Good debt bad debt using credit wisely: Introduction
Good debt bad debt using credit wisely are another one of those financial terms like Balloon Payments, APY – Annual Percentage Yield, Expense Ratios and Cash Flow that are often misunderstood. As we continue our series of confusing financial terms we thought that the holiday season seemed like the opportune time to explore the concept of good debt.
Good debt bad debt using credit wisely: What is good debt?
Typically we define good debt as borrowing money for something that will appreciate in value and increase your net worth. Examples of good debt are taking out a mortgage to purchase your home and investing in your education.
Good debt bad debt using credit wisely: What is bad debt?
Typically we define bad debt as borrowing money for something that will depreciate in value and does not increase your net worth. Examples of bad debt are credit card debt and debt for luxury items you can’t really afford like fancy cars and expensive vacations.
Good debt bad debt using credit wisely: Is good debt a myth?
The old adage that there’s no sure thing except for death and taxes is true. Although taking out a mortgage to buy a home and investing in your education seem like sure things, sadly that isn’t always the case. If you take out a mortgage that’s the maximum you can handle and the interest rates go up, how will you pay for your house? What would happen if you lost your job? Would you lose your house as well? Investing in your education isn’t a sure thing either. There are many PhDs waiting tables. A good education is no longer a guarantee of a good paying job. Good debt is a myth, unless you are also using the credit wisely. At the end of the day, debt is still debt and must be repaid.
Good debt bad debt using credit wisely: What to do about your debt?
Canadians are struggling with debt like never before. Whether you’ve taken on what you consider to be good debt or bad debt, it still needs to be dealt with. And, to deal with debt you need the help of a debt professional – a trustee. Dealing with debt is not a DIY project. CallIra Smith Trustee & Receiver Inc. today and make an appointment for a free, no obligation consultation. We can give you back peace of mind and put you on the road to debt free living Starting Over, Starting Now.
My Brandon’s Blog describes a Court decision that if you owe money, even if it is too late for you to be sued, it can still show up on your credit report Ontario. This is a very interesting case from the Court of Appeal for Ontario for consumers and consumer reporting.
The case was an attempt by Mr. Grant to have the credit reporting agencies Equifax and TransUnion remove from his credit report debts that were more than two years old on the basis that because he can’t be sued anymore, the most accurate reporting would be to cut those debts from his credit report. He argued that since the Ontario Limitations Act provided for a two-year limitation for when he could be sued on certain debts, therefore, any debts more than two years old for which you haven’t been sued should be removed from his credit report.
Limitations Act vs. Consumer Reporting Act
The credit reporting agencies successfully argued against that as the lower court ruled against Mr. Grant. He was now appealing to the Court of Appeal for Ontario. The Ontario Consumer Reporting Act states that debts up to seven years old can be reported and there lies the discrepancy. The Court of Appeal for Ontario agreed with the lower court and said that just because the Limitation Act says that you can’t be sued after two years that has no application to the Consumer Reporting Act that says all valid debts can be reported for up to seven years.
What the Court of Appeal said
The Court of Appeal went on to say just because a creditor misses the deadline or chooses not to sue within the two-year period it doesn’t mean that the debt still isn’t owed. The Court of Appeal also went on to say that under the Consumer Reporting Act people have the right to communicate with Equifax and TransUnion to have errors removed from their credit report. Unfortunately for Mr. Grant in his case, this was not an error.
What should you do if you have too much debt?
Do you have too many debts causing you discomfort on your credit report? Is your credit report creating a bigger hardship for yourself? For help with your debt issues contact Ira Smith Trustee & Receiver Inc. We’re your best defence against debt. Make an appointment for a free, no-obligation consultation and you can be well on your way to a debt free life Starting Over, Starting Now. Give us a call today.
Credit Report Ontario: The decision of the Court of Appeal for Ontario
COURT OF APPEAL FOR ONTARIO
CITATION: Grant v. Equifax Canada Co., 2016 ONCA 500
DATE: 20160623
DOCKET: C61664
Rouleau, van Rensburg and Benotto JJ.A.
BETWEEN
Gary Grant
Applicant (Appellant)
and
Equifax Canada Co., Trans Union of Canada,
Ministry of Government Services and Consumer Services
Respondents (Respondents in Appeal)
Gary Grant, acting in person
Stephen Schwartz, for Equifax Canada Co.
