankruptcies are filed by corporations
If an individual has a significant number of assets, other debt relief options (such as a consumer proposal) may be a better option than bankruptcy, since other methods do not typically involve losing any assets.
When you file for personal bankruptcy, your credit score is affected. A note is placed on your credit report. If it is your first time filing, this note will remain for six years after you have been discharged. Having this note in place will make it more difficult to get a loan and you will likely have to pay a higher interest rate if you do.
However, you can rebuild your credit by following good credit habits. This includes borrowing reasonable amounts and paying them back on time. Getting a secured credit card (a credit card that is backed by a deposit) can help you rebuild your credit score. Most people who have filed for bankruptcy are still able to get a secured credit card. Note that this card is different from a prepaid card, which works like a gift card rather than a credit card. A prepaid card cannot help you rebuild your credit.
Whether it’s the best time to declare personal bankruptcy or not, know that your financial life is not over once you file for personal bankruptcy. While there are certainly consequences, you can still rebuild your financial life.
In some countries, a person files for personal bankruptcy by dealing with a tax lawyer or bankruptcy attorney. In other areas, people may even be able to file for bankruptcy on their own. However, in Canada, only Licensed Insolvency Trustees are authorized to administer the personal bankruptcy process. For a bankruptcy in Canada the rules are very explicit on this fact.
If you are wondering whether a bankruptcy in Ontario rules or the rules in any other province differ on this topic, the answer is no. You do not need an attorney to file for personal bankruptcy anywhere in Canada. In fact, you cannot file through a bankruptcy attorney in Canada. The personal bankruptcy process is always administered by a Licensed Insolvency Trustee. However, people are always welcome and encouraged to also obtain legal advice from an attorney.
As part of the bankruptcy Canada rules, a person can be discharged from bankruptcy after nine months if they have fulfilled their duties, did not have to pay surplus income, and this is their first time filing for bankruptcy.
Once a person is discharged from bankruptcy, their debts are officially eliminated (some exceptions). They are then free to begin rebuilding their financial life. After personal bankruptcy credit score issues will likely be a main concern. Your bankruptcy will be noted on your credit report for at least six years after you are discharged. However, while this can make it more difficult to get a loan, you are able to start rebuilding your credit score once your bankruptcy is over.
One way to do this is through a secured credit card. Secured cards are backed by a deposit. For instance, a person may put down a $500 deposit and then receive a credit card with a $500 limit. With some cards, the limit can be higher than the amount of the deposit, but that depends on the card. You can use a secured credit card like any other card. By making reasonable purchases and paying your bills on time, your credit rating will gradually improve. It’s important to note that a secured credit card is different from a prepaid credit card. Prepaid cards do not allow you to carry a balance or make monthly payments against that balance, and thus they do not help you improve your credit score.
According to federal rules, there is no “limit” as to how often you can file for bankruptcy. However, there are consequences for filing more than one.
If you file for bankruptcy a second time, it will take longer for you to be discharged. In addition, the second bankruptcy will be noted on your credit report for 14 years (rather than six, which is the case in a first bankruptcy). This can make it significantly more difficult to get a loan for a long time, which can harm your financial future.
If you are wondering when is the best time to declare personal bankruptcy, that depends on various circumstances. If you have already filed for bankruptcy twice, filing for a third time comes with even more serious consequences.
If you file for bankruptcy a third time, you cannot be automatically discharged. You will need to go to court to receive your discharge, and the court may impose conditions on your discharge. For instance, your bankruptcy may be held open for an extended period or you may be required to make more payments.
If you are concerned about personal bankruptcy and your business, know that in most cases you are able to keep your business when you file. However, this will depend on the structure of the business. Sole proprietorships and partnerships are not distinct entities from the individuals who operate them, so a personal bankruptcy is in effect a business bankruptcy in these cases.
If a business is incorporated, it is a separate legal entity. However, if a person files for bankruptcy, they cannot act as a Director of a company.
If you have concerns or questions about bankruptcy and your business, speak with a Licensed Insolvency Trustee.
While understanding the personal bankruptcy rules and regulations is important, learning about the effects of filing for bankruptcy is also crucial. When you file, a note is placed on your credit report. If it is your first time filing for bankruptcy, this note will remain for six years after you have been discharged.
