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CONDITIONAL DISCHARGE BANKRUPTCY COMPLETE GUIDE: IRA SMITH TRUSTEE TORONTO

Post author By Brandon Smith
Post date October 27, 2025

conditional discharge

As a Licensed Insolvency Trustee at Ira Smith Trustee & Receiver Inc., I’ve guided many people through the bankruptcy process in the Greater Toronto Area. One of the most common questions I hear is: “What happens at my discharge hearing?” Recently, a significant Ontario court decision has shed new light on this crucial aspect of bankruptcy proceedings, particularly regarding conditional discharge orders.

This case is especially relevant when considering my recent blog posts. In my previous blog posts about the Toronto condo market and current issues in the Ontario mortgage default space, I’ve discussed how many people have found themselves in similar predicaments to the woman described in this recent decision.

Filing for bankruptcy may be a viable option for many people who are on the wrong end of a shortfall claim due to a failed real estate investment. Every person thinking about bankruptcy as a way to eliminate hundreds of thousands of dollars of debt must also consider the possibility that they may not get an absolute discharge from bankruptcy. This is what this case that I describe below highlights.

Today, I want to walk you through the detailed case of Re Xianglan Li, 2025 ONSC 5812. It illustrates what can happen when things go wrong in bankruptcy – and what you can learn from it to protect yourself.

Why Not All Discharges Are Absolute: Introducing Conditional Discharge

Before diving into the case details, let’s establish some fundamentals. When you file for bankruptcy in Canada under the Bankruptcy and Insolvency Act (Canada), the ultimate goal is to receive a discharge from bankruptcy – your legal release from most debts. However, not everyone receives an automatic discharge.

There are four types of discharge orders under the Canadian Bankruptcy and Insolvency Act:

Absolute Discharge – You’re immediately released from your debts that can be discharged with no conditions
Conditional Discharge – You must fulfill certain conditions (usually payment obligations) before being released from your debts
Suspended Discharge – Your discharge is delayed for a specific period. A suspended discharge can be combined with conditions that also must be fulfilled, if appropriate. Otherwise, the person receives an absolute discharge after the suspension period expires.
Refused Discharge – The court denies your discharge entirely (rare and only used in extreme cases)

A conditional discharge typically requires the bankrupt person to pay a certain amount of money to the trustee before being released from bankruptcy. This payment goes toward creditors’ claims and demonstrates a good-faith effort to repay at least some portion of the outstanding debts.

The Real Estate Speculation Case: A Cautionary Tale

The recent Ontario Superior Court decision in Re Xianglan Li provides valuable insights into how courts determine what kind of discharge order to grant, and whether it should be a conditional discharge, what conditions to impose, or should it be a different form of discharge.

The Background Story

Ms. Li’s bankruptcy story began with a failed real estate transaction in Richmond Hill, Ontario. In July 2017, she signed an Agreement of Purchase and Sale (APS) to buy a property for $1,435,607.67 – a significant investment by any measure, but not unusual for a home in the GTA. She paid deposits totalling $179,810.67, including upgrades.

Here’s where things get interesting: Ms. Li signed this agreement while her husband had just purchased another property four months earlier for $955,472.87. The new property she was planning to purchase cost approximately $480,000 more than the one her husband had just bought.

The real problem? The combined total of Ms. Li’s reported taxable income and that of her husband in 2017 was less than $20,000 – yet they were trying to purchase properties for a combined cost of over two million dollars. So either they had a lot of unreported income or they could never afford what they were trying to accomplish in real estate, or both.

When the closing date arrived in November 2018, Ms. Li couldn’t complete the purchase. The developer, Arista Homes, terminated the agreement, kept all deposits, and sued for damages totalling $281,421.39.

In April 2020, before a judgment was issued, Ms. Li filed for bankruptcy. It turns out that Arista was her only creditor in the bankruptcy. That is the Reader’s Digest version of a long, sordid tale.

Why This Matters for Toronto Area Residents

If you’ve been following real estate trends in the Greater Toronto Area, this story might sound familiar. It is a similar story to my prior blogs on the Toronto condo market and current issues in the Ontario mortgage default space.

The combination of rising interest rates, cooling real estate prices, and overextended purchasers has created a perfect storm. Many individuals who signed pre-construction purchase agreements during the hot market now cannot close on their properties.

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What Happened at the Discharge Hearing Before the Registrar in Bankruptcy?

Ms. Li’s discharge hearing revealed several significant problems that led to a conditional discharge order rather than an absolute discharge.

Section 173(1) Facts: The Court’s Concerns

Under the Bankruptcy and Insolvency Act (Canada) (BIA), Section 173(1) lists specific “facts” that, if proven, prevent the court from granting an absolute discharge. This section of Canada’s bankruptcy legislation lists facts for which discharge may be refused, suspended or granted conditionally. In Ms. Li’s case, the court found three such facts proven:

1. Section 173(1)(a) – Assets Not Equal to 50 Cents on the Dollar

This provision requires the bankrupt person to prove that their financial collapse arose from circumstances they cannot “justly be held responsible” for. Ms. Li couldn’t meet this burden.

The court found that Ms. Li had engaged in conduct similar to what the judge called “rash and hazardous speculation.” She had signed a $1.4 million purchase agreement without:

Consulting her husband
Considering how to finance the purchase
Having a reasonable income to support a mortgage qualification
Securing any form of financing commitment

As the court noted, she was “impulsive, naive and irresponsible in committing for a home purchase without any financial planning.”

2. Section 173(1)(e) – Rash and Hazardous Speculation

The court determined that Ms. Li’s conduct constituted “rash and hazardous speculation” under the BIA. The judge emphasized that this assessment must be made relative to the person’s financial circumstances.

For someone with Ms. Li’s paltry reported income to commit to purchasing a $1.4 million property was objectively rash and hazardous. Even if the real estate market had cooperated, there was no realistic path to securing mortgage financing with her income level.

3. Section 173(1)(o) – Failure to Perform Duties

Perhaps most damaging to Ms. Li’s case was the court’s finding that she failed to fulfill her duties as a bankrupt person. Under Section 158 of the BIA, bankrupts have various duties, including:

Deliver all books, records, and documents to the trustee
Make full disclosure of all property dispositions
Submit to examinations under oath
Aid the trustee to the utmost of their power

Ms. Li failed to complete the undertakings from her examination, leaving crucial questions unanswered about:

Bank account statements from relevant periods
Details of family loans and their sources
Contributions to previous mortgage payments
Disposition of proceeds from other property sales
Repaying a loan to a family in China

The court emphasized that bankrupts must “actively aid” the trustee, not “remain passive and hope that the financial storm would blow over.”

Conditional Discharge: The Doctrine of Avoiding Judgment Through Bankruptcy

One particularly important principle emerged from this case: courts don’t look favourably on people who use bankruptcy primarily to avoid paying a judgment claim.

The Supreme Court of Canada established in Kozack v. Richter, 1973 CanLII 166 (SCC), that when someone files for bankruptcy mainly to escape a judgment arising from their wrongful conduct, courts should impose meaningful payment conditions if the person can pay.

In Ms. Li’s situation, even though Arista hadn’t obtained a formal judgment before she filed for bankruptcy, it was clear that the lawsuit was the primary reason for her assignment into bankruptcy. The court considered this factor heavily in determining the appropriate conditions.

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The Final Conditional Discharge Order: How the Court Decided

After reviewing all the evidence in this case, Associate Justice Ilchenko ordered a conditional discharge requiring Ms. Li to pay 10% of the proven claim, being $28,142.14, within 24 months.

This amounted to roughly 10 cents on the dollar of the total claim of $281,421.39. While this was significantly less than the 20-30% sought by Arista, it was also much more than the $5,000 recommended by the trustee.

The court balanced several competing considerations:

Factors Supporting a Lower Amount:

Ms. Li had already paid $179,810 in deposits that Arista kept
She earned a modest income as a bus driver ($64,974 in 2024)
She had some chronic medical conditions
She had tried to extend the closing date and complete the purchase

Factors Supporting a Higher Amount:

The proven Section 173((1) facts show poor judgment
The need to maintain the integrity of the bankruptcy system
Her failure to cooperate fully with the trustee
The public interest in commercial morality
Her age (51) and continued earning capacity

Conditional Discharge: Key Lessons for Anyone Considering Bankruptcy

This case offers several crucial lessons for anyone in the Greater Toronto Area or elsewhere in Ontario dealing with overwhelming debt:

1. Be Realistic About Real Estate Commitments

If you’re considering purchasing property – especially pre-construction condos or high-value homes – ensure you have:

Verified mortgage pre-approval from a qualified lender
Realistic assessment of your income and expenses
Contingency plans if market conditions change
Professional advice from mortgage brokers and real estate lawyers

Don’t rely on optimistic assumptions about future property value increases or income growth.

2. Cooperate Fully With Your Trustee

If you do file for bankruptcy, complete cooperation with your Licensed Insolvency Trustee is essential. This means:

Providing all requested documents promptly and completely
Answering all questions truthfully and thoroughly
Attending all required meetings and examinations
Disclosing all assets, income sources, and property dispositions
Responding to undertakings and follow-up requests
Attending the two mandatory bankruptcy and credit counselling sessions with the Licensed Insolvency Trustee under the Insolvency Counselling Program established by the Office of the Superintendent of Bankruptcy Canada

Failure to cooperate can transform what might have been an absolute discharge into a conditional discharge – or even a refused discharge.

3. Understand Your Duties as a Bankrupt

The BIA imposes significant duties on anyone who files for bankruptcy. You’re not just passively waiting for discharge – you have active obligations to:

Aid the trustee in realizing your assets
Submit to examinations under oath
File all required tax returns
Report material changes in your financial situation
Attend financial counselling sessions

These aren’t optional suggestions – they’re legal requirements that the court takes very seriously.

4. Consider Consumer Proposals as an Alternative

Many people in situations similar to Ms. Li’s might be better served by filing a consumer proposal rather than bankruptcy. A consumer proposal allows you to:

Negotiate a settlement with creditors for less than 100% of your debts
Keep control of your assets
Avoid some of the restrictions that apply to bankrupts
Make predictable monthly payments over up to five years

At Ira Smith Trustee & Receiver Inc., we often find that consumer proposals, or for those with debts greater than $250,000, not including any mortgages or lines of credit secured against your personal residence, a Division I Proposal under the BIA, provide better outcomes for clients, particularly those arising from failed real estate transactions.

5. Document Everything

If you’re involved in property transactions that later fail, maintain meticulous records of:

All agreements and amendments
Payment receipts and bank statements
Communications with developers or sellers
Financial advice you received
The efforts you made to complete transactions

This documentation becomes crucial if you later need to demonstrate that your financial difficulties arose from circumstances beyond your control.

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The Current Real Estate Reality in the GTA

As I discussed in my blog about mortgage default, we’re seeing increasing numbers of people facing similar challenges to Ms. Li’s situation.

The combination of:

Higher interest rates
Stricter mortgage qualification rules
Declining property values
Economic uncertainty
Job market volatility

…has created a situation where many pre-construction purchasers simply cannot close on their agreements.

If you signed a pre-construction purchase agreement during the hot market of 2020-2022, you may now be facing:

Inability to qualify for necessary mortgage financing
Property values below your purchase price
Difficulty selling your current home to fund the new purchase
Developer demands for additional deposits or price increases

These situations require professional guidance from a Licensed Insolvency Trustee who understands both insolvency law and real estate market realities.

Life After Conditional Discharge: Rebuilding Your Financial Future

If you receive a conditional discharge in bankruptcy, here’s what you need to know:

You Remain Bankrupt Until Conditions Are Met

A conditional discharge doesn’t release you from bankruptcy immediately. You remain an undischarged bankrupt with all associated restrictions and obligations until you fulfill the court-ordered conditions.

This means:

You cannot obtain credit over $1,000 without disclosing your bankruptcy
You cannot act as a director of a corporation
You may face professional restrictions depending on your occupation
You must continue reporting income and expenses to your trustee

Payment Terms Are Usually Flexible

Courts typically give reasonable time periods to fulfill payment conditions – often 12 to 24 months. Section 172(3) of the BIA does allow for modifying a conditional discharge order.

If you face genuine hardship preventing payment, you can apply to the court to vary the terms. However, you must demonstrate that you’ve made reasonable efforts and that circumstances beyond your control prevent compliance. Also, you cannot even apply for such relief until at least 1 year after the date the conditional discharge order was made.

Your Credit Report Is Affected

A conditional discharge appears on your credit report differently from an absolute discharge. The bankruptcy notation expiry time period cannot even begin until you satisfy the conditions and receive your discharge certificate.

This can affect:

Your ability to obtain credit
Employment opportunities in the financial sector
Professional licensing in certain fields
Your credit score and borrowing costs

You Can Rebuild Afterward

Once you fulfill the conditions and receive your discharge, you can begin rebuilding your financial life. While the bankruptcy remains on your credit report for six to seven years from discharge, many people successfully rebuild credit within two to three years through:

Secured credit cards
Small installment loans
Consistent bill payment history
Steady employment and income
Financial counselling and budgeting
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When to Seek Professional Help

If you’re facing financial difficulties related to real estate commitments or mounting debts for any other reason, and are considering a potential bankruptcy, don’t wait until the situation becomes critical.

Warning Signs You Need Help Now

Contact a Licensed Insolvency Trustee immediately if you’re experiencing:

Inability to make mortgage or rent payments
Collection calls from creditors or legal proceedings
Using credit cards or loans to pay basic living expenses
Considering withdrawing RRSP funds to pay debts
Losing sleep or experiencing stress-related health problems due to debt
Contemplating a consumer proposal or bankruptcy

What We Can Do for You

At Ira Smith Trustee & Receiver Inc., we provide comprehensive debt relief services for individuals and businesses throughout the Greater Toronto Area, including:

Free Initial Consultations – We’ll review your complete financial situation and explain all available options
Consumer Proposals – We’ll negotiate with creditors to reduce your debt and create affordable payment plans
Personal Bankruptcy Filings – We’ll guide you through the entire bankruptcy process professionally and compassionately
Credit Counselling – We’ll help you understand what went wrong and develop strategies to avoid future problems
Business Restructuring – For entrepreneurs, we offer financial restructuring through commercial proposal services to save your business and the jobs you create

Our team understands the unique challenges facing Greater Toronto Area residents dealing with high housing costs, challenging economic conditions, and complex debt situations.

