Tag: credit card debt

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CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE?

Introduction

The other day I received a phone call from a fellow wanting to know who is responsible for credit card debt after death in Canada. He was, unfortunately, suffering from a terminal illness and wanted to get his affairs in order. His wife will be both the Estate Trustee and beneficiary under his will.

This is not the first time I have received such inquiries. In dealing with the bankruptcy of deceased estates, this question, amongst others, is quite common. So, given the phone call, I thought it might make for an interesting blog to answer, what I have found to be, the most asked questions dealing with what happens to debt when you die Canada.

The 8 most asked questions

The 8 most asked questions I have found around credit card debt after death in Canada are:

  1. Who is responsible for credit card debt after death?
  2. Is my spouse responsible for my credit card debt in Canada?
  3. If your parents die with debt who pays it in Canada?
  4. Is an executor responsible for the debt in Canada?
  5. Am I inheriting my parents’ debt in Canada?
  6. Is there credit card debt forgiveness upon death?
  7. What happens to debts after death with no assets in the estate?
  8. Am I responsible for my spouse’s debt in Ontario?

Who is responsible for credit card debt after death?

The deceased’s estate is responsible for the credit card debt incurred by that person while they were alive. Therefore, any assets in the estate must first be used to pay off the person’s creditors, including tax amounts owing to Canada Revenue Agency. The creditors must be paid in full before any distribution is made to the beneficiaries.

If any person has co-signed the credit card agreement, or has guaranteed the debt or indemnified the credit card issuer for the debt incurred by the person on their credit card account while alive, then that person is liable if there are not sufficient, or any assets in the estate to pay off the credit card debt in full.

If any person holds a supplementary card on that person’s account, then under the credit card agreement, that person is normally held responsible by the credit card issuer for any unpaid debt on the account. That individual is also responsible to repay the bank card debt completely if the estate cannot pay the debt off in full.

Is my spouse responsible for my credit card debt in Canada?

Just like in the last situation, your spouse will be responsible if your spouse:

  1. has guaranteed the debt;
  2. indemnified the bank that issued the credit card; or
  3. is a holder of a supplementary credit card on the same account.

If none of the above conditions are present, then your spouse cannot be held responsible for your debt.

If your parents die with debt who pays it in Canada?

Many times parents name all their children as Estate Trustee. They do so to make sure that the children know that their parents loved them. Hopefully, all the children are also beneficiaries too.

The fact that children are either an Estate Trustee, a beneficiary or both, does not make them liable for their parents’ debts upon their death.

There are however three situations where the children may be liable. They are:

  1. Where there are assets in the estate, the children as Estate Trustees fail to pay all the debts prior to distributing funds to the beneficiaries.
  2. One or more of the children have guaranteed or co-signed for a debt of one or both of the parents or has indemnified a creditor on behalf of one or both parents.
  3. Is a supplementary cardholder on an account of one of the parents and at the date of death, there is an amount owing.

In any of the above cases, hopefully, there are sufficient assets available to pay off the debt(s) so that the individual child won’t be called upon to make good on the debt. In the case where there are no, or there are not enough assets AND one of the above situations exists, then the child will be called upon to pay off the debt.

Is an executor responsible for the debt in Canada?

If an Estate Trustee (previously in Ontario, this person was called the executor or executrix) disregards the financial obligations and disburses the money to the beneficiaries, then yes. The Estate Trustee will most likely be held directly responsible for those financial debts.

If the estate has no assets, or if what it had was insufficient to satisfy all debts, the Estate Trustee does not need to utilize his or her personal funds to satisfy the remaining debts. In this situation, there also will not be any distribution to the beneficiaries.

In the situation where there are some assets, but not enough to pay all liabilities of the deceased, the Estate Trustee would be well advised to seek the advice of both the lawyer and perhaps even a licensed insolvency trustee (formerly called a trustee in bankruptcy). The Estate Trustee should not be in the position after paying off testamentary costs and income tax obligations, to start choosing which debts will be paid and which will not be.

In the situation where the estate is insolvent, the Estate Trustee may be well advised to go to Court for an order allowing the deceased estate to be placed into bankruptcy. Then the funds that are remaining can be distributed in accordance with the Bankruptcy and Insolvency Act (Canada).