A personal bankruptcy credit score note can affect your ability to get a loan. If you have a bankruptcy on your credit report, lenders will likely see you as a greater risk, and this can make it more difficult to get a loan. Getting a personal loan after bankruptcy may be possible, depending on the lender, but you may end up paying a much higher interest rate.
If you follow wise credit habits and pay your debts when they are due, you will rebuild your credit rating over time, which will make it easier to get loans.
Questions involving personal bankruptcy and marriage are common. People want to know how filing for bankruptcy will affect their spouse. For debts that are your own, your bankruptcy will not affect your spouse. While the bankruptcy will appear on your credit report, it will not appear on theirs.
However, when it comes to joint debts (debts you have taken out together) or debts where a spouse co-signed a loan, know that they will be 100% responsible for paying back these debts once you file. You won’t be responsible for the debt, but the debt will not be eliminated with the co-signer.
Another concern relating to personal bankruptcy and marriage is what will happen to your assets. Only your share of any assets you own will be included in a bankruptcy.
If you are struggling to pay your bills as they become due, bankruptcy may be an option for you. If this is the case, you are likely interested in knowing the cost of bankruptcy. The cost of a filing a bankruptcy will depend upon many factors, such as:
your net monthly income;
the size of your family;
the assets you own; and
whether you have been previously bankrupt.
In Ontario, a single person with low income and virtually no assets will pay on average $1,800 to file a bankruptcy for the first time (payable over 9 months), however, the cost varies. Without knowing an individual’s specific situation, it’s best to book a free consultation for further information and to determine bankruptcy costs. Those searching for low cost bankruptcy help should know that most Licensed Insolvency Trustees offer a free consultation to present the options available to you.
While you might be wondering about the cost of retaining a bankruptcy lawyer, know that in Canada, you can only file a bankruptcy through a Licensed Insolvency Trustee. In most cases, a lawyer is not needed. Individuals who have insufficient funds to cover the cost of bankruptcy can access The Bankruptcy Assistance Program (BAP). The BAP can assist an individual in obtaining the services of a Licensed Insolvency Trustee at a reduced rate based on their available disposable income. For those looking for low cost bankruptcy help, know that there are certain criteria in order to be eligible for the Bankruptcy Assistance Program:
- you have consulted with at least two trustees who have told you that they cannot assist you as you are unable to pay their fees;
- you are not currently incarcerated;
- you were not previously or currently involved in commercial activities where the administration of a bankruptcy could give rise to a substantial amount of administration or investigative work for the trustee, and
- you are not required to make surplus income payments to the bankruptcy estate.
For further information, or to find out specific information related to the cost of bankruptcy in Canada, you can speak with a trustee or visit the Office of the Superintendent of Bankruptcy’s website.
Chapter 7 bankruptcy refers to proceedings in the United States. There are filing fees associated with this type of filing, however, this is not applicable in Canada.
In Ontario, a single person with low income and virtually no assets will pay on average $1,800 to file a bankruptcy for the first time. Bankruptcy costs can be paid in monthly installments with the trustee. Situations from one individual to another differ therefore it is best to book a free consultation with a trustee to identify any potential additional costs.
Although you may be struggling with debt, most people are often surprised that there is a cost to file for bankruptcy. The minimum bankruptcy filing cost on average in Ontario is about $1,800 for a first-time bankrupt, but the filing bankruptcy cost will depend on your situation. Most Licensed Insolvency Trustees will make payment arrangements with you over the length of your bankruptcy (nine months). There are other factors that affect the bankruptcy filing cost and will determine the amount you must pay to the trustee, such as surplus income and the value of your assets. The file for bankruptcy cost depends on your specific situation. The Office of the Superintendent of Bankruptcy (OSB) sets net monthly income thresholds for an individual or family to maintain a reasonable standard of living in Canada. What you will pay and how long you will be in bankruptcy is determined by your income compared to these thresholds. If your income exceeds the threshold, there is a requirement on your part to pay 50% of the surplus into your bankruptcy for the general benefit of your creditors. The cost of claiming bankruptcy can vary for everyone. It’s best to speak with a Licensed Insolvency Trustee for further information and to know exactly how much you will pay.
If you’re looking for a bankruptcy lawyer in any province of Canada, it’s important to understand what services this lawyer provides before you decide to proceed. While cost is a factor, know that you do not need a lawyer for bankruptcy filing in Canada. Instead, the bankruptcy process is handled by a Licensed Insolvency Trustee, whose fees are paid out of the cost of the bankruptcy.