The Importance of Choosing the Right Trustee

Choosing an experienced, knowledgeable Licensed Insolvency Trustee matters so much. The relationship between the trustee’s recommendations and the court’s final order can significantly impact your outcome.

When selecting a trustee, look for:

Experience with similar cases – Has the trustee handled situations like yours?
Clear communication – Do they explain complex legal concepts in understandable terms?
Comprehensive service – Do they offer alternatives to bankruptcy like consumer proposals?
Local knowledge – Do they understand the specific challenges in your community?
Professional reputation – What do other clients and legal professionals say about them, such as in Google reviews

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Moving Forward, Your Next Steps

If you’re dealing with overwhelming debt, potential mortgage default, or considering bankruptcy, here’s what to do next:

Step 1: Gather Your Financial Information

Collect documentation, including:

Recent pay stubs and tax returns
List of all debts with balances and payment terms
Monthly expense breakdown
Asset list with current values
Mortgage statements and property tax bills
Any legal documents, like demand letters or court papers
All of this information can be captured by completing our Debt Relief Worksheet

Step 2: Schedule a Free Consultation

Contact Ira Smith Trustee & Receiver Inc. for a confidential, no-obligation consultation. We offer both video and in-person meetings. We’ll review your situation and explain your options clearly, including:

Whether bankruptcy is necessary or if alternatives exist
What type of discharge might you expect
How to avoid a conditional discharge if possible
Timeline and costs for each option
Impact on your family, employment, and future

Step 3: Make an Informed Decision

After understanding all options, you can make the choice that’s right for your situation. We’ll never pressure you – our role is to provide expert advice and support whatever decision you make.

Step 4: Take Action

Once you’ve decided on a path forward, we’ll handle all the legal requirements, court filings, and creditor communications. You’ll have experienced professionals managing every aspect of your case.

Conditional Discharge Conclusion: Learning from Others’ Experiences and Embracing the Path to a Bright Financial Future

The case of Ms. Li’s conditional discharge offers important lessons for anyone struggling with debt in the Greater Toronto Area. While her situation involved failed real estate transactions, the principles apply broadly:

Be realistic about your financial capacity before making major commitments
Cooperate fully with professionals trying to help you
Understand your legal duties and responsibilities
Seek expert advice early, before problems become crises
Choose experienced professionals to guide you through difficult processes

A conditional discharge isn’t the end of the world – it’s a manageable step toward financial recovery. However, the best approach is avoiding situations that might lead to bankruptcy in the first place, or choosing alternatives like consumer proposals when appropriate.

At Ira Smith Trustee & Receiver Inc., we’ve helped many individuals and families in the Greater Toronto Area successfully navigate financial difficulties and emerge with a fresh start. Whether you’re facing mortgage default, overwhelming consumer debts, failed business ventures, or other financial challenges, we’re here to help. You can also visit our Google Business Profile to learn more about our services and read client testimonials.

Don’t let financial stress control your life. Contact Ira Smith Trustee & Receiver Inc. today for a free, confidential consultation. Call us at (647) 799-3312 to discuss your options with an experienced Licensed Insolvency Trustee who truly cares about your future, Starting Over Starting Now.

Remember: seeking help isn’t a sign of failure – it’s a smart step toward financial recovery and peace of mind. Let us help you find the right path forward.

The information provided in this blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc., and any contributors do not assume any liability for any loss or damage.

Brandon Smith is a Licensed Insolvency Trustee and Senior Vice-President at Ira Smith Trustee & Receiver Inc., serving individuals and businesses throughout the Greater Toronto Area. With years of experience in insolvency cases, including financial restructuring, Brandon helps clients navigate complex financial challenges and find sustainable solutions, Starting Over Starting Now.

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Brandon Blog Post

EQUIFAX CREDIT SCORE RESET TO ZERO? GTA DEBT RELIEF EXPERT REVEALS HIDDEN TRUTH

Post author By Brandon Smith
Post date June 2, 2025

Are you struggling with debt in Toronto, Vaughan, Newmarket, Mississauga, or anywhere else in the Greater Toronto Area? Your Equifax credit score might be telling a story you didn’t expect. As a licensed insolvency trustee serving the GTA, I’ve seen how credit score surprises can impact families when they need financial help most.

What is an Equifax Credit Score?

Your Equifax credit score is a three-digit number between 300 and 900 that represents your creditworthiness to Canadian lenders. Think of it as your financial report card—it tells banks, credit card companies, and other lenders how likely you are to pay back money you borrow.

Why Equifax Canada matters:

One of the two major credit bureaus (along with TransUnion)
Used by most major Canadian banks and lenders
Influences your ability to get mortgages, car loans, and credit cards
Affects the interest rates you’ll be offered

Understanding Equifax Credit Score Ranges

Here’s what your Equifax credit score means:

800-900 (Excellent): You’ll get the best rates and terms
720-799 (Very Good): Strong credit with good loan options
650-719 (Good): Average credit, decent loan terms available
560-649 (Fair): Below average, higher rates and fewer options
300-559 (Poor): Difficulty getting approved for credit

The reality for GTA residents: If you’re struggling with debt, your score might be in the fair or poor range. But here’s the shocking truth—sometimes even people with good financial habits face unexpected credit score problems.

The Shocking Truth About Equifax Credit Scores in Canada

Your Equifax credit score is more than just a number—it’s your financial passport in Canada. But what happens when that passport gets taken away without warning?

David Tregear from Victoria, BC, thought he was doing everything right. He paid his bills on time and lived debt-free for two years. Then he applied for a car loan and got rejected. When he checked his Equifax credit score, he couldn’t believe what he saw: ZERO. Not a low score—completely erased.

This isn’t a one-off story. It’s happening to Canadians across the country, including right here in the GTA.

How Your Equifax Credit Score Can Disappear (And Why It Matters)

Here’s what Equifax Canada doesn’t tell you: if you don’t use credit for about two years, they can reset your credit score to zero. No warning. No second chances. You become “unscorable.”

Why this matters for GTA residents:

Many Toronto-area lenders use Equifax Canada as their primary credit bureau
A missing Equifax credit score can block you from getting a mortgage, car loan, or even a credit card
TransUnion (the other major credit bureau) doesn’t have this same policy
Your financial options can disappear overnight

How to Access Your Equifax Credit Score

Online Access (Easiest Method):

Visit Equifax.ca and create a free account
Use the Equifax Canada mobile app for quick checks
Get one free credit report per year, plus monthly score updates with paid plans

Other Access Methods:

By phone: Call 1-800-465-7166
By mail: Send a written request to Equifax Canada
In-person: Visit Equifax Canada offices (limited locations)

For GTA residents: Online access is fastest, but if you’re dealing with serious debt issues, sometimes speaking to someone directly helps clarify your options.

Factors That Influence Your Equifax Credit Score

Understanding what affects your score helps explain why it might be low, or why it disappeared entirely:

Payment History (35% of your score)

Late payments hurt your score significantly
Missing payments for 30+ days show up on your report
Bankruptcy and consumer proposals appear here, too

Credit Utilization (30% of your score)

How much of your available credit are you using
Using more than 30% of your credit limit hurts your score
Maxed-out credit cards are major red flags

Length of Credit History (15% of your score)

How long have you had credit accounts
Average age of all your accounts
This is where the “unscorable” problem happens—no recent activity can reset your score

Types of Credit (10% of your score)

A mix of credit cards, loans, and mortgages
Shows you can handle different types of credit

Credit Inquiries (10% of your score)

Hard inquiries from loan applications
Too many inquiries in a short period hurt your score

The debt connection: When you’re overwhelmed by debt, multiple factors work against you—high utilization, missed payments, and desperate applications for more credit.

When Debt Problems Meet Credit Score Problems

As a licensed insolvency trustee in the GTA, I see clients facing double trouble: overwhelming debt AND damaged credit scores. Here’s what I’ve learned:

The Debt-Credit Score Cycle

When you’re drowning in debt, you might think avoiding credit is smart. But if your Equifax credit score gets reset to zero, rebuilding becomes nearly impossible. You can’t get approved for new credit to rebuild your score.

Comparing Equifax with TransUnion: Why It Matters

Key differences between Canada’s credit bureaus:

Scoring Models

Equifax: Uses a 300-900 range, focuses heavily on payment history
TransUnion: Also 300-900 range, but weighs factors slightly differently
Your scores may differ between bureaus based on which lenders report to whom

The “Unscorable” Problem

Equifax: Can reset your score to zero after about 2 years of inactivity
TransUnion: Doesn’t have the same reset policy
Result: You might be scoreable on one bureau but not the other

Lender Preferences

Some GTA financial institutions prefer Equifax
Others use TransUnion
Many check both, but if one shows “unscorable,” you might be denied

Why this matters for debt relief: When considering consumer proposals or other debt solutions, we need to understand which bureau lenders will check and plan accordingly.

How to Get Your Free Equifax Credit Report

Step-by-Step Guide:

Visit Equifax.ca and click “Get My Free Credit Report.”
Verify your identity with personal information
Answer security questions based on your credit history
Review your report carefully for accuracy
Download or print for your records

Protecting your information:

Only use the official Equifax.ca website
Never give your SIN over unsolicited phone calls
Review reports regularly for identity theft signs
Dispute errors immediately

Red flag for GTA residents: If you can’t access your report online or get “insufficient information” errors, you might be facing the “unscorable” problem.

Tools for Improving Your Equifax Credit Score

If You Can Still Get Credit:

Pay bills on time: Set up automatic payments
Lower credit utilization: Keep balances under 30% of limits
Don’t close old accounts: Length of history matters
Limit new applications: Each inquiry temporarily lowers your score

If You’re Struggling with Debt:

Don’t ignore the problem: Credit scores recover faster than you think with proper help
Consider debt consolidation: One payment instead of many
Explore the consumer proposal process: Can eliminate up to 80% of debt while protecting assets
Understand bankruptcy options: Sometimes it’s the fastest path to rebuilding credit

Premium Equifax Services

Equifax Complete™ Family Plan:

Monthly credit score updates
Credit monitoring and alerts
Identity theft protection
Costs around $25-35/month

Equifax ID Patrol™:

Advanced identity monitoring
Dark web scanning
Recovery assistance if identity is stolen

My recommendation for debt-struggling families: Free credit reports are sufficient while you’re getting your finances back on track. Save the monthly fees for debt payments instead.

The Role of Credit History in Your Financial Recovery

How Long-Term Credit Behaviour Affects Your Options

Good credit history before debt problems:

Makes you a better candidate for debt consolidation loans
Can help negotiate better terms with creditors
Provides more options for financial recovery

Poor credit history:

Doesn’t disqualify you from debt relief options
Consumer proposals work regardless of credit score
Bankruptcy in Ontario provides fresh start opportunities

The “unscorable” situation:

Creates unique challenges but doesn’t eliminate options
May require secured credit cards to rebuild
Licensed insolvency trustees can provide specific guidance

Real Stories from GTA Clients

I’ve helped families in Toronto, Vaughan, Newmarket, Scarborough, Brampton, and North York who discovered their Equifax credit score issues only when applying for debt consolidation loans. By then, their options were limited, but never eliminated.

Your Equifax Credit Score and Debt Solutions: What You Need to Know

Consumer Proposals and Your Credit Score

If you’re considering a consumer proposal in Ontario, here’s how it affects your Equifax credit score:

A consumer proposal shows as an R7 rating on your Equifax credit report
This stays on your report for 3 years after completion
It’s better than bankruptcy (R9 rating), which stays for 6-7 years
You keep your assets while getting debt relief

Bankruptcy and Credit Rebuilding

For some GTA residents, bankruptcy is the best fresh start option:

First-time bankruptcy typically lasts 9 months in Ontario
Your Equifax credit score will rebuild faster than you think
We help clients understand the credit rebuilding process from day one

Protecting Your Equifax Credit Score: Practical Tips for GTA Residents

Monitor Your Score Regularly

Check your Equifax credit score every few months
Look for the “unscorable” warning before it’s too late
Keep one small credit account active if you can manage it responsibly

Know Your Rights

Equifax Canada must investigate disputes within 30 days
You can add a consumer statement to your credit file
Provincial and federal agencies can help with serious issues

Don’t Wait Until It’s Too Late

If you’re struggling with debt in Toronto, Vaughan, Mississauga, Markham, or anywhere in the GTA, don’t wait for credit problems to compound your debt problems.

Red Flags: When to Seek Help with Debt and Credit Issues

Contact a licensed insolvency trustee if you’re experiencing:

Minimum payments that barely cover interest
Using credit cards for basic expenses like groceries
Considering payday loans or high-interest alternatives
Credit applications are being denied due to debt levels
Stress about money is affecting your daily life

How We Help GTA Residents Navigate Debt and Credit Challenges

As your local licensed insolvency trustee, I provide:

Free Consultations

Review your complete financial situation
Explain how debt solutions affect your Equifax credit score
Discuss all options before you make any decisions

Personalized Debt Solutions

Consumer proposals that can reduce debt by up to 80%
Bankruptcy protection when it’s the right choice
Credit rebuilding guidance throughout the process

Local GTA Knowledge

Understanding of Ontario employment standards and exemptions
Connections with local credit counselling services
Knowledge of the GTA housing market impacts on financial decisions

The Bottom Line: Don’t Let Credit Score Confusion Add to Your Debt Stress

Your Equifax credit score is important, but it shouldn’t control your life. Whether your score is perfect, damaged, or mysteriously missing, there are always options for Canadians struggling with debt.

David Tregear’s story shows us that even people who think they’re doing everything right can face credit surprises. Don’t let debt problems and credit score issues compound each other.

Frequently Asked Questions About Equifax Credit Scores and Debt

How do debt problems relate to Equifax credit score problems?

Debt problems and low Equifax credit scores often form a difficult cycle. When overwhelmed by debt, individuals may miss payments (hurting payment history), use a high percentage of their available credit (increasing utilization), and potentially apply for more credit, leading to multiple inquiries. If, in an attempt to manage debt, someone stops using credit entirely for about two years, their Equifax score can reset to zero, making it almost impossible to rebuild credit through conventional means.

Can a consumer proposal improve my Equifax credit score?

A consumer proposal will initially lower your Equifax credit score, but it provides a clear path to rebuilding credit while eliminating unmanageable debt.

How long does it take to rebuild credit after bankruptcy?

Most clients see their Equifax credit score improve within 12-18 months of discharge with proper credit rebuilding strategies.

Should I check my Equifax credit score if I’m already in debt trouble?