By doing so, the Estate Trustee is not making any decisions about cherry-picking creditors who will get paid, while others won’t. This will protect the Estate Trustee from attack by any creditor who will not be paid or be paid in full.

Am I inheriting my parents’ debt in Canada?

You cannot inherit debt. As a beneficiary, if there are more debts than assets, you won’t receive an inheritance either. But, you can’t inherit debt. You can only be responsible if any of the conditions I explained above exist. The one exception is that if you are a blood relative, your parent owes money to Canada Revenue Agency (CRA) and you received a transfer of their property while the debt to CRA was outstanding.

Is there credit card debt forgiveness upon death?

There is no automatic credit card debt forgiveness upon death. As I have discussed above, the person’s estate is responsible for paying off the credit card (and any other) debt. However, if there are no assets in the Estate, then the credit card issuer has no choice but to write off the debt if there is no other person to claim against. You will recall that I have previously discussed the situations where there may be a third party the credit card issuer can claim against.

One more possibility exists. If the bank that issued the credit card offered credit card balance insurance, and the person paid for it, then there will be an insurance policy that will pay off the debt. In that situation, the bank will get paid through the insurance policy. In this case, the credit card debt will neither be forgiven nor written off.

What happens to debts after death with no assets in the estate?

If there are no assets in the estate, then there are no funds to pay debts with. In this case, the Estate Trustee would notify all known creditors of the death of the person and that there are no assets. The creditors will have no choice but to write off the debts if there is no other person to claim against.

Am I responsible for my spouse’s debt in Ontario?

As I have discussed above, there is no automatic personal financial responsibility where one spouse is liable for the debts of the deceased spouse. However, if the remaining spouse has guaranteed, indemnified, co-signed or was otherwise jointly responsible for the same debts, then they will be. Specifically, with credit card debt, there is also the issue of being a supplementary cardholder on your spouse’s credit card account.

If none of those exceptions come into play, then one spouse is not responsible for the other spouse’s debt in Ontario.

Credit card debt after death in Canada summary

I hope you have found this credit card debt after death in Canada Brandon’s Blog informative. I am finding that I am getting involved more often in deceased estate matters. My involvement is in advising people who are the Estate Trustee of an insolvent estate. I also have acted as the licensed insolvency trustee of a bankrupt deceased estate.

That work has now naturally led to obtaining assignments where my skill set as a licensed insolvency trustee comes in handy in a deceased estate. Two examples are having acted as the Estate Asset Manager in selling off assets in an estate and as acting as an Estate Trustee where there is no bankruptcy involved.

Because of that work, Ira Smith Trustee & Receiver Inc. has opened up a new business division called Smith Estate Trustee Ontario. In that business, as Estate Trustee, we offer options for the complicated estate concerns. We end the discomfort and irritations the stakeholders are experiencing. We use the experience and integrity that we have built up over the years, with compassion, to help the parties navigate the messy estate issues. We strive for a win for all beneficiaries, adding value by reaching the settlements and distributions they were unable to accomplish by themselves.

We provide a full range of services to provide solutions for the complex Estate issues to end the pain and frustration the stakeholders are experiencing. We apply our expertise and creative thinking to take care of all details to end your pain and achieve the goals of the beneficiaries and other stakeholders. Contact Smith Estate Trustee Ontario today for your free consultation.

credit card debt after death in canada

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HELP WITH DEBT: WILL THIS NEW METHOD ACTUALLY WORK?

help with debt

Help with debt

If you would prefer to listen to the audio version of this help with debt Brandon’s Blog, please scroll down to the bottom and click on the podcast.

Help with debt introduction

Many people need help with debt; especially credit card debt. They are stuck lugging around this debt. They only make the minimum monthly payment while a high rate of interest cost continues to accumulate. The net result is they never really make a dent in paying down the balance owing.

Canadian household help with debt

In March 2019, Equifax Canada reported that Canadian consumer debt delinquent accounts are increasing. Equifax also reported that the average Canadian household consumer debt is an average of $23,000, not counting mortgages. Bank of Canada Governor Stephen Poloz previously said that the typical Canadian owes about $1.70 for each dollar of income she or he earns each year, after taxes.