In the US, individuals who find themselves in financial difficulty may obtain the advice and/or services of an attorney to assist them with negotiating or settling their debt. In Canada, a Licensed Insolvency Trustee will be able to assess your financial situation and provide you with several options to assist you in dealing with your debt. A bankruptcy lawyer in Canada is not needed if you wish to file for bankruptcy.
You don’t need a lawyer to file a bankruptcy in Canada. In fact, lawyers cannot assist you with this. Lawyers can however provide some guidance and advice on your financial situation. That said, only Licensed Insolvency Trustees can file bankruptcies and consumer proposals.
Filing a bankruptcy will eliminate most of your unsecured debt including lawyer fees. Keep in mind that the lawyer will not do any more work for you if they are not getting paid.
As mentioned, bankruptcy eliminates most unsecured debts, and this includes fees that are owed to a lawyer.
In most cases it is not necessary to retain an Insolvency Lawyer if you are considering filing a bankruptcy or a consumer proposal. If, however, you have significant assets or complex legal matters, you may want to speak to an Insolvency Lawyer. They can provide additional advice and guidance on the best course of action.
Unlike the United States, you don’t need a lawyer in order to file a bankruptcy. In Canada, you can only file bankruptcy through a Licensed Insolvency Trustee.
In Canada, bankruptcies and consumer proposal can only be administered by a Licensed Insolvency Trustee. You do not require a lawyer to file.
Unlike the United States, you don’t need a lawyer to file bankruptcy. In Canada, you can only file bankruptcy through a Licensed Insolvency Trustee. Once appointed, the trustee can only be substituted not fired. This is not a common occurrence. For the Court to substitute the trustee, you would need to show valid reasons for the request. In addition, you would need to find another trustee willing to act and have a lawyer make application to the Court. A Court date would be set where you or your lawyer and the trustee would appear. The Court would hear the arguments presented and make their decision accordingly.
Bankruptcy lawyers can be helpful in complex legal matters pertaining to corporate issues and disputes. A bankruptcy lawyer also may be able to assist an individual when a creditor and/or the trustee opposes the bankrupt’s discharge. Most personal bankruptcies don’t require a lawyer and can be handled strictly by the Licensed Insolvency Trustee.
A bankruptcy lawyer is a Licensed Legal Practitioner who specializes in insolvency law. Those searching for “lawyer for bankruptcy near me” or other similar terms may need to look for an insolvency trustee service. A Licensed Insolvency Trustee administers the bankruptcy process in Canada.
A bankruptcy lawyer (also known as an insolvency lawyer) will periodically provide legal advice to Licensed Insolvency Trustees and undischarged bankrupts on matters involving court actions and discharge hearings. They also deal with complex matters pertaining to corporate insolvencies and disputes. Typically, bankruptcy lawyers represent creditors in corporate matters and will advocate their client’s position in either negotiations or court proceedings. The average individual will not require the services of an insolvency lawyer when filing a bankruptcy or a consumer proposal.
Although these terms are used in conjunction with one another; they are not interchangeable and are not same. Insolvency refers to an individual’s financial status whereas bankruptcy is a legal proceeding. An individual is deemed to be insolvent when he or she owes at least $1,000 and is unable to pay their debts in full as they become due. Someone who is insolvent may choose to file a bankruptcy or a consumer proposal to deal with their debts.
The difference between insolvency vs bankruptcy is that insolvency refers to an individual’s financial state. Bankruptcy is a legal procedure. As an insolvency service, bankruptcy is designed to provide an individual with a way to eliminate their unsecured debts and get a fresh start.
Purpose of Bankruptcy and Insolvency Act
The Bankruptcy and Insolvency Act Canada (BIA) outlines bankruptcy and insolvency rules, including:
- Permitting an honest but unfortunate individual to obtain a discharge from debts, subject to reasonable conditions, to allow the debtor to have a fresh financial start. The financial rehabilitation of an insolvent individual is a fundamental purpose of the BIA;
- To provide for the orderly and fair distribution of property of a bankrupt among unsecured creditors on a pari passu (equal footing) basis;
- to allow for an investigation to be made into the affairs of a bankrupt; and
- setting aside of preferences, settlements and other fraudulent transactions.
All bankruptcy and insolvency general rules are outlined in the act, which governs Canadian bankruptcy and insolvency law. The act also governs the Office of the Superintendent of Bankruptcy, a federal agency responsible for ensuring these processes are administered in a fair and orderly manner.