Yes. Understanding your current credit situation helps determine the best debt relief strategy for your specific circumstances.

Can I get a mortgage in the GTA after a consumer proposal?

Many clients successfully obtain mortgages 1-2 years after completing a consumer proposal, often with better terms than they had while struggling with debt.

Take Action Today

If you’re a GTA resident dealing with overwhelming debt, don’t wait for your credit situation to get worse. As a licensed insolvency trustee serving Toronto, Mississauga, Brampton, Markham, and surrounding areas, I’m here to help you understand your options.

Free consultation available:

No obligation to proceed
Complete review of your debt and credit situation
Clear explanation of how debt solutions affect your Equifax credit score
Practical next steps you can take immediately

Remember: Your current financial situation doesn’t define your future. With the right help and information, you can overcome both debt challenges and credit score problems.

As a licensed insolvency trustee serving the Greater Toronto Area, I encourage consumers and business owners to view financial difficulties not as failures but as challenges that can be addressed with proper guidance. By understanding the warning signs of insolvency and seeking professional advice early, many people and businesses can find a path forward – whether through restructuring, strategic changes, or in some cases, an orderly wind-down that protects their future opportunities.

Remember: The earlier you seek help for company insolvency concerns, the more options you’ll have.

If you or someone you know is struggling with too much debt, remember that the financial restructuring process, while complex, offers viable solutions with the right guidance. As a licensed insolvency trustee serving the Greater Toronto Area, I help entrepreneurs understand their options and find a path forward during financial challenges.

At the Ira Smith Team, we understand the financial and emotional components of debt struggles. We’ve seen how traditional approaches often fall short in today’s economic environment, so we focus on modern debt relief options that can help you avoid bankruptcy while still achieving financial freedom.

The stress of financial challenges can be overwhelming. We take the time to understand your unique situation and develop customized strategies that address both your financial needs and emotional well-being. There’s no “one-size-fits-all” approach here—your financial solution should be as unique as the challenges you’re facing.

If any of this sounds familiar and you’re serious about finding a solution, reach out to the Ira Smith Trustee & Receiver Inc. team today for a free consultation. We’re committed to helping you or your company get back on the road to healthy, stress-free operations and recover from financial difficulties. Starting Over, Starting Now.

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Brandon Blog Post

PROTECTION FROM CREDITORS: WHAT TORONTO ENTREPRENEURS ABSOLUTELY NEED TO KNOW BEFORE IT’S TOO LATE

Post author By Brandon Smith
Post date May 12, 2025

protection from creditors

Protection From Creditors: The Real Problem Toronto Business Owners Face

I need to start by reminding you that I am a licensed insolvency trustee, not a lawyer. This Brandon’s Blog on protection from creditors is not about how to hide your assets from creditors when financial trouble looms. It is also not legal advice. For that, you need to see your lawyer.

Rather, this is for informational purposes about the realization that pretty much every Toronto entrepreneur risks losing their assets to business debt. This Brandon’s Blog is meant to provide practical steps to gain protection from creditors for your personal assets while resolving business financial troubles from a licensed insolvency trustee with many success stories.

Meet Carlos. He started a food truck in Toronto selling arepas in 2022. By 2024, food costs doubled, and he took out a $100,000 loan using his North York home and his food truck as collateral. Now, he’s three months behind on payments. The bank wants his business AND his house.

Carlos isn’t alone. Nearly 3 out of 4 small business owners in Ontario lose sleep over mixed personal and business debts. With consumer debt hitting record highs and business bankruptcies up almost 18% in Ontario last year, keeping your business problems from becoming problems for your personal financial affairs is crucial.

Protection From Creditors: Why Your Business Debt Becomes Personal -Three Common Traps

Trap #1: Using Personal Credit Cards for Business

“I just needed to buy supplies quickly.”

The hard truth: When you swipe your card for business expenses, you’re personally responsible for that debt. 68% of new businesses use personal credit.

Trap #2: Signing Personal Guarantees

“The bank said I had to sign my name to get the loan.”

The hard truth: Almost all Canadian small business loans (92%) require personal guarantees. Last year, a Mississauga contractor lost his heavily mortgaged home because he guaranteed a $350,000 equipment loan he could not repay.

Trap #3: Mixing Money

“I don’t have time to keep everything separate.”

The hard truth: When your personal and business money flows through the same accounts, you’re asking for trouble. Almost 9 out of 10 bankruptcy cases get more complicated and expensive because of mixed finances.

protection from creditors

Four Ways Toronto Entrepreneurs Can Get Protection From Creditors

Option 1: Creditor Protection Through Business Restructuring (For Incorporated Companies)

This uses Canada’s Companies’ Creditors Arrangement Act (CCAA) or the restructuring provisions of the Bankruptcy and Insolvency Act (BIA) to:

Keep your business running while you work out new payment terms
Shield your personal stuff from business creditors

Real example: A restaurant group kept six locations open through this process last year.

Good points:

Protects your personal assets
Keeps your employees working

Not-so-good points:

CCAA only works for bigger companies ($5+ million in debt) and is court-driven and therefore very expensive.
For companies that owe less than $5 million, the restructuring provisions of the BIA are available and is a less costly process than the CCAA. Technically, nothing is stopping a debtor that qualifies under the CCAA to use the BIA instead.
Takes 6-18 months to complete

Option 2: Consumer Proposal (Perfect for Many Small Unincorporated Business Owners)

A consumer proposal can legally:

Cut up to 80% off your total debt
Let you keep your assets if completed successfully
Stop collection calls, lawsuits, and bank account seizures immediately

Real example: A Scarborough sole proprietor cut $150,000 in mixed debts down to $30,000 through a consumer proposal.

How it works:

Meet with a licensed insolvency trustee (free first meeting)
File paperwork under the BIA
Make one affordable monthly payment for up to 5 years that your unsecured creditors have agreed to either at a meeting of creditors (if required) or having agreed in advance, and therefore no meeting is necessary

Option 3: Strategic Personal Bankruptcy

Sometimes starting fresh makes the most sense, especially when:

Your business can’t be saved
You need immediate relief from overwhelming debt
You don’t own any or many assets

What Can You Keep? Ontario’s 2025 Bankruptcy Exemptions

When dealing with serious debt problems, many Toronto entrepreneurs worry they’ll lose everything. Good news – Ontario law lets you keep certain things even during bankruptcy or proposals.

Your Home

You can keep your home if: You have $10,783 or less in equity (that’s your home’s value minus what you still owe on your mortgage).

You might lose your home if: Your equity is higher than $10,783. In that case, the trustee might sell your home to pay creditors, but you’d still get the first $10,783.

What Else Can You Keep?

Household Items: Furniture, appliances, dishes, and food up to $14,180

Work Tools: Equipment you need for your job or business up to $14,450

Your Car: One vehicle worth up to $6,600

Clothes: All your necessary clothing, no dollar limit

Retirement Savings: Most RRSPs are protected (except money you put in during the 12 months before filing)

Life Insurance: Many policies are protected from creditors

For Farmers: Special protections for livestock, equipment, and tools up to $31,379

Real-World Example: I will call this woman Samira. When Samira, a Toronto web designer, filed for bankruptcy, she kept her car valued at $5,000, her computer equipment (valued at $8,000), and her condo (because her equity was only $9,000). This gave her the fresh start she needed without losing essential assets. She still had lots of secured debt, which is another issue, but she did not have to give up those assets.

Note: These exemption numbers can change yearly with regulations. Always check with a licensed insolvency trustee for the most current exemption amounts.

Option 4: Debt Consolidation (The 2025 Method)

Many Toronto entrepreneurs are now:

Working with alternative lenders to the big banks, such as credit unions
If of sufficient value, using business equipment as collateral instead of their homes

Warning: Be careful with this option. Nearly half of consolidated debts end up in default within two years.

Get Protection From Creditors Today: The One-Hour Checklist

Step 1: Separate Your Money (This Afternoon)

Open business accounts at a different bank from your personal accounts
Stop using credit cards that you cannot afford to pay off monthly for business expenses
Set up automatic transfers for your business’s “salary”

Step 2: Document Everything (This Evening)

Take photos of all business equipment
Make copies of all loan agreements
Create a list of who you owe money to (both business and personal)

Step 3: Get Help (This Week)

Contact the Ontario Business Legal Clinic for free advice
Visit Toronto’s Office of Financial Empowerment
Calculate your business debt ratio (Total Debts ÷ Total Assets)
protection from creditors

Protection From Creditors: Real Toronto Success Stories

The Tech Startup That Bounced Back

Problem: A Markham software company owed $2.3 million to creditors, both secured creditors and unsecured creditors. The founder had used his $900,000 condo as loan collateral.

Solution: Through a court-supervised restructuring, the company cut their debt by 60%. Today, they’re profitable and employ 12 people.

The Food Truck Owner Who Saved His Home

Problem: Carlos (from our opening story) had $230,000 in combined debt. The CRA was about to garnish his income.

Solution: Through a consumer proposal, he reduced his unsecured debt to $30,000 and will be paying it off over five years ($500 monthly). He can pay that along with his bank loan payments and therefore keep his home and his food truck.

Protection From Creditors: Three Things To Do Before Friday

Download our free worksheet: “Toronto Debt Relief Worksheet“. Fill out all the requested information. Warning: it asks for a lot of information because it aims to look at every important aspect of your financial situation.
Review carefully all the information you filled in: If you were honest and completed the whole worksheet, the issues you need to work on will jump right off the page at you.
Book your free consultation: If the worksheet highlights issues you don’t know what the best solution would be to fix them, contact us for a no-cost consultation.
protection from creditors

Protection From Creditors Conclusion

I hope you’ve found this protection from creditors Brandon’s Blog, helpful. There is a lot of uncertainty in business today. The time to properly plan to gain asset protection from creditors is when you begin your business. Once your business is in financial trouble, it is too late.

protection from creditors

Brandon Blog Post

DEBT COLLECTION AGENCY LAWSUIT: AVOID THESE 3 SERIOUSLY COSTLY ERRORS

Post author By Brandon Smith
Post date September 16, 2024

collection agency

Collection Agency Lawsuit: Introduction

As a licensed insolvency trustee, I’ve witnessed the serious effects that a debt collection agency or other creditor lawsuits can have on people and their families. The idea of being sued can feel incredibly daunting, especially when you learn from your lawyer that your chances of winning might not be great. The stress and anxiety that come with being chased by a collection agency can be exhausting, and the fear of receiving a judgment against you can be paralyzing.

However, it’s important to know that you don’t have to face this challenge on your own. Throughout my career, I’ve assisted many individuals and families in navigating the complicated and often stressful world of debt collection lawsuits. Along the way, I’ve identified three common mistakes that can worsen an already difficult situation.

In this post on Brandon’s Blog, I’ll outline these three costly errors that people often make when dealing with debt collection agency lawsuits. Whether you’re currently facing a lawsuit and feeling overwhelmed or just want to be prepared, this information could be vital for you.

Collection Agency Lawsuit: Understanding Ontario’s Debt Collection Regulations

Overview of Ontario laws and practices

The Province of Ontario’s debt collection laws regulating the activities of each collection agency are governed mainly by the Collection and Debt Settlement Services Act, R.S.O. 1990, c. C.14. However, elements of the Consumer Reporting Act, R.S.O. 1990, c. C.33 also come into play. Here’s an overview of the laws and collection practices that every collection agency must follow:

Collection and Debt Settlement Services Act:

Registration: To provide debt collection agency services, they must be registered with the Province to operate in Ontario and collect outstanding debts on behalf of either the original creditor or themselves if they purchased the debt from the original creditor. To obtain registration, a collection agency must meet certain requirements, such as having a minimum amount of insurance coverage and a designated complaints officer.
Prohibited Practices: Every Ontario debt collection agency and their collection agents are prohibited from engaging in certain practices, including:
- Using threats, intimidation, or harassment to collect debts
- Making false or misleading representations
- Disclosing confidential information
- Falsifying documents
- Using unfair or deceptive tactics
Communication: Every collection agency in Ontario must communicate with consumers professionally and respectfully. They must also provide clear and concise information about the debt, including the amount owed, the creditor’s name, and the date the debt was incurred.
Verification: Each Ontario collection agency must verify the debt before attempting to collect it. This includes confirming the debt with the creditor and ensuring that the consumer is the correct person responsible for the debt.
Cease and Desist: Consumers can request that a collection agency cease contacting them. The agency must comply with this request and not contact the consumer again unless they have a new debt to collect.

Consumer Reporting Act:

Credit Reporting: Credit reporting agencies must follow strict guidelines when collecting and reporting consumer credit information. This includes ensuring that the information is accurate, up-to-date, and not used for discriminatory purposes.
Consumer Rights: Consumers can access their credit report, dispute errors, and request that inaccurate information be removed.
Data Protection: Credit reporting agencies must protect consumer data by implementing reasonable security measures to prevent unauthorized access, disclosure, or use of the information.
collection agency

Best Practices for Debt Collection Agency Responsibilities in Ontario

Compliance: Debt collectors and the collection agency they work for must comply with the laws and regulations outlined above.
Transparency: Debt collectors must be transparent about the debt, including the amount owed, the creditor’s name, and the date the debt was incurred.
Professionalism: Debt collectors must communicate with consumers professionally and respectfully and not use coercive language.
Verification: Debt collectors must verify the debt before attempting to collect it.
Cease and Desist: Debt collectors must respect consumers’ requests for the collection agency to cease and desist from contacting them.
Data Protection: Debt collectors and the collection agency they work for must protect consumer data by implementing reasonable security measures.

Penalties for Non-Compliance

Fines: Any collection agency and all credit reporting agencies that fail to comply with the laws and regulations may be subject to fines.
License Revocation: A collection agency that fails to comply with the laws and regulations may have its license revoked.
Criminal Charges: Debt collectors who engage in illegal or unethical practices may be subject to criminal charges.

It’s essential for debt collectors, their collection agency employer and credit reporting agencies to understand and comply with the laws and regulations outlined above to avoid penalties and maintain a positive reputation.

Collection Agency Lawsuits: Understanding the Reality of Debt Collection Lawsuits

As someone who has been closely involved in the world of financial services and recovery, I can tell you that the reality of debt collection lawsuits over unpaid debts is far more prevalent than many people realize. In Canada alone, over 500,000 individuals grapple with such legal challenges every single year. This staggering figure reflects the growing financial struggles that touch nearly every corner of our society. It’s not just a number; it’s a profound reality affecting people’s lives, families, and futures.