This, of course, is not a new story for Canadians. I have been writing about Canadians’ love affair with taking on more debt for several years now.

The Province of Quebec is trying to make a difference for help with debt

On November 15, 2017, Quebec’s Bill number 134, “An Act mainly to modernize rules relating to consumer credit and to regulate debt settlement service contracts, high-cost credit contracts and loyalty programs”, came into force. On August 1, 2019, certain aspects of this legislation, aimed at trying to curb credit card debt in Quebec, come into force.

Now in Quebec, brand-new charge card accounts opened up need the minimum monthly payment to be increased to 5% of the balance owing on those brand-new credit cards. For cards issued before August 1, 2019, cardholders will continue being required to pay a minimum of 2% of the outstanding balance. They have until 2025 to begin paying the new minimum of 5%. However, the minimum payment limit each month will be increased by half a percentage point annually after August 1, 2020, up until it gets to the five percent level.

Consumer advocates feel that other provinces will be viewing carefully what Quebec is doing. The Quebec government obviously believed that debt issues are an essential problem in Quebec that needed to be addressed.

Will this help with debt work?

Canadians have actually gone away from being a country of savers to a nation of borrowers. Therefore, if an unanticipated financial emergency hits, on average, Canadians do not have the resources to deal with it.

Many Canadians strung out on credit card debt need credit card debt help. A simple credit card debt calculator shows how problematic unpaid credit card debt is. Take a charge card with a balance owing of $1,000 with an annual 19.9% rate of interest and a two percent minimum monthly payment. It will take 26 years to pay off the balance. As well, it will cost $3,000 in interest. All this with an original balance of $1,000!

If the minimum monthly payment increases to 5%, that same credit card balance of $1,000 will take six years to pay off with $442 of interest. So you can see what the Province of Quebec is trying to achieve for its citizens.

The arithmetic of course works. However, the issue is not one of arithmetic. Better arithmetic won’t save Canadians who go into debt they cannot repay. If their budget does not allow them to pay more than a minimum of 2% each month, where will the extra money come from? Wage growth is stagnant and family expenses rise each year.

The Quebec government feels that having its people experience short-term pain for long-term gain will work.

As noble and well-intentioned this Quebec Bill 134 is, it does not appear that it has thought through what the real consequences will be. Will it help Quebeckers reduce their household debt faster? How will people who can only afford to pay a minimum monthly amount of 2% find the money to pay the higher amount. For Quebeckers in debt, it deserves asking if this sort of the change in policy will really help the people? Or, will it speed up the rate at which people in Quebec will have to make an insolvency filing, be it a consumer proposal or bankruptcy?

Has Quebec tackled the real help with debt issue?

High credit card debt is plainly a difficult situation for many. Time will tell exactly how effective a technique it is to raise the minimum monthly payment to 5% on a charge card will be. What Quebec is doing is a step in the right direction but it may not be one of the best high household debt solutions. But I am disappointed that it was not coupled with the requirement for better financial education and financial literacy.

In my opinion, it would have been much more impressive for Quebec to have at the same time developed simple online financial education tools for its citizens in trying to combat the problem of too much debt. What is really needed is to teach people that paying only the minimum monthly balance increases the cost of paying off the balance. Ideally, people need to adjust their household budget to be able to pay the full balance off every month.

Help with debt: Financial education was never on any curriculum

For many Canadians, proper money management and budgeting had not been a large subject in their house growing up. They get to college or university and they obtain that bank card. They just start spending and perhaps they also have student financial debt. They graduate and may or may not get a well-paying job to start off their new career. Then life takes place and living costs increase. Perhaps now a home with a home mortgage, children, automobile loan repayments and all other living costs take hold. Due to stagnant wage growth, or worse, corporate downsizing, there is not enough income in the family to keep up with all these debts. Now all you can do is make minimum payments.

To avoid this mess in the first place, people need to be taught basic budgeting skills. People need to understand that a household cannot spend more money than is earned, after income tax. This is the most basic concept for those in need of help with debt. The concept of having emergency savings funds is also necessary. People need to understand how fast credit card debt can grow and how hard it is to pay it off if the most you are able to pay is the minimum monthly payment.