Two terms that are related, yet different, are insolvency and bankruptcy. The difference between the two refers to an individual’s financial state or status and the other refers to a legal procedure under the Bankruptcy and Insolvency Act (which details the bankruptcy and insolvency general rules). Insolvency is a financial state whereas bankruptcy is a legal procedure. An individual is deemed to be insolvent when he or she owes at least $1,000 and generally can’t pay their debts in full as they become due. An individual who is insolvent may choose to file a bankruptcy or a consumer proposal to deal with their debts. The Bankruptcy and Insolvency Act rules govern both bankruptcies and consumer proposals.
A Stay of Proceedings is automatic upon filing an insolvency bankruptcy or consumer proposal. This means that unsecured creditors are prohibited from starting any legal proceedings or continuing with their lawsuits, and from garnishing your wages. Under the Bankruptcy Insolvency Act, secured creditors can still seize assets you’ve provided security for if you fail to maintain your payments as required.
The Bankruptcy and Insolvency Act Canada (BIA) is a federal statute. It outlines bankruptcy and insolvency rules. The BIA governs all bankruptcies and proposals filed within Canada. The BIA allows the “honest but unfortunate debtor” relief from their financial burden by offering them a “fresh start” in terms of managing their financial affairs. The act also defines the roles and protects the rights of all stakeholders involved in insolvency proceedings, including creditors, debtors, trustees, the Court and the Superintendent of Bankruptcy.
- simplify life and reduce stress;
- save on interest charges; and
- pay the debt off as soon as possible.
If you are confused about the usage of the term credit consolidation vs. debt consolidation, know that, in most cases, these terms are used interchangeably and refer to the same thing.
The Difference Between Secured and Unsecured Debt Consolidation Loans
A consolidation loan may be secured or unsecured. The interest charges are usually lower when the loan is secured. A loan is secured when the borrower is required to use an asset as collateral for the loan. This means that the lender may sell the asset to pay the debt if the borrower defaults on the loan. Some examples of secured loans are collateral mortgages and home equity lines of credit (HELOCs), which are secured against real property. Debt consolidation mortgage options are available. When using a house as collateral, the debt may be consolidated by refinancing the existing first mortgage, obtaining a second mortgage, or obtaining a home equity line of credit (HELOC) to pay off the debts. Refinancing, second mortgages and HELOCs are the most common means of consolidating debt in Canada for those who own a home. Unsecured debt consolidation loans in Canada often charge higher rates since there is no asset used as collateral. A loan is unsecured when the borrower is not required to use any assets as collateral for the loan. An example of an unsecured loan is a personal loan or an unsecured line of credit (LOC), where no assets are used as collateral.
Credit Consolidation and Other Debt Relief Options
Credit consolidation loans are not the only debt relief options available. Those looking for debt relief in Canada will want to consider their own personal financial situation when choosing between credit consolidation loans and other options. If you are in a situation where you could repay your debt if the interest rate was lower, then choosing to consolidate could be a good option for you. However, if even making the payments without any interest would still be difficult, then you may wish to choose another path towards becoming debt free. After all, the reason why you would choose to consolidate loans is to make it easier and more affordable to repay your debt. If consolidating your debt doesn’t do this, it could be a good idea to choose another option. In addition, if you have a poor credit score, it can be tough to get a consolidation loan with a low enough interest rate to help your situation. This is especially true when it comes to unsecured debt consolidation loans in Canada, as these often have higher interest rates. While consolidating your debt can make it easier to make your payments (since you’ll only have one payment instead of many) it doesn’t actually reduce the amount that you are expected to pay back. If you’re not saving on interest, it will still be quite difficult to eliminate your debts. If this is your situation, you may wish to look for a secured loan or you might want to consider other financial debt help options. While it may seem like there are no options available, that frequently isn’t true. Every financial situation is unique and that means the solution you choose will be unique to you as well.
Debt consolidation usually involves applying for a loan from one lender to pay off many debts from various lenders.
There Are Six Basic Steps To Obtaining a Debt Consolidation Loan:
- Review your budget to ensure that you will be able to afford the monthly payments on the consolidation loan. You will want to be confident that a consolidation loan will help solve your debt problem and not make matters worse. For example, you should consider not going ahead with a consolidation loan if:
- You cannot afford the monthly payment;
- You are going to incur other debt to pay the consolidation loan;
- You are likely to default on the payments; or
- The cost of borrowing on the consolidation loan is more than your existing debt.