Imagine waking up one day to find a statement of claim served upon you. Your heart races, palms sweat, and a whirlwind of anxiety seize you. It’s easy to feel overwhelmed, especially when confronted with the daunting legal jargon and complex processes that accompany a lawsuit. Many of those involved in these situations often feel disheartened, confused, and uncertain about the steps they must take next.

Real-Life Implications of Receiving a Statement of Claim

Let’s unpack what it truly means to be sued after normal collection agency collection efforts are exhausted without success. When you’re served with a court document, it’s not just a piece of paper; it’s a critical juncture in your financial journey. The implications are profound. Ignoring the claim will not magically make it disappear. It almost certainly worsens the situation. Many people mistakenly believe they can sidestep the problem, hoping it will fade away. Trust me, it won’t.

How you respond is vital, and can ultimately shape your financial future. I’ve seen firsthand how a lack of action can lead to disastrous outcomes. If taken lightly, it could lead to a judgment against you, which in turn can result in wage garnishments, frozen bank accounts, or even property liens. The psychological burden of such outcomes is immense, often leading individuals to feel trapped and hopeless.

Common Misconceptions About Debt Handling

One of the most significant misconceptions I often encounter is the belief that simply explaining one’s situation to a judge will lead to a favourable outcome. Unfortunately, reality operates quite differently. Courts have legal frameworks and procedures that must be followed. I’ve seen individuals attempt to represent themselves in court, unaware of the legal nuances that could potentially tip the scales in their favour. This lack of understanding often results in preventable mistakes that can cost dearly in the long run.

Moreover, misconceptions about debt relief options are common. Many people aren’t aware that debt collection lawsuits may present unforeseen opportunities to negotiate settlements or engage in alternate resolutions. An overwhelming percentage of those facing these challenges don’t seek legal assistance—only about one-third take that step. This lack of guidance often leads to missed opportunities for improved financial outcomes.

‘Ignoring debt is like ignoring a fire; it only gets worse over time.’

It’s crucial to dispel these misconceptions. Knowledge is power, and being informed means being better equipped to respond to the challenges debt collection lawsuits pose. It’s essential to reach out for help and understand all available options—taking control of the situation is the first step toward a more secure financial future.

Seek Professional Guidance: Your law firm experienced in such matters can provide invaluable expertise tailored to your specific situation.
Understand Your Rights: Knowing what legal protections you have can significantly influence your case.
Consider Debt Relief Options: Programs like consumer proposals or bankruptcy may offer a strategic path to recovery.

Ultimately, if you find yourself facing a debt collection lawsuit, remember that you’re not alone. The road ahead may seem daunting, but taking action early on can pave the way toward a brighter financial landscape. Whether it’s having your lawyer in your corner or understanding the options available to you, every effort counts.

As someone who has guided many through similar experiences, I can assure you that empowering yourself with accurate information and support can transform a seemingly dire situation into an opportunity for recovery. Imagine breaking free from the overwhelming pressure of financial strain. Picture a future where you’re no longer burdened by the weight of debt. It can happen, but only if you take that first step today.

Collection Agency Lawsuit: 3 Critical Errors in Responding to Debt Collection Lawsuits

As someone who has seen countless individuals navigate the turbulent waters of debt collection lawsuits, I can assure you that how you respond can profoundly impact your financial future. It’s not merely about settling scores; it’s about preserving your well-being and financial stability. Allow me to share some critical errors that can lead to catastrophic consequences and how to avoid them.

Understanding the Importance of Timely Responses

Let’s start with the most pressing point: the significance of responding promptly to a debt collection lawsuit. Imagine receiving a claim; your heart races and panic sets in. Many people think they can buy themselves time by delaying their response. However, this is a dangerous miscalculation. Inaction can lead directly to a default judgment, which means the court automatically rules against you simply because you failed to respond.

According to legal statistics, late responses can significantly jeopardize your case and lead to repercussions like wage garnishments and asset seizures. When you fail to respond in time, it’s not just a missed opportunity—it can spiral out of control, making your situation far more difficult than it needs to be. Timing is everything, and knowing when to act could make all the difference.

Consequences of Admitting Debt Too Soon

It’s important to be cautious when it comes to admitting the alleged debt, especially before you’ve fully assessed your situation. Many people, feeling overwhelmed, might quickly agree that they owe the amount claimed in a lawsuit without considering their options. This premature admission can severely limit your ability to negotiate and may cause you to overlook potential defenses that could work in your favor.

For instance, there might be errors in the amount owed, or the creditor might not even have the legal right to pursue the claim against you. I’ve seen many individuals inadvertently close off avenues for resolution just by admitting guilt too soon.

Before you make any statements about your debt, it’s vital to have a clear strategy. The potential consequences are significant—one misstep can put everything you’ve worked for at risk. It’s wise to consult with a legal expert who can help identify possible defences and negotiate on your behalf.

The Risks of Self-Representation

It’s important to understand that admitting to a debt too quickly can have serious consequences. Many people, feeling pressured and overwhelmed, might simply agree to the amount claimed in a lawsuit without fully considering their options. This can significantly reduce your chances for negotiation and might even forfeit defenses you didn’t know you had. For example, there could be errors in the amount owed, or the creditor might not even have the right to pursue the debt.

I’ve seen too many individuals inadvertently close off potential solutions by rushing to admit fault. Before making any statements about your debt, it’s vital to have a clear strategy in place. The implications of a hasty admission can be severe and could jeopardize everything you’ve worked hard for. Consulting with a legal professional is key—they can help identify possible defenses and negotiate on your behalf.

‘The stakes are high – one error can jeopardize everything you’ve worked for.’

The Emotional Toll of Mishandling Lawsuits

It’s vital to recognize that the consequences of mismanaging a debt collection lawsuit stretch beyond just financial implications. The stress that accompanies relentless creditor calls and the looming shadow of a court judgment can take an emotional toll that affects your relationships and overall well-being.

Many people underestimate how overwhelming financial troubles can be. The shame of facing a lawsuit can lead to feelings of isolation and anxiety, which are detrimental to both mental and physical health. I’ve spoken to individuals who felt like their lives were unravelling—caught in a cycle of fear, worry, and self-blame. It’s utterly exhausting and can drain your spirit.

Final Thoughts on Making Informed Decisions

Recognizing these three common mistakes when dealing with debt collection lawsuits is an important step in regaining control of your financial situation. By understanding the need to respond promptly, avoiding early admissions of guilt, and not going it alone without legal help, you can significantly improve your chances of achieving a better outcome.

Seeking professional advice can help you take charge of your financial future. Whether you need legal representation or are considering bankruptcy options, the most important thing is to take informed steps. Remember, being knowledgeable about your rights and options can be your biggest advantage during this difficult time.

Collection Agency Lawsuit: The Emotional and Financial Toll of Mishandling Lawsuits

As someone who has witnessed the devastating impacts of people who default on their monthly payment obligations and mishandling debt collection lawsuits, I can tell you that the fallout goes beyond just the immediate financial consequences. The reality is that when a lawsuit is mishandled, it triggers a domino effect that can alter one’s life in unimaginable ways. Let’s delve into the layers of this issue—looking not just at the financial repercussions but also the profound emotional toll it can take.

Immediate Financial Repercussions

When a debt collection lawsuit is mishandled, the financial ramifications are swift and serious. I’ve seen firsthand how beautiful dreams of financial freedom can turn into nightmares almost overnight. Many individuals underestimate the severity of a judgment against them, thinking it might not be a big deal. Unfortunately, the implications are significant. Once a court issues a judgment, the total debt amount, often much larger than the original loan due to accruing interest and legal fees, is now your responsibility. Not only are you stuck paying back the debt, but you might also be faced with additional costs.

Moreover, judgments can linger on credit reports for as much as seven years. If you’ve ever had to navigate the world of loans, mortgages, or even renting an apartment, you know how crucial a good credit score is to your financial viability. A low score may bar you from access to future loans or significant purchases—plummeting your chances of achieving goals you may have set for yourself. I’ve seen good people get turned down for jobs simply because of what’s on their credit report.

Long-term Impacts on Credit Scores

What I find incredibly frustrating is that the impact of a mishandled lawsuit doesn’t just end when you pay off your debt, if you can. The repercussions can echo into your future, overshadowing your financial landscape for years. The stain of a poor credit report and credit score isn’t easy to wash away, and the road to recovery can be long and winding. Financial institutions such as banks, credit unions and credit card companies rely heavily on credit scores when assessing new credit applications.

If you find yourself in a situation where a lawsuit leads to a judgment against you, the aftershocks can be felt in your credit score for years, creating barriers to financial opportunities that are vital for a secure future.

A judgment can impact your ability to rent a home.
It may hinder future loan applications or result in unfavourable interest rates.
It can limit your job prospects, as some employers check credit history during hiring.

As I mentioned earlier, the emotional struggle that accompanies these financial burdens is often overlooked. It’s vital not to underestimate how these experiences can impact your psyche. How many of you have felt that pit in your stomach when you see a creditor’s name pop up on your phone? It’s more common than you think.

The Overlooked Emotional Toll

As I walk alongside individuals facing debt collection lawsuits, I frequently notice how deeply these situations affect mental wellness. It’s not just about the debt; it becomes a stress point in every aspect of life. Stress manifests in various ways—relationship strains, health problems, and even long-term psychological effects. I know people who have faced sleepless nights filled with anxiety, worrying about unseen threats to their financial stability.

Just ask yourself: how would you feel knowing that a part of your hard-earned income is about to be garnished due to a court judgment? The feeling can be suffocating. It’s like standing on a precipice, staring down at the potential of losing everything you’ve worked so hard to maintain. And the isolation can be crippling. The shame associated with financial struggles can cut you off from support networks, making it harder to seek help when you need it most.

‘The emotional impact can be just as crippling as the financial one.’

Amidst all this, people often miss out on chances to negotiate more favourable terms or explore debt relief options. If only there were better guidance available, less hope would be lost when faced with such legal hurdles. I often reflect on the countless individuals who, due to misinformation and fear, missed out on opportunities for financial redemption.

To sum it up, mishandling a debt collection lawsuit can plunge you into a cesspool of financial instability and emotional turmoil. I’ve seen it wear people down, affecting their relationships, their health, and their overall quality of life. Once you find yourself in the whirlwind of a lawsuit, it’s crucial to tackle it head-on, seeking the right guidance and understanding the full scope of what’s at stake.

Collection Agency Lawsuit: Empower Your Financial Future: Steps to Take Now

As someone who’s seen countless individuals struggle with their finances, I cannot stress enough the importance of taking proactive steps toward achieving financial stability. Many people find themselves in overwhelming debt situations, and I often find that the best move is to seek professional guidance. This is not just a recommendation; it can truly be a lifeline in navigating these stormy waters.

In my interactions with clients, I’ve learned that many overlook the various options available to them in the face of insolvency challenges. Interestingly, seeking the help of a licensed insolvency trustee can illuminate paths they never considered. For instance, options like consumer proposals can be immensely beneficial, potentially leading to substantial debt reduction. These structured exits can alleviate the stresses of overwhelming debts without the burden of a lawsuit lingering over your head.

“Knowledge is power, and understanding your rights is the first step to taking control.”

Taking swift action can not only help you avoid the escalation of financial issues but also open doors for negotiation or resolution. The earlier you either confront the debt or seek help, the more options you have at your disposal.

Exploring Alternative Debt Management Strategies

Don’t underestimate the variety of avenues available to tackle your debt. While some may view bankruptcy as a daunting final resort, it offers legal protection against multiple and persistent creditor lawsuits. It’s vital to recognize that filing for bankruptcy or opting for a consumer proposal can pave the way for a fresh start. These strategies protect you from aggressive creditors, helping to secure your financial future.

I frequently advise my clients to consider all possible alternatives when managing debt. Engaging a licensed insolvency trustee can reveal insights into your specific situation and highlight options that not only aid in immediate debt relief but also help in rebuilding your creditworthiness in the long run.

The Path Towards Financial Recovery

Recovering financially is not just about resolving debts; it’s about reclaiming your financial future. Think about it: having a clear road map can give you peace of mind and remove layers of stress caused by those constant calls from creditors. I often ask my clients to imagine what life would feel like free from the worry of financial pitfalls, and that image often serves as motivation to take the necessary steps forward.

Sometimes, the biggest hurdle is the fear of the unknown. If you’re reading this because you’re feeling overwhelmed, know that there is a way out. Having someone like me or my trusted colleague, Brandon Smith, by your side could mean the difference between continuing down a precarious financial path or stepping toward recovery.

Taking Action: Your Proactive Steps

Now, let’s get practical. Here are key actions you can take:

Consult with an expert: Reach out to a legal professional who specializes in debt management to get a realistic opinion on the lawsuits facing you.
Explore other options: Contact a licensed insolvency trustee to learn about consumer proposals, bankruptcy, and other debt management strategies suitable for your situation. We have a very high success rate in consumer proposals.
Act swiftly: Don’t wait for the situation to worsen before seeking help; early intervention can be invaluable.

At the end of the day, it’s about recognizing that you are not alone in this. There are resources and people ready to help. When you reach out for assistance, you take the first step toward stability and financial empowerment. Remember, it does not have to be this way. There is hope for a brighter financial future, and with the right guidance, you can regain control over your financial destiny.

In summary, by seeking professional guidance and educating yourself on debt management options, you can chart a path toward financial recovery. Don’t let the weight of financial stress hold you back—take action today. Your future self will thank you for it!

Collection Agency Lawsuit: Conclusion

The bottom line is that you need to seek professional help to navigate debt challenges and challenging financial circumstances; explore options like consumer proposals or bankruptcy to regain control if the chances of success in winning your lawsuits are slim or dim. Early action is crucial for financial recovery and peace of mind.

I hope you enjoyed this collection agency lawsuit Brandon’s Blog. Do you or your company have too much debt? Are you or your company in need of financial restructuring due to distressed real estate or other reasons? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or someone with too much personal debt.

You are worried because you are facing significant financial challenges. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

The stress placed upon you is huge. We understand your pain points. We look at your entire situation and devise a strategy that is as unique as you and your problems; financial and emotional. The way we take the load off of your shoulders and devise a plan, we know that we can help you.

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team.

That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious about finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a free consultation. We will get you or your company back on the road to healthy stress-free operations and recover from the pain points in your life, Starting Over, Starting Now.