Alan Melamud, for Trans Union of Canada
Domenico Polla, for the Ministry of Government Services and Consumer Services
Mahmud Jamal and Raphael Eghan, for the intervener Canadian Bankers Association
Heard: June 21, 2016
On appeal from the judgment of Justice Kofi N. Barnes of the Superior Court of Justice, dated November 2, 2015.
ENDORSEMENT
[1] The appellant brought an application in the Superior Court seeking an order that two consumer reporting agencies remove debts over two years old that were shown on his credit report, where no legal action had been commenced or judgment obtained in respect of the debts. He relied on the provisions of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and in particular the basic limitation period of two years applicable to the commencement of a proceeding in respect of a claim.
[2] The appellant argued in the court below, and on appeal, that this two year limitation period should apply in interpreting the provisions of the Consumer Reporting Act, R.S.O. 1990, c. C.33 (the “CRA”). He asserts that, in requiring consumer reporting agencies to adopt all procedures reasonable for ensuring accuracy and fairness in the contents of their consumer reports (s. 9(1) of the CRA), the Act anticipates that debts will not be listed where a limitation period for their enforcement through legal action has expired. The most accurate record of a debt, he says, is one that has been or can be confirmed by an order or judgment of the court. When debts are included in consumer reports, where no legal action is possible, consumers are adversely impacted in their efforts to borrow money and to conduct other business.
[3] The respondents assert that the application judge did not err in his dismissal of the appellant’s application, on the basis that the basic limitation period has no application to the statutory framework for consumer credit reporting in Ontario, and that there was no violation by the consumer reporting agencies of the requirements of the CRA.
[4] We agree.
[5] The CRA provides for a regulatory scheme for the fair reporting of information regarding an individual’s history of credit activities. The CRA requires the registration of consumer reporting agencies, permits consumer reporting information to be provided only for certain prescribed purposes, and sets out standards for consumer reporting.
[6] The Limitations Act, 2002, by contrast, applies to bar “claims pursued in court proceedings” that are commenced outside the applicable limitation period. The Act does not apply to the CRA, whether expressly or by implication. Indeed, the CRA contains its own specific provisions prohibiting the inclusion of certain information in consumer reports, including debts or collections more than seven years old, unless confirmation that the debt or collection is not barred has been obtained. The CRA expressly contemplates that debts not reduced to judgment that are up to seven years old may be reported (see s. 9(3)(f)). This makes sense, as the passing of a limitation period does not extinguish a debt; it only precludes the commencement of a court proceeding for its enforcement. As such, the reporting of debts after a limitation period has passed, is not inconsistent with the purposes of the CRA, and is expressly contemplated by its terms.
[7] Under the Act, consumers, such as the appellant, have access to the information contained in their files, and a mechanism by which they can dispute information contained in a report to the consumer reporting agency, and to the Registrar of Consumer Reporting Agencies, with a right to apply to the Licence Appeal Tribunal for a hearing if they are aggrieved by a Registrar’s decision.
[8] The appellant availed himself of the right to dispute information, and was able to have certain stale information removed from his consumer reports. There was no basis, however, for requiring the removal of information concerning debts simply because they were more than two years old.
The holidays can be wonderful for some; but this is also the time of year that people are drowning in by debt and looking for legitimate bad credit loans online. Unfortunately, there is no such thing. Holiday spending is tipping them over the edge and they don’t know what to do. Then they see headlines like these and think their prayers are being answered:
Loans for bad credit – $0 down with 100% approval rate
No credit check loans online
Loans for bad credit people
Guaranteed loan approval no credit check
Legitimate bad credit loans online: If it seems too good to be true…..
Some Canadians grab these bad credit loans online like a lifeline and don’t realize that they’ve put themselves in a worse place than they were before.
We’ve warned you before but with the holiday season fast approaching, it’s time to warn you again.
Legitimate bad credit loans online: Six Good Reasons to Say No to Bad Credit Loans Online
There are no quick fixes when it comes to dealing with debt. The financial services industry is very strictly regulated for your protection. That’s why banks, credit unions and other financial institutions don’t offer bad credit loans online.
Legitimate bad credit loans online: What are they?