A consolidation loan will likely add stress if you are not able to afford the payments and are forced to cut back other important expenses, like healthy food or if you are going to incur other debt to service the consolidation loan.
- Complete the lender’s loan application, keeping in mind that multiple credit inquiriesmay reduce your credit score. Therefore, you will want to be selective when making formal applications. There are many different unsecured debt consolidation loans in Canada, but too many credit inquiries can hurt your credit rating, so only make formal inquiries with lenders that you are serious about.
- If you qualify for the desired consolidation loan, use the loan proceeds to pay off yourexisting debts in full. The bank may pay your debts off directly, or you may be required to do this yourself. Also, consider closing the old accounts to prevent yourself from running the balances back up again. If you do not qualify for a consolidation loan, then consult with a Licensed Insolvency Trustee.
- Make the loan payments as required and pay off the consolidation loan as soon as possible. If you’re wondering how the debt consolidation works in Canada, it works best if you makeall of your payments on time and if you pay off your debt as quickly as you can. The goal of a debt consolidation loan is to reduce the amount of money you’re spending on interest charges and you can help yourself by paying off your loan quickly.
- Consider setting up pre-authorized payments directly from your bank account, as makingtimely payments on the loan may improve your credit score. Keep in mind that paying the loan off early may save on interest charges, however, may also result in pre-payment penalties, depending on the terms of your loan agreement.
Check all Debt Consolidation Providers first! This is why it’s important to look at the terms of the different Debt Consolidation Canada providers and your specific loan. Rather than just knowing how to consolidate your debt, you’ll also need to know how to consolidate it effectively and this means getting the right loan for your situation. This is most often the loan that charges the lowest interest and the fewest penalties and fees.
- Once the consolidation loan is paid off, ask the lender for written confirmation to keep with your recordsand also check your Equifax and TransUnion credit reports to ensure that they correctly reflect the status of the loan. Also consider closing the account or take other action to prevent credit fraud.
Debt consolidation mortgage programs can work, but you need to be aware of all the details. Mortgage brokers may help shop around for the best mortgage rate and terms.
- Complete the lender’s loan application, keeping in mind that multiple credit inquiries may reduce your credit score. Therefore, you will want to be selective when making formal applications. There are many different unsecured debt consolidation loans in Canada, but too many credit inquiries can hurt your credit rating, so only make formal inquiries with lenders that you are serious about.
- If you qualify for the desired mortgage consolidation loan, use the loan proceeds to pay off your existing debts in full. The bank may pay your debts off directly, or you may be required to do this yourself. Also, consider closing the old accounts to prevent yourself from running the balances back up again. If you do not qualify for a mortgage consolidation loan, then consult with a Licensed Insolvency Trustee.
- Make the loan payments as required, and pay off the consolidation loan as soon as possible. If you’re wondering how debt consolidation works in Canada, it works best if you make all of your payments on time so that you can pay off your debt off as quickly as you can. The goal of a debt consolidation loan is to reduce the amount of money you’re spending on interest charges and you can help yourself by paying off your loan quickly.
- Consider setting up pre-authorized payments directly from your bank account, as making timely payments on the loan may improve your credit score. Keep in mind that paying the loan off early may save on interest charges, however, may also result in pre-payment penalties, depending on the terms of your loan agreement.
- Check all Debt Consolidation Providers first!
- This is why it’s important to look at the terms of the different Debt Consolidation Canada providers and your specific loan. Rather than just knowing how to consolidate your debt, you’ll also need to know how to consolidate it effectively and this means getting the right loan for your situation. This is most often the loan that charges the lowest interest and the fewest penalties and fees.
- Once the consolidation loan is paid off, ask the lender for written confirmation to keep in you records, and also check your Equifax and TransUnion credit reports to ensure that they correctly reflect the status of the loan. Also consider closing the account or take other action to prevent credit fraud.
If you have a lot of debt, you’ll quickly find that repaying it is difficult. This is often because many debts have very high interest rates. Even if you make your payments each month, it will take a very long time to reduce your debt and it will cost you quite a lot to do so. Interest charges can make each of your monthly payments higher, which can make it more difficult to repay your debt.