The information provided in this Brandon’s Blog is intended for educational purposes only. It is not intended to constitute legal, financial, or professional advice. Readers are encouraged to seek professional advice regarding their specific situations. The content of this Brandon’s Blog should not be relied upon as a substitute for professional guidance or consultation. The author, Ira Smith Trustee & Receiver Inc. as well as any contributors to this Brandon’s Blog, do not assume any liability for any loss or damage resulting from reliance on the information provided herein.

Tags alleged debt, coercive language, collection agency, collection agency lawsuit, Collection agency responsibilities, Collection Agency Services, collection agents, collection practices, credit card, credit history, credit report, credit score, Debt collection laws, debt collectors, financial circumstances, Financial services, law firm, monthly payments, outstanding debt

Brandon Blog Post

DEBT MANAGEMENT PROGRAM VS. BANKRUPTCY: OUR CHEAT SHEET HELPS YOU TO CHOOSE THE RIGHT OPTION FOR YOUR FINANCIAL SITUATION

Post author By Brandon Smith
Post date March 25, 2024

Debt Management Program: Introduction

Are you drowning in credit card debt, tax debt or any other debt and feeling overwhelmed by mounting interest charges? Are you behind in some or all of your debt payments? Is there a collection agency hounding you? It’s a common struggle, especially with the recent increases in interest rates. But fear not, there are debt relief options available to help you regain control of your finances. Two popular choices are a debt management program and bankruptcy, but there are key differences to consider.

In this Brandon’s Blog post, we will explore the differences between these two options and guide you on how to choose the right one for your unique financial situation. Read on to discover the path to financial freedom.

Understanding a Debt Management Program

A debt management program offers a way to pay off high-interest credit card balances without resorting to bankruptcy. However, it’s important to note that a debt management program may not be the best solution for everyone. It is most effective when your debt amount is manageable and you have assets you want to protect.

If you find yourself in this situation, a debt management plan can help you lower your overall payment to a more affordable amount, without the need for legal filings or interventions. This means you can keep your valuable possessions, such as homes, cars, and other assets. Additionally, debt relief allows for a more gradual approach, giving you the flexibility to regain your financial footing over time.

Is a debt management program right for you?

When you find yourself overwhelmed by debt, exploring debt management program options may provide a much-needed solution. However, determining whether a debt management plan is ideal for your situation requires careful consideration.

Debt Amount Consideration

A debt management program tends to be most effective when your debt amount is manageable. While the specific threshold varies depending on individual circumstances, having a debt level that you can realistically work to pay off over time is typically more conducive to successful debt management program outcomes.

You also need to separate secured debt from unsecured debt. Secured debt is what its name sounds like. The debt is secured against one or more of your assets, such as an auto loan. If you need the asset and its value is greater than the amount of debt against it, the secured lender will not be motivated to amend the amount you owe.

No Legal Filings Required

One of the key advantages of a debt management program is that it generally does not necessitate any legal filings or interventions. This streamlines the process and makes it more accessible to individuals seeking relief from their financial burdens. By avoiding legal procedures, a debt management program can offer a more straightforward and efficient path to debt resolution.

Use of Credit and Affordability

A debt management program allows you to continue using credit while you work towards repaying your debts. This can be particularly beneficial for maintaining essential expenses and managing unexpected costs during the debt management program process. Additionally, a debt repayment program often offers an affordable and gradual approach to debt repayment, making it suitable for individuals looking to regain financial stability without experiencing overwhelming financial strain or having the negative impact on your credit score that happens with bankruptcy.

Overall, the decision to pursue a debt management program should be based on a comprehensive evaluation of your financial situation and goals. By considering factors such as the amount of debt you owe, the convenience of the process, and the affordability of the options available, you can determine whether a debt management program aligns with your needs and priorities.

Debt Management Program: Considering Bankruptcy

A bankruptcy filing, on the other hand, provides a more immediate solution for those facing crushing debt loads. It can be the right choice when you owe significant amounts of credit card debt, unsecured personal loans, or other unsecured debts that far exceed your means. The bankruptcy process offers unparalleled debt elimination, but it comes with serious trade-offs.

Your credit score may be negatively impacted for a period of seven to ten years, making it a less favourable option if you have good or marginal credit and owe only a few thousand dollars. However, if your credit is already severely impaired, filing bankruptcy may be a quicker and more efficient way to resolve your debt burdens.

Is bankruptcy right for you?

Bankruptcy is a difficult financial decision that many individuals may consider when they find themselves overwhelmed by debt and unable to manage their financial obligations. While bankruptcy is a serious process under the Bankruptcy and Insolvency Act (Canada) with long-term consequences, it can also provide a fresh start for those in dire financial circumstances.

Relief from Crushing Debt Load

One of the primary reasons individuals opt for bankruptcy is the overwhelming burden of debt they carry. When debts become unmanageable, it can lead to constant stress, sleepless nights, and strained relationships. Filing for bankruptcy can provide relief by allowing individuals to eliminate or restructure their debts to a more manageable level.

By working with a Licensed Insolvency Trustee (LIT), individuals can develop a repayment plan or proceed with liquidating assets to pay off debts. This process can help individuals regain control of their finances and start anew with a more sustainable financial future.

Solution for Badly Damaged Credit

For individuals with severely damaged credit, bankruptcy can offer a way to address their financial challenges and start rebuilding their credit history. While bankruptcy harms credit scores initially, it also provides an opportunity for a fresh start.

By discharging debts through bankruptcy, individuals can eliminate the burden of overdue payments and past defaults that have been dragging down their credit rating. With a clean slate, individuals can gradually rebuild their credit by managing new credit responsibly and demonstrating improved financial habits.

Quick Resolution and Legal Protections

Unlike other debt management program options, bankruptcy offers a relatively quick resolution to financial problems. Depending on the type of bankruptcy filed, individuals can receive a discharge of their debts within less than 1 year to a few years, depending on the circumstances. This allows them to move forward without the weight of excessive debts.

Keep in mind that your discharge of debt does not take place until you are discharged from your bankruptcy. A few kinds of debt cannot be discharged through bankruptcy, but most people get their entire debt discharged.

Additionally, bankruptcy provides legal protections against creditors, wage garnishment, and foreclosure. Once an individual files for personal bankruptcy, an automatic stay goes into effect, preventing creditors from taking collection actions such as wage garnishment or repossession of assets.

This legal protection can provide individuals with much-needed relief and breathing room to address their financial situation. The downside of bankruptcy of course is that your non-exempt assets must be turned over to the Trustee to be sold.

The only Debt Management Program Approved By The Canadian Government

There is only one debt management program approved by the Canadian Government and it is an excellent option for those with a steady income. This government-approved form of debt relief is called a consumer proposal. It is the only government-approved debt settlement plan available in Canada and is an alternative to a liquidation bankruptcy. It is not as drastic as personal bankruptcy but has most of the bankruptcy protection elements making it more potent than in a debt management program.

A consumer proposal is a legal process also under the BIA designed to help individuals settle their debts with creditors in a manageable way. It provides a structured framework for debt repayment while offering protection from creditors’ collection actions. Let’s delve deeper into the key aspects of a consumer proposal.

Legal Process to Settle Debts with Creditors

When an individual is struggling with overwhelming debt and is unable to keep up with payments, a consumer proposal can be a viable solution. This process involves working with a LIT to create a formal proposal to creditors outlining a revised payment plan. The proposal typically includes an offer to repay a portion of the total debt over a set period, based on the individual’s financial situation.

Once the consumer proposal is submitted to the creditors, they have the opportunity to review and vote on the proposal. If the majority of creditors accept the terms of the proposal, it becomes a legally binding agreement, and the individual is bound to fulfill the revised payment plan.

Allows Debtor to Make a Formal Proposal to Creditors

One of the key benefits of a consumer proposal is that it allows debtors to take an active role in addressing their financial difficulties. Instead of facing aggressive collection actions from creditors or considering bankruptcy as the only option, individuals can work with a LIT to craft a proposal that is fair and feasible for both parties.

By making a formal proposal to creditors through a consumer proposal, debtors have the opportunity to demonstrate their commitment to repaying their debts in a structured manner. This not only helps in resolving financial issues but also allows individuals to regain a sense of control over their financial future.

Provides Protection from Creditors’ Collection Actions

Like bankruptcy, one of the significant advantages of opting for a consumer proposal is the protection it offers from creditors’ collection actions. Once the proposal is filed, an automatic stay of proceedings is initiated, which prevents creditors from pursuing legal actions, such as wage garnishments or asset seizures, against the debtor.

This protection provides individuals with relief from the constant stress and pressure of dealing with aggressive collection attempts. It allows them to focus on adhering to the terms of the consumer proposal and working towards becoming debt-free without the fear of immediate consequences from creditors.

In conclusion, a consumer proposal is a valuable tool for individuals facing overwhelming debt and seeking a structured way to settle their obligations with creditors. By understanding the legal process, the opportunity it provides to make a formal proposal, and the protection it offers from debt collectors’ collection efforts and legal actions, individuals can make informed decisions to improve their financial situation and work towards a debt-free future.

Meeting with a nonprofit credit counsellor to assess your financial situation

Consider credit counseling sessions with a certified nonprofit credit counsellor for expert recommendations. If you’re unsure about the best course of action to take regarding your debt, seeking advice from a certified nonprofit credit counselor can provide invaluable insights. These professionals working at a nonprofit credit counseling agency can assess your financial situation, provide personalized recommendations, and guide you toward effective debt management strategies.

WARNING: Stay away from for-profit debt settlement companies. A nonprofit credit counselor or a bankruptcy trustee can provide you with the same advice at no charge.

Choose between a debt management program or bankruptcy based on your specific circumstances

When deciding between a debt management program and bankruptcy, several factors should be taken into account. First, carefully assess your full financial situation and long-term goals. Consider the amount of debt you owe, your ability to make payments, and the impact on your credit score.

If you have assets you want to protect and prefer a more affordable and gradual approach, a debt management program might be the better option. On the other hand, if you are facing wage garnishment, or foreclosure, or need a quicker resolution, bankruptcy may be the right debt solution choice for you.

A consumer proposal or bankruptcy can be a viable option for individuals facing insurmountable debt, damaged credit, and the threat of financial instability. While it is a significant decision with long-lasting consequences, bankruptcy offers a path to financial relief, a fresh start, and legal protections against creditor actions.

It is essential for individuals considering bankruptcy to seek the advice of a financial advisor or bankruptcy professional to fully understand their options and make an informed decision about their financial future.

Debt Management Program: The bottom line

When it comes to managing debt, making informed decisions is crucial. Here are some key takeaways to help you navigate this challenging situation:

Carefully assess your financial situation and long-term goals.
Before taking any steps toward resolving your debt problems, it’s essential to have a clear understanding of the current financial position of your assets and all your outstanding debts.
Take stock of your monthly income and living expenses, so that you can create an accurate monthly budget to see where your money is being spent. Don’t forget to deduct from your monthly income your actual income taxes deducted from your monthly pay.

Debt Management Program: Conclusion

Assess your finances and goals, seek advice from a nonprofit credit counselor, and decide between a debt management program, consumer proposal or bankruptcy based on your specific circumstances. You can also have a no-cost consultation with a LIT to get personalized advice and find out how a consumer proposal or bankruptcy would work in your specific situation.

Dealing with overwhelming debt is no easy task, but there is hope. By understanding the differences between a debt management program, consumer proposal and bankruptcy, you can choose the right option for your financial situation. A debt management program offers a manageable and gradual approach, protecting your assets while you work towards becoming debt-free.

Bankruptcy, on the other hand, provides a quicker resolution and is best suited for those with significant debt loads and impaired credit. Remember to carefully evaluate your circumstances and consult with an expert if needed. With the right choice and determination, you can pave the way to a brighter financial future. Don’t let debt hold you back any longer – take control today and improve your financial health and your life.

I hope you enjoyed this debt management program Brandon’s Blog. Individuals and business owners must take proactive measures to address financial difficulties, consumer debt and company debt and promptly seek assistance when necessary. It is crucial to recognize that financial stress is a prevalent concern and seeking help is a demonstration of fortitude, rather than vulnerability. Should you encounter challenges in managing your finances and find yourself burdened by stress, do not delay in pursuing aid.

Revenue and cash flow shortages are critical issues facing people, entrepreneurs and their companies and businesses with debt problems that are in financial distress. Are you now worried about just how you or your business are going to survive? Are you worried about what your fiduciary obligations are and not sure if the decisions you are about to make are the correct ones to avoid personal liability? Those concerns and more associated with your company debt are obviously on your mind.

The Ira Smith Team understands these financial health concerns. More significantly, we know the requirements of the business owner or the individual who has way too much financial debt. You are trying to manage these difficult financial problems and you are understandably anxious.It is not your fault you can’t fix this problem on your own and it does not mean that you are a bad person. The pandemic has thrown everyone a curveball. We have not been trained to deal with this. You have only been taught the old ways. The old ways do not work anymore.

The Ira Smith Team uses innovative and cutting-edge methodologies, to adeptly navigate you through the intricacies of your financial challenges ensuring a resolution to your debt-related predicaments without resorting to the rigours of the bankruptcy process. We can get you debt relief now! We have helped many entrepreneurs and their insolvent companies who thought that consulting with a Trustee and receiver meant their company would go bankrupt. On the contrary. We helped turn their companies around through financial restructuring.We look at your whole circumstance and design a strategy that is as distinct as you are. We take the load off of your shoulders as part of the debt settlement strategy we will draft just for you.

The Ira Smith Trustee & Receiver Inc. team understands that people facing money problems require a lifeline. That is why we can establish a restructuring procedure for you and end the discomfort you feel.Call us now for a no-cost consultation. We will listen to the unique issues facing you and provide you with practical and actionable ideas you can implement right away to end the pain points in your life, to begin your debt-free life, Starting Over, Starting Now.

Tags Bankruptcy, collection agency, credit card, credit card debt, credit score, debt collectors, debt management program, debt relief options, debt settlement, debt settlement plan, debt solution, financial difficulties, monthly budget, nonprofit credit counseling agency, nonprofit credit counselor, protection from creditors, tax debt, unsecured debt, wage garnishments

Brandon Blog Post

DEBT AND UNPOPULAR INTEREST RATE HIKES, HOW IS THE ECONOMY FARING?

Post author By Brandon Smith
Post date May 30, 2022

What is the definition of debt?

Debt is the money that a person or company owes to others. That is the simplistic definition. It is really one of life’s most stressful parts. Some people grow up in debt. For them, it’s just part of their lives, and they can make it work. Others live from paycheque to paycheque and save little to nothing. For them, it is crippling and can consume their lives, making their existence a daily struggle. For others, it is a parasite, feeding on their mind and their body. It can destroy their life, pulling them down and limiting their options and choices.