Bad credit loans online are nothing more than scams. They prey on those who are desperate and who can’t get a loan from a federally regulated financial institution. The problem is that these bandits get you coming and going. First they hit you up with fees – processing fees, insurance fees, transfer fees, etc. You get the idea. Then they charge you interest that can amount to over 500%/year. Before you know it you’re in a debt cycle you can never escape from.
Legitimate bad credit loans online: What can you do instead of going for a bad credit loan online?
We urge you not to get trapped in a debt cycle. Now is the time to stop and deal with debt with the help of a professional trustee. We’re experts in debt. We won’t help you get a loan today; but we will help you get back control of your life. There is light at the end of the tunnel and Ira Smith Trustee & Receiver Inc. can help you get back onto a solid financial footing Starting Over, Starting Now. We’re just a phone call away.
Laurie Campbell joins me now to explain about credit fraud alert Canada. She is the CEO of Credit Canada Debt Solutions. Alright so let’s talk about some practical tips. What are your top three tips that will help people lower the risk that they could go through like this woman from Winnipeg described below went through?
Credit Fraud Alert Canada: Laurie’s top 3 tips
Laurie’s top 3 tips are:
Check your credit rating. Contact both Equifax and TransUnion because those are the two credit reporting agencies in Canada.
Limit the of credit cards you have. So many people are not aware of how easy fraud can happen when you have five or six or ten types of credit out there.
Don’t give out your credit card or personal information to people even if you know them well. Safeguard it like money and make sure you do not give your credit card to people who may phone you asking for it. There are many scammers just phishing for information.
Credit Fraud Alert Canada: A very sad story
This woman’s story has lasted just over three years. Imagine, three years to get your credit fixed. That is unusual, incredibly unusual for it to take that long. Certainly there are some there are processes in place and you know unfortunately for her the only reason she found out about it was because she had a mortgage renewal. This is why it’s important to check your credit rating.
Credit Fraud Alert Canada: The credit rating
So remind us again what a credit rating is. There is a credit rating and a credit score. Both are very important. Your credit rating is a rating on how well you pay your debts and it reflects your credit history. For example, if you pay on time and you have a long period of history reports on the different types of credit that you have.
Your credit score is accumulation of information including not just your credit rating but that how long have you been using credit and your behavior with credit over time. It is personal information so essentially your credit rating makes up your credit score to a certain degree.
Credit Fraud Alert Canada: An ounce of prevention
Both are really important and so what options does a fraud victim have when you’re getting stonewalled by the creditors or the credit agency and there is wrong information about you in your credit report?
First there are certain things we hopefully can do to prevent that from happening but once that does happen you can ask for an investigation by the credit reporting agencies. You are going to need to be able to have some backup information on your set of circumstances to prove that it wasn’t you. In this case you are guilty until proven innocent. The burden is on you as the consumer to point out why they’re wrong and made a mistake.
Don’t forget that the credit reporting agency is merely reporting on information from the date provided to it. So first, you are going to need to have the creditor recognize that there is an error. Keep in mind it could be something as simple as your employment information. If you don’t have up-to-date employment information on you because you haven’t applied for credit since you have a new job or new place of residence. Those types of things are considered errors as well so we start to whittle away it.
Credit Fraud Alert Canada: Always check your credit report
We need to know what our credit report says and that’s why as Canadians we should be checking it on a regular basis. Some families share their credit cards with their kids which makes them more susceptible to being victims of fraud. Anytime you’re giving your giving your credit card out, especially to family members or friends, you’re putting yourself at risk.
First, there is “friendly fraud”. You hope it never happens to you where somebody else is using your credit in a way that you don’t want them to. Also, exposure in the marketplace is a problem. That is where people can leave credit cards behind and people then use it for their own purposes.
You should safeguard your credit like cash, but some people don’t do this.
Credit Fraud Alert Canada: Get your solution
The last thing any of us need is having our identity stolen and a fraud perpetrated on us to ruin our credit. If you are having credit and debt problems, help with your debt issues is available now. Contact Ira Smith Trustee & Receiver Inc. We’re your best defence against debt. Make an appointment for a free, no obligation consultation and you can be well on your way to a debt free life Starting Over, Starting Now. Give us a call today.
Debt management spreadsheet: Download ours for free at the bottom of this blog
T’is the season to be jolly but it’s also the season that can have you taking on debt you can’t afford. If you have too much debt before you begin your holiday spending, you could make use of our debt management spreadsheet. At the bottom of this blog is a link for you to get it.