If this is the situation that you are in, you may wish to consider debt consolidation services. Traditional debt consolidation services provide loans that you can use to repay your existing debts. If you have many different high interest debts and you take out a new loan with a lower interest rate than the debts you have, you’ll save money on interest charges. This will mean lower monthly payments and you’ll be able to repay your debt more quickly.
If this sounds like a situation that could benefit you, you’ll want to find the best debt consolidation loan available. Speaking with a debt consolidation service like a traditional bank may help you understand what you may need.
Overall, remember that there are many different options available and that the best debt consolidation option is the one that works for you and your financial situation.
A Consumer Proposal is a legal process that must be filed with a Licensed Insolvency Trustee, who will act as the proposal administrator. This is a process where you make an offer to your unsecured creditors that will see you repay them on terms that you can afford. In most cases, you will offer to pay a portion of your debts in monthly payments over a specific period of time. Once you have made all of the agreed-upon payments, your remaining outstanding debts will be forgiven. If you choose to proceed with this debt relief option, the Trustee will determine what a fair offer to your creditors will be. This offer will be sent to all of your unsecured creditors who then have a right to vote on whether or not to accept the proposal. If the majority of your creditors vote to accept your Consumer Proposal, all are bound by its terms. If you wish to find out more about the consumer proposal process, speak to an Insolvency Trustee, or read more about Consumer Proposals here.
Bankruptcy is a legal process that is administered by a Licensed Insolvency Trustee. The bankruptcy process provides honest yet unfortunate debtors with an opportunity to eliminate most, if not all, of their debts and make a fresh financial start – without debt. Despite what some people may believe, the goal of the bankruptcy process is designed to be rehabilitative rather than punitive. Instead, bankruptcy is designed to put you in a position where you can rebuild your financial life. For more information on bankruptcy, read our Bankruptcy section and speak with a Licensed Insolvency Trustee. For a free consultation with an Insolvency Trustee, please schedule a debt relief consultation using the form below.
Debt Management Plan
One debt relief option that a credit counselling agency may offer is what is known as a debt management plan. A debt management plan is an informal arrangement where the credit counsellor contacts your creditors and attempts to negotiate a plan to make it easier for you to repay your debts. One way this is often done is by consolidating your debts into a single payment.
This process is designed to make paying your debt more straightforward. A lot of people who struggle with debt have difficulty remembering which debts they have to pay, when they have to make payments, and how much to pay each month. This confusion often results in missed payments, which can damage your credit rating and open you up to significant penalty charges.
In some cases, the debt counsellor will be able to negotiate a lower interest rate on your payments. If this happens, you’ll pay less in interest each month, which means you’ll save money over the life of your debt. The counsellor may also request that your creditors give you more time to repay your debts, which will make each payment smaller and easier to manage. However, with most debt management plans you will still be required to pay 100% of the debt that you owe. The goal of these plans is to make it easier to afford your payments, not to reduce the overall amount you owe.
Before arranging the debt management plan, the counsellor will meet with you and discuss your financial situation. You will likely work together to make a budget and determine how much you can afford to pay to your creditors each month. The counsellor will then need to contact each of your creditors and inform them of the situation.
If some or all of your creditors agree with the plan, you will make regular payments to the credit counselling service as per the terms of the plan. The counsellor will use these payments to pay off your creditors.
Before you agree to proceed with a debt management plan, you’ll want to make sure that it works for you financially and that it will save you money. Make sure you consider all aspects of the plan. For example, if the debt management plan sees you pay less interest, this could save you money, but keep in mind that you will likely have to pay a fee to the debt counselling agency. You’ll need to make sure that the money you’re saving by going with the plan is greater than what you are paying in fees.
Are you in trouble with debt or do you have a manageable amount? Most people have some debt, usually in the form of a mortgage or a car loan or a line of credit. But how do you know when it’s too much?
There is no easy answer that works for everyone. However, here are a few ways to tell if you have too much debt.
- You are unable to pay your monthly expenses without using a credit card or line of credit
- You’re only making the minimum payments on your debt
- You’re receiving calls from creditors
- You’ve missed payments
- You’re not sure how much debt you have
- You regularly use overdraft protection on your bank account
- You’re feeling stressed or worried about your debt
- You hide your debt or your spending from friends and family
These are just some of the warning signs. Each person is different and every situation is unique. However, if you are struggling with debt, you need to seriously consider debt management and other ways to relieve yourself of this financial trouble.
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