Consumer debt and household debt come from a number of places. Some source of debt is from emergency situations, and some of it is from buying expensive things but useful and worth the cost. That is how people have viewed real estate over the last decade, especially during the unprecedented pandemic. However, I also see some situations where high levels are just from bad decisions.

Business loans and corporate debt come in handy for a number of reasons. Perhaps you need some extra cash to get your business up and running. Or, maybe you’re looking to expand your operations by opening a new branch or purchasing new equipment. In any case, a business loan can provide the funds you need to reach your goals. Or, like in the last 2 years, perhaps the bottom has fallen out of the economy due to the COVID-19 pandemic and in order to survive, the business has had to take on government-support loans to increase the business debt load substantially.

All of these are now coming together in a perfect storm, as the Bank of Canada attempts to battle inflation and high Canadian real estate prices by beginning a pattern of interest rate hikes.

In this Brandon’s Blog, I look at how interest rate hikes, higher Canadian household debt and more Canadian business bankruptcies are the most recent signs of the Canadian consumer debt burden, as well as the major indicator of the current state of business in Canada. debt

Policy Interest Rate – Bank of Canada

The Bank of Canada’s primary business is to conduct monetary policy for the Canadian economy. This means that the Bank uses its tools of monetary policy to try to hit its target for inflation, which it does by adjusting the Bank of Canada’s policy interest rate. The Bank of Canada’s policy interest rate is the rate at which it lends money to financial institutions.

At the beginning of March, the Bank of Canada increased its target for the overnight rate to 1%, with the Bank Rate at 1¼% and the deposit rate at 1%. This Fed interest rate hike was the biggest increase in two decades. The reason? To fight inflation.

The world’s biggest central bankers have long argued that ultra-low interest rates encourage spending and investment, helping to boost growth and employment. So at the outset of the pandemic with the world economies in tatters, all major central bankers, including the Bank of Canada, set borrowing costs at record lows. Those actions, amongst other things, contributed to the current state of inflation in the economy.

Macklem won’t rule out an inflation-driven, super-sized rate hike

The central bank predicts that inflation will remain high, averaging almost six percent in the first half of this year and remaining elevated in the second half of 2022. It is expected to ease in the second half of next year before returning to the two-per-cent target in 2024.

What are the factors causing this inflation? The global financial situation has become more difficult and unpredictable. Prices for oil, natural gas, and other commodities have risen sharply, contributing to inflation in many parts of the world. Supply disruptions resulting from Russia’s invasion of Ukraine have caused the prices of energy and other commodities to increase even further.

Looking to the future, Bank of Canada Governor Tiff Macklem stated that the Bank will be taking another 50-basis-point step which has already been baked into the financial markets. He believes that the economy needs higher rates and can handle them. It is evident that Macklem is dedicated to using Canada’s policy interest rate to bring inflation back to target. As inflation continues to surge to new highs, an even bigger interest rate hike may be on the horizon. Bank of Canada Governor Tiff Macklem indicated that further and faster rate hikes could be necessary to keep inflation in check.

The problem is that Canadian inflation is as much from a global impact as it is local. Raising interest rates may slow down home buying and mortgage growth. While it is true that mortgage debt is Canadians’ single largest obligation, increasing interest rates won’t fix the sky-high pricing at the gas pumps and the supermarkets. debt

As interest rates increase, so is household debt!

The latest figures from Statistics Canada, the agency responsible for collecting and disseminating statistics related to the economy of Canada, indicated that the total amount of household debt in the country increased by 0.5% in March 2022, up $14.4 billion to $2.69 trillion.

The increase of $13.2 billion came largely from debt related to the real estate market, such as mortgage borrowing and home equity lines of credit (HELOCs). This amount totalled $2.16 trillion outstanding. However, Statistics Canada also reported that credit card debt has increased for the second consecutive month, growing at a faster rate than mortgage debt!

Now as the Bank of Canada embarks on a hiking cycle that could go faster and further than before, and sky-high inflation squeezes household budgets, economists and capital markets are once again raising the red flag.

In a recent poll, 31% of Canadians polled say they already don’t make enough to cover their bills and required payments. Economists look at the rise in credit card debt and attribute it to a rise in personal spending. This is true. However, with prices rising much faster than wages, the increase could be a troubling sign that Canadians are spending on basics by using credit to replace the money they do not have and will not have to repay the new rising liabilities.

The rising cost of debt payments is already putting a strain on Canadians

If you’re borrowing money, interest is what you pay to your lender for using their money. It is your debt cost. If interest rates go up, the amount you have to pay each month for a mortgage, line of credit, or other loans with variable interest rates will increase. The minimum payment required each month on variable rate loan products will increase as interest rate hikes continue. At some point, you’ll also need to renew a fixed interest rate mortgage or loan. When interest rates are rising, the renewal rate on the fixed debt cost will be higher.

Raising borrowing costs to quell rising consumer prices may pose some risks, especially since Canada has a high level of household debt. In terms of household debt to income, Canada ranks 4th highest in the world. debt

What are the most effective ways to reduce your debt?

Paying down debt as much as possible will help counter the effects of a rise in interest rates and provide you with much-needed debt relief. Here are some of the best ways to reduce your debt burden thereby improving your credit score and credit rating:

Cut up your credit cards and only use cash for an extended period of time until things are back in control.
Make a budget and stick to it.
You should have an emergency fund to pay for unexpected expenses arising from external events out of your control.
Create a payoff plan. Look at your various categories of debt and make a plan that is most realistic for each type of debt.
Save money on interest by paying down the outstanding amount with the highest interest rate first.
Debt consolidation. Consolidate your liabilities with the highest interest rates into a single loan with a lower interest rate. By keeping your payments the same, and paying more than the monthly minimum payment, you’ll be able to pay it off faster and save money in the long run.
Avoid getting the biggest mortgage or line of credit that you’re offered.
Get a part-time job or begin a side hustle to boost your income.
Think first about how borrowing more money could impede your ability to save for future objectives.
Speak to a financial advisor or one from a wide variety of other financial professionals to find out how to teach you how to create a plan to be debt-free.

What will happen now with external debt and business bankruptcies?

As businesses continue to experience insolvencies, it’s important to note that the Canadian business bankruptcy rate is on the rise, according to a recent report by Statistics Canada and the Office of the Superintendent of Bankruptcy Canada. This increase underscores the importance of taking measures to protect your business from financial hardship.

Business bankruptcies in Canada increased by almost 34 percent year-over-year in the first quarter of 2022, which some experts warn could be the start of a growing wave of failures. This is closer to pre-pandemic levels. The number of business bankruptcies and proposals increased in the first quarter of 2022, with 807 cases compared to 733 in the previous quarter and 603 in the first quarter of 2021.

Business bankruptcies in Canada are increasing as government support comes to an end and businesses face a difficult post-pandemic recovery with high costs, supply chain problems and a shortage of workers. The financial support provided by the government through the COVID-19 pandemic assisted in delaying the surge in bankruptcies. Funding sources are becoming more expensive also.

Small business owners are feeling increased pressure from inflation in comparison to the average Canadian. With each budget line costing more, filing for bankruptcy is often the only option left. The data doesn’t capture the number of insolvent businesses that are forced to close without any formal filing, but the trend is now becoming evident.

Do you think that debt levels and bankruptcy filings will surpass pre-pandemic levels?

The state of the economy and how inflation and supply chain issues are managed will determine if the number of bankruptcy filings will rise in the coming months or not. As you can see, inflation, supply chain issues, interest rate hikes, household debt problems, business owners searching for more solutions and business bankruptcy filings are all now coming together in a perfect storm.

I hope this Brandon’s Blog on the current state of Canadian interest rates, household debt and business bankruptcies was helpful to you in understanding more about the corporate bankruptcy system in Canada.

If you or your company has too heavy a debt load, we understand how you feel. You’re stressed out and anxious because you can’t fix your or your company’s financial situation on your own. But don’t worry. As a government-licensed insolvency professional firm, we can help you get your personal or corporate finances back on track.

If you’re struggling with money problems, call the Ira Smith Team today. We’ll work with you to develop a personalized plan to get you back on track and stress-free, all while avoiding the bankruptcy process if at all possible.

Call us today and get back on the path to a healthy stress-free life. debt

Brandon Blog Post

BUY NOW PAY LATER IN CANADA: 4 PRACTICAL THINGS TO KNOW BEFORE GETTING A BUY NOW PAY LATER PLAN

Post author By Brandon Smith
Post date January 31, 2022

As the COVID-19 pandemic continues, we hope that you, your family, and your friends are safe, healthy, and secure. Ira Smith Trustee & Receiver Inc. is fully operational, and both Ira and Brandon Smith are readily available for phone or video consultations.

Buy now pay later in Canada plans: Introduction

The holiday shopping season is over. Your bills have arrived. A buy now pay later in Canada program attracted many Canadians. In Canada, people may not realize that they are borrowing money to pay for their purchase when they opt for a buy now pay later in Canada plan. Such a financial product is also known as a BNPL, instalment loan, or retail credit services. A BNPL is a credit product that is best suited for purchases of large-ticket items such as furniture, televisions, and home appliances. This kind of payment option is available both from brick and mortar retailers and for online shopping too.

The buy now pay later in Canada industry is pumping out millions of dollars, as many people rush to buy big-ticket items. However, many people can’t afford to pay for these items, and the buy now pay later in Canada industry is swallowing these people up. We are talking about people who have a bad credit score, unpaid bills, could not pass credit checks and just plain don’t have the money.

In this Brandon Blog, I discuss how for some people a buy now pay later in Canada plan might be too good to be true as there are hidden risks.

buy now pay later in canada

What is a buy now pay later in Canada plan?

The buy now pay later in Canada plan is popular with consumers who don’t qualify for a credit card or other financing, but who would still like to purchase a large item and spread out the payments. Customers can make purchases and pay them back at a future date, often interest-free, using this short-term financing vehicle.

Examples of BNPL agreements include:

an agreement where the purchaser commits to purchase a product or service from the retailer;
the retailer’s agreement with a lender to finance purchases;
the customer’s agreement with a financial service provider which usually specifies:
- The amount of each monthly payment.
- Payment frequency.
- The number of payments.
- Rate of interest. If there is an interest-free period, the rate of interest upon default of making either a monthly payment or paying off the balance on time.
- Any fees.
- The payment method.

Retailers can obtain BNPLs from a variety of financial service providers. This type of financing option is available from financial institutions, such as banks, credit unions, caisses populaires, financing companies and money services businesses, including fintech.

buy now pay later in canada

Buy now pay later in Canada plan: Here are some things to consider before choosing to use one

With a buy now pay later in Canada plan, you can pay for nearly any large household item such as appliances, furniture, a furnace, or a central air conditioning system. BNPLs have their advantages for some people. These plans have the risk of getting you into uncontrollable debt very (very) quickly.

Pros of buy now pay later in Canada plans

Buy now pay later in Canada programs offer consumers some benefits. No fees, no interest, and you know that unlike with a credit card, the full amount of your purchase will not hit you all at once. Retailers bear the fee involved.

A soft credit inquiry is all that is required to approve a buy now, pay later loan. A soft credit check with the major credit bureaus does not impact your credit score. Furthermore, BNPLs have the advantage of being different from traditional layaways. Layaway plans entail making a down payment to the seller and paying a small amount each week for the balance. Only after you have fully paid for the item can you take it out of the store. A BNPL allows you to leave with your item or have it delivered so that you can use it immediately without paying the entire purchase price.

A buy now pay later in Canada plan allows consumers to obtain instant gratification.

Cons of buy now, pay later plans

A BNPL is ideal for those who can make all the payments on time and pay the outstanding balance in full on the due date. It is also good for those who have a steady income and the discipline to make sure the entire amount is paid off at the end of the interest-free period. There are unfortunately more cons than pros to a buy now pay later in Canada plan.

They are:

Depending on your payment history, as well as the policies of the retailer, financial tech companies set limits on the amounts you can defer.
It’s convenient to spread payments out, however, there are fewer protections than if you used a credit card.
BNPL programs also present the risk that those seemingly affordable payments may lead you to splurge.
The BNPL statement is strangely designed. According to one buy now pay later in Canada study, two-thirds of those who fell behind said they simply forgot about the payments, not that they did not have the cash.
In lending, a company wants to make sure the consumer can handle the new account and will be able to repay it. An unpaid buy now, pay later balance will be sent to collections, damaging your credit.
By transforming one big price tag into an array of smaller payments, deferred payment plans in BNPLs lower sticker shock. Impulse spending goes up as a result.
This can lead to a rapid accumulation of debt. You may forget how much you need to set aside for your BNPL payments if you’re not tracking your expenses and budgeting.
Not all BNPLs require regular payments. They instead require the sum to be paid by a certain date in the future (usually 6-12 months from the time of purchase). Notices, reminders, and invoices may not be sent until almost the end of the period. Once the BPNL due date passes, the full sum becomes due, plus interest and late payment charges and fees for missed payments.

Buy now pay later in Canada: 8 Options when you buy now and can’t pay later

During the interest-free period, you can spread out large expenses over a period of time, but you should be ready to pay the full balance by the due date. If you cannot pay off the balance on your account after the interest-free period expires, what are your options? Unemployment or a family emergency may have changed your financial situation due to circumstances beyond your control.

Here are some options you can consider:

Speak with your lender. There may be a financial hardship program that you can utilize, enabling you to get more deferrals and thus more breathing room. Changing the due dates may also be an option.
Take a look at your finances and household budget to see where opportunities exist. Focus on saving money in other areas while prioritizing essentials like housing, food, utilities, and medicine.
Let go of the purchased item. You might be able to return the item to the merchant for a refund. Although some buy now, pay later companies do not refund interest payments, you may be able to get your money back. During the refund process, payments may still be due. Consider selling the item to recoup some of the money if a merchant won’t accept a return. Online marketplaces, apps or websites may help you find a buyer. It’s important to understand the terms before listing an item on an online marketplace since they may take a cut of the sale.
Get a side gig to make money. Increasing your work hours or earning supplemental income through a side job, such as driving for a rideshare company or delivery service, can help you pay down your buy now, pay later debt faster.
Perhaps you can qualify for a debt consolidation personal loan if your credit score is good enough in order to reduce the interest charges on all high-interest rate debts, such as credit card debt. The cash you free up can be used to pay off the BNPL.
Contact a non-profit credit counselling agency for free help. Avoid going to a for-profit debt relief company.
To discuss your realistic options, contact a licensed insolvency trustee for a no-cost consultation.