You may have already made your Christmas list and checked it twice, but Santa won’t pay the bills when they arrive, even if you’ve been nice. The question is, will you be able to pay your holiday spending bills?
Why?
Now is a very important time to make a debt spreadsheet. Believe me, it’ll be a reality check as what you can really afford to spend. A debt spreadsheet can give you a clear picture of how much you owe and how you plan to pay off your debts. If you’re in the process of repaying debts, now is no time to take on more debt. Getting deeper in the hole is not what the holiday season is all about. The holidays are all about getting together with family and friends, not spending money you don’t have and can’t repay.
How to enjoy the holidays without new debt
Listen to your spreadsheet and instead of going overboard shopping here are some ideas to control holiday spending.
Sit down with family and friends and let them know that you’re only buying gifts for the children. They’ll probably be relieved that you’ve lessened their load.
Buy books and crafts for the kids, not over-the-top electronic toys and gadgets.
Instead of spending money on hostess gifts, homemade items are always well received – baked goods, jams, sweets or homemade wine.
Give the gift of time. Spend time with your loved ones.
How to get rid of debt
The real spirit of the holidays doesn’t involve spending money you don’t have and creating a bigger hardship for yourself. For help with your financial problems and issues contact Ira Smith Trustee & Receiver Inc. We’re your best defence against debt. Make an appointment for a free, no-obligation consultation and you can be well on your way to a debt-free life Starting Over, Starting Now. Give us a call today.
Our free debt management spreadsheet
CLICK ON THE PICTURE BELOW TO GET OUR FREE EXCEL DEBT MANAGEMENT SPREADSHEET
The Manulife debt survey 2016 published recently shows that the results continue the trend of earlier Manulife surveys. We have written about the Manulife debt survey findings before in some of our blogs including:
Manulife debt survey: Majority of Canadians have no savings
The findings in the current debt survey shows that Canadians are continuing to rely upon debt and not building up any savings to speak of. The highlights from the 2016 Manulife debt survey are:
almost 4 in 10 homeowners were “caught short” at least once in the past 12 months in that they didn’t have enough money in their bank account to cover expenses
6 in 10 homeowners lack confidence that they’ll be able to maintain their lifestyle in retirement
a weaker Canadian dollar had an impact on over half of homeowners’ daily lives. It affected Canadians more on the spending and consumption behaviours than saving, debt repayment and investment activities
1 in 4 homeowners indicated they expect their home equity will make up over 80% of their household wealth at retirement
1 in 4 homeowners in their 50s expect their home equity will make up over 80% of their household wealth at retirement
Manulife debt survey: What does it mean for Canadians?
What this means is that on average:
Canadians’ wealth is composed of their equity in their homes and nothing else
spending habits are such that they have no savings to speak of
if faced with an emergency people couldn’t put their hands on a few thousand dollars of cash quickly
baby boomers have not saved for retirement, other than for the equity in their home;
millennial’s see their fate as the same as the baby boomers
on average, Canadians’ spending habits are such that many times they do not have enough money to live before the next payday
Manulife debt survey: 5 simple questions to ask yourself
The dangers are obvious. With everyone’s wealth tied up in the equity in their homes, most Canadians are cash and investment poor. Canadians worry that they won’t be able to live their current lifestyle in retirement. Also, without cash and investment savings, upon retirement, homeowners will have to sell their home to have the necessary cash to live on. Ask yourself the following:
Is all of my wealth tied up in the equity in my home?
If faced with an emergency, would I have to try to borrow more money because I don’t have a few thousand dollars available?
Do I have too much debt?
Manulife debt survey: Do you have no cash and too much debt?
If you have answered yes to any of these questions, there is help available for you. If you’re like many Canadians who don’t have a plan to deal with debt repayment, you need professional advice. ContactIra Smith Trustee & Receiver Inc. before your debt load becomes critical. The earlier you begin to deal with it, the more options you’ll have. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now you can live a debt free life.
Credit scores Ontario is a judgment about your financial health, at a specific time. It indicates the risk you represent for lenders, compared with other consumers. There are many ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900.
In Canada, the magic number is probably 650. A score above 650 will likely qualify you for a standard loan while a score under 650 will likely bring difficulty in receiving new credit.
Credit scores Ontario: How is it calculated?
The credit score formula takes all or most of the following into account:
Your payment history
The total amount you owe
Length of your credit history
New credit accounts
New credit inquiries, whether approved or not
Types of credit in use
Credit scores Ontario: Good credit scores do have sex appeal
A good credit score has shown that money does play a big role in the dating world; it is a reality. It’s sad but true; your income does play a big part in how attractive you seem to a potential partner. And, did you know that good credit scores have sex appeal?
Credit scores Ontario: Like it or not, a good credit score makes you attractive
There’s an old joke that says there’s no such thing as an ugly man in a Ferrari. But, let’s be honest, if you were on an online dating site and saw a potential date who was attractive but unemployed or in what you perceived as a low paying job, would you reach out to that person?
Conversely, if you saw someone who wasn’t movie star attractive but reported a high income or listed their profession as CEO, lawyer or doctor, wouldn’t they look a lot better to you?
Credit scores Ontario: Credit score dating backed by scientific studies
Don’t take my word for it. This is all backed up by science. There are many studies on the subject including a recent one co-authored by behavioural economist Dan Ariely who in the journal Quantitative Marketing and Economics reported:
Men and women prefer a high-income partners over low-income partners
This income preference is more pronounced for women
Credit scores Ontario: Beware – high income is only one part of it
Income only tells part of the story. Find out how they spend their money. Are they living within their means? They may have a big income but is it enough to cover the expenses of the fancy sports car, big house and exotic vacations? Big earners, celebrities and even Presidents (and President-elects!) declare bankruptcy too:
Credit scores Ontario: what to do about too much debt
We aren’t in the dating business, but we can help you get your debt issues under control. Give the Ira Smith Team a call today so that Starting Over, Starting Now you can live a debt free life, and you may have better luck dating.
The holiday shopping season is upon us and the first sign that you are in financial trouble is if you truly need to learn about consumer proposal vs bankruptcy BEFORE you begin your holiday shopping! If you have already recognized that you need to know your options in dealing with your debt before you start putting holiday gift purchases on your credit card, I suspect that the New Year will become the time when you begin taking positive action to reduce your debt and gain back control over your life.
A consumer proposal is an alternative to bankruptcy. Although similar in many respects, there are some major differences. Consumer proposals are available to people only whose total debts do not exceed $250,000, not including debts secured by their principal residence. Division 1 proposals are available to both businesses and people whose debts exceed $250,000 (excluding the mortgage on their principal residence). The focus of this vlog is on the differences between a consumer proposal vs bankruptcy.
Consumer proposal vs. bankruptcy: What are consumer proposals?
Consumer proposals are formal ways governed by the Bankruptcy and Insolvency Act (BIA) available only to people. Working with a licensed insolvency trustee (Trustee) acting as the consumer proposal administrator, you make a proposal to:
Pay your creditors a percentage of what you owe them over a specific period not exceeding 60 months
Extend the time you have to pay off the debt
Or a mix of both
Payments are made through the trustee, and the trustee uses that money to pay each of your creditors. The consumer proposal must be completed within 5 years from the date of filing.
Below I will highlight more differences between a consumer proposal vs. bankruptcy.
Consumer proposal vs bankruptcy: What are the advantages of a consumer proposal?
The advantages of a consumer proposal vs. bankruptcy are:
You keep all of your assets
Actions against you by unsecured creditors, such as wage garnishments will stop.
Unlike informal debt settlement, the consumer proposal is a forum where all of your creditors must deal with your restructuring
You don’t have to declare the “B” word
What are the differences in credit history score?
The individual that declares bankruptcy will certainly get R9 status. This is the lowest credit score as well as it will continue to be on their report for 7 to 14 years. A person that submits a consumer proposal will have an R7 ranking which is less extreme. It will certainly continue to be on their record for approximately 8 years in total, from the moment of declaring.
For the most part, you will certainly pay less than you owe with a consumer proposal. Often as much as 70% less. Your several financial obligations will also be consolidated right into a simple regular monthly settlement. This number will be based upon what you can pay for.
Your ability to improve your credit score later is much different in a consumer proposal vs bankruptcy
What are the costs and fees of a consumer proposal versus filing for bankruptcy?
When doing a consumer proposal, the Trustee’s charges are included in the payment you bargain with your creditors. For instance, if your consumer proposal has you paying $400 monthly for 60 months, the Trustee’s fee and disbursements are taken from those funds.