Buy now pay later in Canada plan: Summary

In summary, you may find that getting a buy now pay later in Canada plan is a good option for you and your financial situation. A buy now pay later plan could help you with those unforeseen expenses, such as when an old furnace breaks down for good. Just make sure you understand everything involved in the buy now pay later plan before signing up, and you can see yourself being able to be debt-free when the interest-free period ends.

I hope you found this buy now pay later in Canada Brandon Blog informative. Although nothing is guaranteed, managing your debt in a way that will allow you to be able to afford it, will lead to your financial success. It will also give you the best shot at having a financially stress-free life.

Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

Call the Ira Smith Team today. We have decades and generations of experience assisting people looking for life-changing debt solutions through a debt settlement plan and AVOID the bankruptcy process.

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a Government of Canada-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

Call the Ira Smith Team today so you can eliminate the stress, anxiety, and pain from your life that your financial problems have caused. With the one-of-a-kind roadmap, we develop just for you, we will immediately return you right into a healthy balanced problem-free life.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags BNPL, buy now pay later in canada, consumer reports, cornerstone advisors, credit card, debt collectors, deferred payment plans, financing option, future purchases, Ira Smith Trustee, layaway, monthly installments, monthly payments, online shoppers, payment method, payment models, payment plans, payments on time

Brandon Blog Post

BANKRUPTCY SEARCH ULTIMATE GUIDE: WHAT KIND OF BANKRUPTCY RECORDS DO YOU WANT TO SEARCH

Post author By Brandon Smith
Post date December 20, 2021

bankruptcy search

Bankruptcy search: What bankruptcy records exist in Canada?

Records of bankruptcy exist in Canada in four different forms. A party can use three of them to determine whether a specific company or person has filed for bankruptcy or some other form of insolvency.

There are, however, two methods to do a bankruptcy search that cost money, and one of those methods also requires the permission of the individual or company who is involved in the insolvency proceeding. It is not well known that there is another paid way. Only licensed insolvency trustees, attorneys, and credit grantors use it.

There is a 4th type of bankruptcy record that can only be accessed by a select few people. In this Brandon Blog, I will discuss the various ways to do a bankruptcy search, discuss each one and focus on an unreported court decision involving one of them.

Bankruptcy search type 1: Bankruptcy and insolvency records search

If you need to file for bankruptcy or to file a consumer proposal or a full restructuring proposal under the Bankruptcy and Insolvency Act (Canada) (BIA), you may be distressed. Their main concern is who will know about my bankruptcy and who can see my bankruptcy records? As I will explain, there is a very small probability that anyone who is not a creditor of yours will find out about an individual insolvency filing by the methods it is made public, notwithstanding they are public records.

There are 6 different kinds of official bankruptcy records that you might want to search. These include:

Personal bankruptcies
Business/corporate bankruptcies
Corporate/business receivership.
Consumer proposals
Full BIA proposals
Companies’ Creditors Arrangement Act (CCAA) bankruptcy protection filings

Personal bankruptcies are those which are filed by individuals. Business bankruptcies are those which involve businesses.

Insolvency filings in Canada are available through the Bankruptcy and Insolvency Records Search database of the Office of the Superintendent of Bankruptcy (OSB). In order to search by name, enter the search criteria information you know in any order and click “Search.” If you are not entitled to a search account like a licensed insolvency trustee is, a minimum fee of $8 will be assessed for each set of 10 (or fewer) records.

A lot of people don’t know about this database. Furthermore, nosy neighbours are not going to pay $8 to do a search of bankruptcy records and spend time in front of the search screen to find out whether a person or company has filed for bankruptcy, whether a consumer proposal has been filed, whether a full BIA proposal has been filed, whether a company has filed for bankruptcy protection under the CCAA, or whether a business is in receivership. It is really only licensed insolvency trustees who need to do frequent searches. There is no other internet search tool or online search service in Canada.

Bankruptcy search type 2: How long do credit bureaus report consumer bankruptcies?

Insolvency and bankruptcy records for all Canadians maintained by the OSB can be accessed by credit reporting agencies such as Equifax and TransUnion. Additionally, they have access to the names and addresses of individuals who have declared bankruptcy. Since it pertains to consumers, they call the information they collect about insolvency filings “consumer reports” or “credit bureau records”.

If you don’t consent in writing in advance, no one can pull your credit report. Most likely, when you apply for a credit card or a loan, you authorize the credit card company or financial institution to pull your credit report. You may also authorize a credit report to be obtained when you apply for insurance or rent an apartment.

If you don’t give written permission, that person won’t be able to get your credit report. An insolvency filing on your credit report is not visible to a friend, relative or neighbour. Depending on whether it is a personal bankruptcy or another type of personal insolvency filing, these companies keep a record of the past insolvency filing on file for varying amounts of time. In the case of consumer bankruptcy, the credit report will probably show the past bankruptcy for seven years after the discharge is granted. Upon completion of a consumer proposal, it takes slightly less time.

Bankruptcy search type 3: Will my bankruptcy be published in the newspaper?

In the past, I have written about the differences between a summary administration consumer bankruptcy and an ordinary administration personal bankruptcy. Under the streamlined summary administration rules, a bankrupt person’s assets cannot have an expected liquidation value greater than $15,000.

Notice of bankruptcy does not have to be published in a summary administration bankruptcy. The Trustee must publish a notice in the prescribed form in a local newspaper as soon as possible after the bankruptcy and no later than five days before the first meeting of creditors in any ordinary administration personal bankruptcy or corporate bankruptcy (which is, by definition, an ordinary administration).

Newspapers publish bankruptcy notices in the legal notice section. Lawyers, trustees, and bankers are the only people who regularly look in that section. To find your name, someone would have to read all the local newspapers every day for the bankruptcy notice of you or your company. The chances of someone you know seeing the notice of bankruptcy published in the newspaper are extremely slim, but not impossible.

Bankruptcy search type 4 is only available to a select few

In contrast to the previous three types of bankruptcy searches, this type is only available to a select few. Furthermore, it is the subject of this unreported Ontario court decision I am going to tell you about. I am talking about the bankruptcy search of records and files kept by licensed insolvency trustees who handle bankruptcy filings for individuals and corporations.

Under the BIA, the Trustee must allow the OSB, the bankrupt, or any creditor access to the bankruptcy administration’s books, records, and documents. Trustees’ books and records are available only to them.

Now for the unreported decision. You may recall that I previously wrote a Brandon Blog titled “TRUSTEE IN BANKRUPTCY: CERTAIN ACTIONS AGAINST TRUSTEE CAN BE UNLEASHED WITHOUT FIRST REQUIRING COURT PERMISSION“. During a period of 13 years, Mr. Flight filed for bankruptcy 4 times! Over and over again, he filed the same type of bankruptcy. According to him, the defendant Trustee in bankruptcy is responsible for his financial situation. In a lawsuit filed against the trustee in bankruptcy, Mr. Flight claims negligence, fraud, breach of fiduciary duty, unjust enrichment, and conversion. Allegations are made that the accused failed to identify and correct a fraud perpetrated by a bookkeeper for Mr. Flight’s sole proprietorship business.

Recently, they appeared in court. M. Flight’s motion was decided by the Judge on December 7, 2021. The motion was for:

the delivery of all the records pertaining to all four bankruptcies involving Mr. Flight, including the records related to the action commenced by the Trustee against the bookkeeper; as well as
to examine Mr. Flight’s Trustee to investigate the administration of the 4 bankruptcies.

Mr. Flight’s counsel claims the Trustee has returned some but not all of the documents with respect to the last bankruptcy filing in 2016. That was the focus of the hearing. Other filings occurred in 2004, 2006, and 2011, all outside the statutory period of four years during which the Trustee is obligated to keep the records.

Counsel for the Trustee asserts that copies of the records have been produced and that the request for an examination is an improper fishing expedition with the collateral purpose of bolstering a separate lawsuit brought by Mr. Fight against the Trustee.

Bankruptcy search: The Judge’s analysis

As per the Judge, a Trustee must maintain proper books and records when administering estates under the BIA. It is directed that the Trustee allow the bankrupt as well as those I mentioned to inspect and copy those books, records, and documents. A Trustee is required to retain records related to estate administration for at least four years following discharge under Rule 68 of the Bankruptcy and Insolvency General Rules.

Moreover, the Judge noted that based on the Trustee’s evidence, no books or records from Mr. Flight’s first 3 bankruptcy cases are in the Trustee’s possession. The Judge found that the Trustee made an effort to provide copies of the documents sought. Due to the submissions by both sides leads to a discrepancy between the number of pages sent by the Trustee and those received by Mr. Flight, the only practical solution is to perform a review and reconciliation of what was sent by the Trustee and what is still in its possession, with those documents received by Mr. Flight.

Bankruptcy search: The Judge’s decision

Within 60 days of the court’s order, counsel for Mr. Flight or its representative may arrange and attend the Trustee’s office or as directed by Trustee’s counsel to examine the file as produced and do their bankruptcy search. The Trustee shall be permitted to designate a representative to facilitate and oversee the examination of documents.

At that time, Mr. Flight’s counsel or his representative may scan an electronic copy of the documents using a scanning device provided by Mr. Flight’s counsel or his representative. All the documents involved in the proceedings shall be made available as may be necessary to provide a complete account of the Trustee’s administration of the estate.

If the parties disagree over whether certain documents should be allowed to be viewed and copied, they can go back to court. According to the Judge, an examination of the Trustee was not appropriate at this time. A Trustee examination is premature until the final determination has been made as to whether all documentation has been provided.

As I have already stated, this kind of bankruptcy search is not one of the normal ones you think of.

Bankruptcy search: Summary

I hope you found this bankruptcy search Brandon Blog informative. Are you or your company in financial distress and a debt crisis? Are you embroiled in costly litigation or a crushing debt load and need a time out in order to restructure? Do you not have adequate funds to pay your financial obligations as they come due? Are you worried about what will happen to you in retirement? Do you need to search out what your debt relief options and realistic debt relief solutions for your family debt are? Is your company in financial hot water?

As licensed insolvency professionals, we are the only people accredited, acknowledged and supervised by the federal government to provide insolvency advice and to implement approaches to help you remain out of personal bankruptcy while eliminating your debts. A consumer proposal is a government-approved debt settlement plan to do that. It is an alternative to bankruptcy. We will help you decide on what is best for you between a consumer proposal vs bankruptcy.

You can have a no-cost analysis so we can help you fix your troubles.

Call the Ira Smith Team today. This will allow you to go back to a new healthy and balanced life, Starting Over Starting Now.

Tags bankruptcy records, bankruptcy search, credit bureau records, credit card, frequent searches, insolvency records search database, internet search tool, Ira Smith Trustee, legal notice, licensed insolvency trustee, notice of bankruptcy, official bankruptcy records, online research service, public records, search criteria, search of bankruptcy, search screen

Brandon Blog Post

3 TOP WAYS TO SUCCEED IN CREDIT REPAIR USING A CREDIT CARD FOR REBUILDING CREDIT

Post author By Brandon Smith
Post date November 4, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Credit card for rebuilding credit: Introduction

Money mistakes in the past can negatively impact your credit score and your ability to qualify for a loan or obtain a good interest rate. Fortunately, there is hope. Bad credit scores can be improved in Canada by the use of perseverance and some time. You might even qualify for a credit card for rebuilding credit in Canada.

This Brandon Blog shows you how to take control of your finances, including learning how to use a credit card for rebuilding credit to improve your credit rating.

credit card for rebuilding credit

A credit card for rebuilding credit for people with bad credit is not your first step

Getting a copy of your credit report is the best way to determine which areas need improvement when it comes to repairing your credit. How many late or missed payments have you had in the past? The credit bureaus can report past due utility payments, outstanding cell phone bills, and old parking tickets. Have you exceeded your debt utilization ratio? Did you experience bankruptcy in your past?

Could your credit report be inaccurate? This is something that needs to be brought to the creditor’s attention so that they can fix the problem and revise their reporting. As an alternative, you can provide proof to the two credit reporting agencies in Canada, so that each can correct the error.

credit card for rebuilding credit

A credit card for rebuilding credit Canada is not your next step either

Now that you know your debts need to be addressed, you need to figure out how to get your payments in order. You need to develop smart spending and saving habits to rebuild your credit score. One of the best ways to do this is to create a budget that reflects your income and expenditures. In my Brandon Blog, I have written extensively about the importance of household budgets. Budgets are essentially a plan for how you will spend your money. Following a budget will help you with having normal and current payment activity.

Getting comfortable with not overspending and living within your means should become a habit. You don’t have to give up every nice dinner or outing just because you have a budget, but you do have to be aware of how much income you have available to spend and save after taxes. This will allow you to be able to make all necessary payments on time.

Next, you must establish better credit history through consistent payments. Your payment history is the most important factor in determining your credit score, so if you’ve fallen behind on your payments – or haven’t been paying on time – your credit situation is unlikely to improve until you catch up on your accounts. Without improving on this, you cannot fix a poor credit score. Spoiler alert – making only the minimum payment each month against your regular credit card is not keeping current on that debt.

If you cannot pay your overdue accounts right now, call up your creditors. Maybe you can negotiate a special repayment plan that fits your budget. Cut your debt as much as possible. Credit utilization ratios are very important. If your various types of credit, such as credit card balance, line of credit, or overdraft are used more than three-quarters of your available credit, that will bring down your credit score.

With time, patience, and financial discipline, building a better credit history and credit score – even rebuilding credit after bankruptcy – can be done. In the beginning, you may need to only use cash, and preferably not your debit card, for all of your necessary everyday purchases. Put your credit cards away to avoid temptation. Knowing that if you do not follow your budget you will run out of money is a strong motivation to stay on track when you only take out the amount of cash your budget says you can afford to spend.

One of the first steps to rebuilding credit with a credit card might be to lock each traditional credit card away and not use them!

credit card for rebuilding credit

Prepaid Credit Cards vs. Secured Credit Cards: What’s the Difference?

Prepaid cards are sold at many retail locations, such as grocery stores and pharmacies. A service fee is charged when you load money onto the card and when you use it. So not all the money you load onto the card is applied to your purchases. Whenever you do buy something with this kind of credit card, the dollar amount of your purchase is deducted from your cash balance.