Nevertheless, if you were to file for bankruptcy, the cost is established by any kind of excess earnings you could have (based on the criterion that includes earnings as well as family size), any assets that you may intend to try to keep, and also the monthly contribution for surplus income if any.
If there is no excess earnings or assets, the insolvency cost will be around $2,000. This is another difference between a consumer proposal vs bankruptcy.
Are assets treated differently between a consumer proposal vs bankruptcy?
If you do a consumer proposal, you can retain your assets whereas in bankruptcy your properties might be impacted. This consists of the equity in your home if higher than $10,000, a car or truck worth more than $6,000 (with no liens against it), financial investments, tax refunds, and also RRSP payments made in the last 1 year. In bankruptcy, you transfer your possessions (except those that are exempt by regulation) to the Trustee, and they are then sold or transferred to repay your creditors.
This difference between a consumer proposal vs bankruptcy is huge.
What if I default on my consumer proposal vs bankruptcy payments?
If you do not maintain your payments on a consumer proposal, it defaults and is void. You also are unable to submit an additional one. Collection action by your credits will begin again. If you do not complete all your duties in bankruptcy, you will certainly not be discharged and eventually, your creditors will resume collection activities as well.
This is another consumer proposal vs bankruptcy difference.
When is a meeting of creditors held in a consumer proposal?
A meeting of creditors in a consumer proposal is held if one is requested by one or more creditors who are owed at least 25% of the total value of the proven claims.
A request for a meeting has to be made by the creditors within 45 days of the filing of the consumer proposal. The OSB can also request the Trustee to call a meeting of creditors any time within that exact same duration.
The meeting of creditors should be held within 21 days after being called. At the meeting of creditors, they vote to either approve or decline the proposal.
If no meeting of creditors is asked for within 45 days of the filing of the proposal, the proposal will be deemed to have been accepted by the creditors no matter any objections received later.
A consumer proposal is finished once the individual has actually made the required payments for the needed period of time. In a bankruptcy, the discharge depends on a variety of different aspects, consisting of whether it was the first time the debtor filed for bankruptcy and if they need to make surplus income payments.
If the debtor has actually never ever declared bankruptcy before and they do not have to make surplus income payments, most bankrupts are discharged 9 months after declaring bankruptcy. However, if the bankrupt has surplus income, they will need to make payments for 21 months prior to when they can be released.
This is another difference between a consumer proposal vs bankruptcy.
What do consumer proposals and bankruptcy have in common?
Both a consumer proposal and filing for bankruptcy are lawfully binding procedures that are provided by a Trustee. If you are thinking about bankruptcy, it is essential that you consult with a Trustee so that you can totally understand the procedure, what’s involved, and also any charges. You can speak with friends or family that may have filed for one or the other before, yet it is necessary that you get professional recommendations concerning your unique situation.
Filing for bankruptcy or doing a consumer proposal are both matters of public record. That means there will certainly be an irreversible public document regarding your insolvency that can be accessed by anyone. If the debts are joint or co-signed, the other individual is accountable for the financial debt in both a consumer proposal and personal bankruptcy as well, unless it is a joint filing.
Even these similarities still point out differences between a consumer proposal vs bankruptcy.
Consumer proposal vs bankruptcy: How to Figure Out Which Option is Best for You?
As you can see, when you look at a consumer proposal vs bankruptcy, there are definitely differences between the two, but they also have a lot in common too. What’s most important, though, is that you find the best way to get your finances back on track in a way that will help you achieve your long-term goals.
Consumer proposals and bankruptcy aren’t the only ways of obtaining debt relief and consolidating debt. There are also other ways of resolving debt problems that don’t involve an official program or paying anyone. If you honestly want to carefully and objectively look at all your options, contact a local Trustee, and speak to him or her. They’ll listen to your situation and issues and advise you on what will work best for you even if you do not need to file for either a consumer proposal or bankruptcy.
Their help is usually free and non-judgmental.
At our Firm, declaring bankruptcy is only encouraged until all other settlement solutions have been exhausted. A consumer proposal in Ontario is shaping up to be one of the better bankruptcy alternatives, primarily because of the reasons I describe in this Brandon’s Blog.
Consumer proposal vs bankruptcy: Who qualifies for a consumer proposal?
A consumer proposal is available to people whose total debts do not exceed $250,000, not including debts secured by their principal residence.
Before you decide what to declare, contact a professional to discuss all of your options. A trustee is a highly-skilled, professionally licensed by the federal government that can evaluate your situation and presents all the options available to you. Whatever process ends up being the best and the most helpful for your particular circumstance, we can administer the insolvency process.
Consumer proposal vs bankruptcy: How to file for bankruptcy?
In order to file, you must engage a Trustee. This is an individual or company licensed by Industry Canada to administer the insolvency process. The 10 steps below are a guide to the bankruptcy process.
Contact a licensed insolvency trustee and attend a meeting with him or her to talk about your personal situation and your options including if it is possible for you to avoid bankruptcy.
Work with the trustee to complete the required forms. The trustee will then file the bankruptcy with the Office of the Superintendent of Bankruptcy (OSB).
The trustee notifies your creditors of the bankruptcy.
You attend a meeting of creditors if one is called.
You attend two counselling sessions.
Subject to your provincial exemptions, the trustee sells your assets; you may also have to make surplus income payments to the trustee.
In certain circumstances, you may have to attend an examination by an officer at the OSB.
The Trustee prepares a report to the OSB describing your actions during the bankruptcy.
You attend the discharge hearing if required.
You get your discharge from your bankruptcy and then the trustee completes the administration, including paying a dividend to your creditors, if available.
Consumer proposal vs bankruptcy: Move on with your life
I hope you have enjoyed this consumer proposal vs bankruptcy Brandon’s Blog. Both a successfully completed consumer proposal or obtaining your discharge from bankruptcy lets you get back on the road to financial health, relieve the stress you face and bring you:
The ability to live better than just hanging on one payday to the next;
Improved credit ratings; and
Improved health and well-being.
Ira Smith Trustee & Receiver Inc. offers a full range of insolvency services to people facing a financial crisis. Whether you need help with a proposal to your creditors to avoid the worst case, financial counselling or advice about insolvency options, our goal is to make sure that you understand the process, your choices, and what steps will get your life back on track.
Call us for your free first consultation. We will inform you about all the choices readily available so you can make a proper decision about the very best plan to deal with your financial obligations. ContactIra Smith Trustee & Receiver Inc. today. All you have to lose is your debt!
Managing Healthcare Expenses in Retirement: The Myth
We Canadians tend to wrap ourselves with our secure universal healthcare program without paying any mind to the fact that some things are not covered (and coverage varies from province to province). Most people working don’t worry about managing healthcare expenses in retirement.
Some of the items not covered or only partly covered may include:
Prescription drugs
Eye glasses and contact lenses
Para-medical services like physiotherapy
Dental Care
Dentures
Unfortunately the older we get, the more likely it is we’ll be availing ourselves of these types of services. However, we don’t seem to be saving for these expenses.
Managing Health Care Expenses in Retirement: What should the average Canadian be saving?
According to the Canadian Institute for Health Information costs paid out-of-pocket for healthcare expenses not covered by our provincial plans are on average:
$2,700 for people between the ages of 55 and 80
More than $5,600 a year for those 80+
The time to start managing healthcare expenses in retirement is now. By 2063 it’s estimated that 20% of Canadians will be 65 and older. And the cost of healthcare is only going to rise making managing healthcare expenses in retirement more challenging.
If you’re living paycheque to paycheque or are a senior on a fixed income, how will you come up with the money to pay for prescription drugs or para-medical expenses? Sadly there are those who are denying themselves their medical necessities because the money is just not there. Or, they’re accumulating debt month over month to try to keep up with expenses. Neither one of these options is a good solution.
Managing healthcare expenses in retirement: What Can You Do If You Have Too Much Debt?
If you’re teetering on the brink of insolvency, Ira Smith Trustee & Receiver Inc. is here to throw you a life jacket. There is no reason to drown in debt when help is at hand. Give us a call today and meet with us for a free, no obligation consultation. We’ll evaluate your situation and come up with a solid plan so that Starting Over, Starting Now you can be on your way to debt free living.
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Are bankruptcy fees tax deductible: Introduction
We are often asked the question “are bankruptcy fees tax deductible?”. This vlog attempts to answer that question for the various types of Canadian insolvency proceedings.
I caution that we are not income tax advisors; I am a licensed insolvency trustee. This vlog does not attempt to and does not replace expert income tax advice. If you have a specific situation, you should get advice from your professional income tax advisor.