You can still get a prepaid credit card without having a good credit score. That is because by getting this type of card, you are not applying for or getting credit from anyone. To load it, you use your own money. To put money onto a prepaid card you can: (i) transfer money from your bank account onto the card; or (ii) give cash to the clerk who will add it to the card at the store that sold it to you.

Prepaid cards are not credit cards in the traditional sense, so they won’t help you build credit or repair credit. In the same vein, it is not a credit card for rebuilding credit.

One of the requirements of a secured credit card is that you need to pay a cash deposit. Once the deposit is made, the credit limit is equal to the amount of the deposit. The security deposit that you pay is collateral held onto by the credit card issuer in return for the credit they are extending to you. If you don’t repay your balance on time, the credit card company can use this security deposit to pay off your debt. Once you have paid the security deposit, you can use the secured credit card.

The normal size of payment of security deposit typically varies from $500 to $10,000. You can get a secured charge card if you do not get approved for a standard unsecured credit card. Those with a poor credit history looking for a credit card for rebuilding credit will certainly find a charge card of this kind beneficial. Secured cards do not require a credit check because the financial institution is protected by the down payment. Consequently, you are practically certain to be authorized.

You will boost your credit rating as you make purchases and repay your full balance outstanding every month with this type of card. It is because the issuer of the secured credit card is really giving you credit. Your balances as well as payment history are reported frequently to the two credit bureaus in Canada. You can enhance your credit score over time by making your full regular monthly payments when due. Any individual aiming to use a credit card for rebuilding credit should seriously look into getting a secured credit card.

credit card for rebuilding credit

Credit card for rebuilding credit: Secured credit cards vs. unsecured credit cards

There are differences between secured cards and unsecured credit cards. An unsecured credit card is a routine charge card that can be made use of day-to-day as much as the credit limit allows. The issuer of these types of traditional charge cards makes a hard credit check inquiry right into your credit report when you apply for one. An unsecured card does not need a down payment. An unsecured charge card normally has a higher credit limit, and some credit card companies offer with their unsecured cards benefits like cashback, price protection, a better interest rate on purchases or travel points.

You can ask if your secured card can be turned into an unsecured one after an amount of time (and your security deposit returned). I would say that a reasonable time period would be six months to a year of making consistent payments on time as well as staying within your credit line. You have to demonstrate that you can handle credit properly.

Credit cards, both secured and unsecured, report your activity to the credit bureaus. If you use the card responsibly, you can build or rebuild your credit. Look around carefully to find the right credit card for your financial and credit score situation that will help you rebuild your credit. Secured, unsecured, low-interest rate, travel benefits and even guaranteed approval credit cards are available from many financial institutions in Canada.

Picking the ideal credit card for rebuilding credit is really crucial. While some bank cards have an annual cost, others do not. You must constantly check out the fine print in the contract when picking a credit card. I wish you great success in your financial journey.

credit card for rebuilding credit

Credit card for rebuilding credit: Summary

I hope you found this credit card for rebuilding credit Brandon Blog post informative. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Your situation may be so dire that a redone budget and a secured credit card may not be enough of an answer. If it is too much debt for any reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Even though we are licensed insolvency trustees, we have found that not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation. We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

Brandon Blog Post

WHAT DOES BANKRUPTCY DISCHARGED MEAN FOR 1 BANKRUPTCY TRUSTEE AND SOMEONE WHO IS SERIOUSLY BANKRUPT?

Post author By Brandon Smith
Post date October 28, 2021

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

What does bankruptcy discharged mean: Restrictions placed on undischarged bankrupts

By enabling debtors to file an assignment in bankruptcy or consumer proposal, the Bankruptcy and Insolvency Act (BIA) provides relief to an honest but unfortunate debtor. Garnishment of wages (other than marital support) ceases, legal actions and collection calls cease, and the debtor receives some breathing space. If a bankrupt fails to fulfill his or her obligations, what happens? Can they receive a discharge from bankruptcy?

This Brandon Blog examines a recent case from Nova Scotia dealing with what does bankruptcy discharged mean for both a bankrupt person and for the licensed insolvency trustee. I also describe what does it mean for an undischarged bankrupt if the bankruptcy trustee gets its discharge when the bankrupt person does not have their bankruptcy discharge.

I will eventually get to the Court case, but there is first some background information that I will provide which sets the stage for a better understanding of the Court decision.

What does it mean to be an undischarged bankrupt?

In the event, you were unable to fulfill your obligations under your personal bankruptcy proceedings, your Trustee, and maybe a creditor or two would have opposed your discharge from bankruptcy. A bankrupt who has not been discharged poses many potential problems. Therefore, if you are an undischarged bankrupt, it is because you have failed to fulfill one or more of your obligations as a bankrupt.

what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts eliminated by bankruptcy discharge

A bankruptcy discharge means that you have completed your personal bankruptcy process and are no longer legally liable for any outstanding debt you included in the bankruptcy filing (with the exception of a few which I will describe soon). Upon receiving an absolute discharge from bankruptcy (we’ll get to that shortly), you are no longer responsible for any discharged debts.

The discharge in bankruptcy eliminates most of your debts, including unsecured debts such as credit card bills, medical bills, and payday loans. When you are discharged from bankruptcy, not the fact that you filed for bankruptcy, is what eliminates your debts. You need your discharge to get rid of your debts, which explains why it’s so important. That is what does bankruptcy discharged mean, really means.

What does bankruptcy discharged mean: Bankruptcy law can resolve tax debts

As well as the usual unsecured debts mentioned above, if you owe Canada Revenue Agency (CRA) money because you were not able to pay your whole personal income tax obligation when you filed your taxes, then a payment arrangement makes sense.

Collections officers from the CRA contact taxpayers regarding outstanding income tax debt arising from their tax filings and notices of assessment. They attempt to collect from delinquent taxpayers. When you say that you cannot pay the full amount at that time, they will offer you the option of a payment arrangement. The interviewer will ask you about your financial situation and may ask you to submit documents to support your income and expense claims.

They recommend a settlement plan after evaluating the information. Only if all attempts at collection have failed will legal action be taken. You must send the CRA postdated cheques to cover the agreed-upon monthly payment to participate in such a plan. Additional payments can be made if you have money to spare. The interest clock does not stop with a CRA payment plan. Be certain that all your cheques clear the bank as well. The entire payment plan can be cancelled if only one is returned NSF.

Should you enter into a payment plan? Yes. You should demonstrate to CRA that you want to work with them, and avoid tax debt collection activities that will disrupt your life. The most common enforcement activity involves freezing and taking money from your bank accounts, as well as garnishing your salary or wages if you’re employed. If you are a proprietor, they can notify your customers and claim your receivables. Furthermore, a federal judgment can be obtained without your knowledge to place a lien on your home.

You do not need to experience CRA’s more drastic collection methods. Be sure to pay your obligations on time. A tax garnishment, third-party assessment, or an asset lien is never pleasant. The consequences are severe and disruptive. In most cases, CRA only takes this step if you fail to comply with their efforts to enter into and maintain a CRA payment arrangement.

CRA tax debts can be discharged under bankruptcy law if no payment plan can be arranged. If bankruptcy is successfully discharged or a consumer proposal is fully completed, the income tax debt can be eliminated. We assume that CRA hasn’t already obtained a judgment against your interest in your home and registered it against it. Upon doing so, the CRA has successfully turned an unsecured debt into secured debt, and bankruptcy law no longer applies.

Several other things to keep in mind are:

A bankrupt who owes more than $200,000 in personal income taxes and whose personal income tax debt represents at least 75% of their total unsecured proven claims is considered a high-tax debtor. In this situation, you cannot be automatically discharged. It is unavoidable that the Trustee will object to your discharge and there will be a discharge hearing before the Bankruptcy Registrar in the Bankruptcy Courts. Additionally, the CRA will oppose your discharge and will make submissions at your hearing. I am certain you will receive a conditional discharge, at least with the condition that you pay a portion of your income tax debt to the Trustee for distribution among your creditors.
Unremitted employee source deductions owed by a proprietor or partner of an unincorporated business will not be helped by bankruptcy law. Generally, bankruptcy will eliminate HST obligations. For now, CRA ranks the debt as unsecured in a consumer proposal, but as CRA provides the accommodation, it is not a part of bankruptcy law. If the outstanding HST is extremely large, the CRA may argue that since you held the HST in trust for them, it still remains a claim even if you declare bankruptcy. Under Canadian bankruptcy law, they can do this, but I have not seen them do it yet.
Director liability for unremitted employee source deductions or HST is an unsecured claim against you for your personal liability as a Director. Bankruptcy and a properly worded Proposal will both eliminate that debt.
what does bankruptcy discharged mean

What does bankruptcy discharged mean: Debts never discharged in bankruptcy

In personal bankruptcy, there are certain types of debts that are not discharged. Section 178(1) of the BIA outlines the following debts that are nondischargeable debt:

Any type of fine, penalty, restitution order, or other order similar to a fine, penalty or restitution order, imposed by a court for an offence, or any kind of debt arising from a recognizance or bond;
Damages awarded by a court in a civil case for:
- bodily injury intentionally caused, or sexual assault, or
- wrongful death as a result of these acts;
the payment of spousal support or an alimentary pension;
any financial obligation or liability arising under a judgment establishing an association or regarding support, maintenance, or an agreement for maintenance and support of a spouse, former spouse, previous common-law partner, or child who is not living with the bankrupt;
a financial obligation or liability that results from fraud, embezzlement, misappropriation or defalcation in a fiduciary capacity or, in the Province of Quebec, while acting as a trustee or administrator;
apart from debts and responsibilities arising from equity claims, any debt or liability resulting from getting property or services by false pretenses or fraudulent misrepresentation;
unless a creditor had notification or understanding of the bankruptcy and didn’t take reasonable action to prove a claim, the liability for the dividend that a creditor would have received on any provable claim not disclosed to the trustee; or
student loans if the bankruptcy occurred before the bankrupt stopped being a full- or part-time student or within seven years of the date the bankrupt stopped being a full- or part-time student.

***What does bankruptcy discharged mean:* *Absolute discharge vs. conditional discharge and so on and so forth***

In order to obtain a discharge, a bankrupt person must have fulfilled all of their bankruptcy duties. These personal bankruptcy duties include:

providing all books, records or documents to the Trustee that identify the assets and liabilities of the debtor;
prepare and submit to the Trustee within 5 days after filing for personal bankruptcy, unless the Office of the Superintendent of Bankruptcy Canada extends the time, a sworn statement of affairs detailing the person’s assets and liabilities, and for each of the bankrupt’s creditors, their respective names, addresses and the amount owing;
disclose to the Trustee complete details of all dispositions of property within 1 year before the date of the bankruptcy;
make a disclosure to the Trustee of all the details of property disposed of by gift or settlement without adequate valuable consideration within a 5 year time period before the date of bankruptcy;
if a creditors’ meeting is called, attending it;
making any required surplus income payments to the Trustee;
participating in two mandatory financial counselling sessions; and
offering whatever assistance is requested by the Trustee.

If the bankrupt fulfill all of their duties, then the Trustee will not have a reason to oppose the discharge. If no creditor opposes, then the bankrupt is entitled to an absolute discharge. As already stated, the discharge is what eliminates unsecured debts.

In addition to an absolute discharge, there are other types of discharge under bankruptcy law available to a bankrupt person upon having a discharge hearing:

conditional discharge;
suspended discharge; and
refused discharge.

To read more on the different kinds of discharges available to be applied to a bankrupt person, and for what does bankruptcy discharged mean, take a look at my August 2021 Brandon Blog “A BANKRUPTCY DISCHARGED IS THE KEY TO HEARTWARMING DEBT ELIMINAT1ON“.

what does bankruptcy discharged mean

What does bankruptcy discharged mean: At long last, the Nova Scotia case

The Nova Scotia bankruptcy case deals with the discharge of the Trustee in a personal bankruptcy matter. Once the Trustee brings on the bankrupt’s application for discharge and a discharge Order is made by the Court, and the Trustee completes the rest of the administration of the bankruptcy estate, the Trustee is entitled to a discharge. If the bankrupt did not receive an absolute discharge and has not completed his or her duties, including complying with a conditional discharge order, eventually, the Trustee can still apply for its discharge. Upon the Trustee’s discharge two things occur:

The bankrupt goes into bankruptcy purgatory. No discharge occurs. The Trustee has fulfilled its obligation to present the bankrupt’s discharge request to the court and the court has issued an Order. Whenever the bankrupt wants to prove they have fulfilled all their obligations, obeyed the discharge order, and now deserve an absolute discharge, he or she will need to retain a bankruptcy lawyer and apply to the Bankruptcy Courts.

On the day the Trustee is discharged, the stay of proceedings that had protected the bankrupt from any enforcement action by creditors whose debts were owed at the date of bankruptcy no longer applies. As a result, creditors can now pursue the bankrupt person since the debts have not been eliminated and the stay of proceedings is no longer in place.

It is interesting to examine how far the Registrar in Bankruptcy directed the Trustee in this Nova Scotia bankruptcy case to ensure that all creditors understood that they still had the right to pursue the bankrupt.

The decision in Frost (Re), 2021 NSSC 296 can be boiled down to the following facts:

Mr. Frost went bankrupt.
He failed to fulfill his duties and moved to the UK permanently.
He didn’t inform the Trustee of his new address and telephone number.
His actions left his Trustee and other stakeholders to fend for themselves, explicitly telling the Trustee he wasn’t going to fulfill those duties and didn’t intend to do so.
A hearing was held for the bankrupt’s discharge and Mr. Frost was refused discharge.
The Court previously directed the Trustee to appear before it to be heard on the Trustee’s application for discharge.

The Court concluded that the Trustee completed the administration of the bankruptcy estate and gave the Trustee its discharge. However, the reason why the Registrar in Bankruptcy wanted the Trustee to attend such a hearing was so the Registrar could take things one step further. In the normal course, the Trustee sends out a notice to all those whose proof of claim was admitted of the results of the bankruptcy administration and of the Trustee’s discharge. However, the Registrar wanted to make sure that it was crystal clear to all creditors.

The Registrar wrote a cover letter for the Trustee and directed the Trustee to send it along with the normal statutory notice to creditors (or their debt collectors of record). Here is a copy of that letter:

what does bankruptcy discharged mean

What does bankruptcy discharged mean summary

I hope you found this what does bankruptcy discharged mean Brandon Blog post informative. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? If it is too much debt for any reason, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.