Are bankruptcy fees tax deductible: What does Canada Revenue Agency say?
Costs incurred in a bankruptcy filing can be categorized as either: (i) incurred for the purpose of gaining or producing income from a business or property or; (ii) incurred for capital or non-income earning reasons. Another way of saying it is a taxpayer cannot deduct personal expenses but can deduct those categorized as business expenses. So are bankruptcy fees tax deductible? It depends on who you are.
Are bankruptcy fees tax deductible: Personal bankruptcy and (consumer) proposal restructuring
If you are the individual person who has too much debt and either restructures under one of the proposal provisions to avoid bankruptcy, or goes bankrupt, then your real obligation is not to pay professional fees. Rather, you are making payments to the licensed insolvency trustee in a restructuring to settle all of your debts or you have given up your non-exempt assets and may also be paying part of your monthly income as surplus income to your licensed insolvency trustee.
Under either scenario, the licensed insolvency trustee obtains their fee under the Bankruptcy and Insolvency Act (BIA). You as the individual debtor are not paying bankruptcy expenses to earn income. Therefore you are not entitled to any tax deduction for the amounts and property given to the licensed insolvency trustee.
Corporations attempt to restructure under either the proposal provisions of the BIA or the restructuring provisions of the Companies’ Creditors Arrangement Act (CCAA) for the purpose of avoiding bankruptcy and the end of its business. The purpose of the restructuring attempt is to stay an active corporation, preserving jobs, continuing to earn income and pay income tax. In this case, professional fees paid to legal and financial advisors would be tax deductible for the company restructuring.
As this vlog is only to answer the questions are professional fees tax deductible, I am not addressing the issue of the income tax treatment of the corporate debt forgiven in a successful restructuring. That is where I turn to professional tax advisors for the answer.
Are bankruptcy fees tax deductible: Corporate bankruptcy
In a corporate bankruptcy, the bankruptcy corporation’s assets would be taken over by the licensed insolvency trustee handling the bankruptcy, subject to the interests of the secured creditor(s) and trust claimants, if any. Therefore, there are no fees paid by the bankrupt corporation for the purpose of earning income. Hence, there is no tax deduction for professional fees to be taken on the bankrupt corporation’s final income tax return.
Are bankruptcy fees tax deductible: Receivership and secured creditors
Receivership is a remedy for secured creditors to enforce security. The secured creditor whose loan is in default, when in a place to enforce its security, appoints a receiver to take possession of the assets, formulate a plan to maximize the sale value, sell the assets and remit the proceeds to the appointing secured creditor, up to the amount outstanding under the security. The company in receivership does not incur professional fees, but the secured creditor does; to both legal counsel and to the receiver. Those professional fees incurred in the normal business of the lender are therefore tax deductible.
I will leave the topic of the income tax consequences for a secured creditor who suffers a shortfall when realizing upon assets covered by its security to the professional tax advisors.
are bankruptcy fees tax deductible
Are bankruptcy fees tax deductible: Purchaser of assets
Many times in corporate restructuring, the restructuring plan calls for the sale of assets. In both bankruptcy and receivership, the assets will be sold. The purchaser of assets will in such cases be a corporation. That purchaser corporation will need insolvency and income tax professional advisors in structuring and paying for the asset purchase. Those professional fees are tax deductible to the purchaser.
Are bankruptcy fees tax deductible: Unsecured creditors
In any of the insolvency processes discussed in this vlog, there will certainly be many unsecured creditors. The major unsecured creditors, especially in corporate insolvency proceedings will want to consult with professional advisors as to their rights and remedies when faced with an insolvent debtor.
Sometimes unsecured creditors make an application to Court to have a Bankruptcy Order made against a debtor. Both legal and trustee advice is necessary.
In either case, the professional fees are paid in the normal course of business and will be tax-deductible.
Are bankruptcy fees tax deductible: Do you need insolvency advice?
If you need insolvency advice, either because you or your company have too much debt, or one of your major customers are experiencing financial problems, the professional fees may very well be tax deductible. The Ira Smith Team acts on behalf of both debtors and creditors. We have successfully restructured many people and corporations, thereby allowing them to avoid bankruptcy. We have also acted on behalf of both secured and unsecured creditors both in an advisory role and an enforcement role.
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