Money management education and learning are so vital. People need to know that when they purchase things on a credit card, they do really need to have the money available to pay off that credit card at the end of the month. A credit card, unfortunately, is treated by many as an extra source of cash. In reality, it is a financial tool for convenience, but not an additional source of income.

Do you have too much debt?

Do you feel that you don’t have sufficient financial literacy? Do you believe that the lack of knowledge has led to you making financial mistakes? Have these mistakes caused you to now have too much debt? Is the pain and stress of too much debt now negatively affecting your health? Do you need help with debt?

If so, contact the Ira Smith Team today. We have decades and generations of helping people and companies in need of financial restructuring and counselling. As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and supervised by the Federal government to provide debt settlement and financial restructuring services.

We offer free consultation to help you solve your problems. We understand your pain that debt causes. We can also end it right away from your life. This will allow you to begin a fresh start, Starting Over Starting Now. Call the Ira Smith Team today so that we can begin helping you and get you back into a healthy, stress-free life.

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Brandon Blog Post

DEBT HELP NEAR ME: OUR TORONTO DEBT REPAYMENT CALCULATOR STRATEGY

Debt help: Introduction

Canadian household debt is a problem for many Canadian families. So in this Brandon’s Blog, let’s chat about it.

There are two primary techniques for debt settlement: (1) debt stacking technique (also called the debt avalanche approach) and; (2) the debt snowball technique.

Debt help: Are you an avalanche or a snowball?

In the avalanche method, you pay off your liability with the highest rate of interest first, second highest next and so on. In the snowball technique, you pay off the single amount with the smallest outstanding balance first, second smallest second and so on.

Both techniques use, as soon as you’ve settled one, what you were paying goes to your next target balance. Avalanche can clearly conserve you cash because you are saving on interest costs. The additional amount above the minimum payment you can put towards reducing the debt goes totally against reducing the principal balance. Snowball theoretically might not save you as much with time, yet by using this technique, the quicker checkpoints wind up motivating you to place even more money against your debt.

Avalanche is more about the long haul while snowball is more about changing the way you think. When you see that you are just $60 from cleaning up one of your debts, you could select to toss that $60 right against your debt as opposed to heading out to eat.

Debt help: A real example

The best way to show this is to use an example. I will use the same set of facts and show you how the two methods would work.

Assume that you have 5 sorts of debt:

  1. An auto loan which has a current balance of $18,000, with a minimum monthly payment of $500 a month, at a 4.9% interest rate.
  2. Two student loans. One is down to $20,000. Excellent work at having it that reduced! The minimum repayment a month on that one is $300 and the interest rate is 4.6%. The 2nd student loan has a $10,000 current balance. The minimum monthly payment is $100 and is at a 5.9% interest rate.
  3. You bought some furniture and took advantage of a 24 month zero interest special promotion. You currently owe $7,581, the required monthly payment is $399 and you have 19 months left to go at the special promotion interest rate. Again, it is at a 0% rate of interest. If you do not pay off the balance in the next 19 months, the balance will then click away at 29% per annum.
  4. You only have one credit card. You owe $12,000 and it has a minimum monthly payment of $100. The annual interest rate is 19.8%.

So currently, your total debt is $67,500. Your monthly minimum repayments are a total of $1,429. At that level, it will take you about another 5 years to repay all your debt or some time in 2024 (other than for the furniture debt).

Through your budgeting, you see that you can squeeze an extra $171 out of your monthly budget to put towards your debt repayment. So overall you are paying $1,600 a month towards your debt. In the avalanche method, you will be debt free in February 2023. The interest paid throughout that time is $11,149.00.

Debt help: Repayment strategy options – Snowball vs. avalanche

Under the snowball method, you are done in April 2023. The interest paid in snowball is higher at $14,445.00. This is a difference of $3,296.00. You can certainly put those interest cost savings into your own savings plan. Also under the snowball method, it has you paying off the zero percent interest furniture loan in 13 months. The avalanche method puts the extra money against your highest interest rate credit card debt. It also lets you use the entire remaining 19 months to pay off the principal only furniture loan.

Nonetheless, both methods are valid. Under both methods, you pay off your debt a year earlier than if you did not use either of these methods and putting a bit extra against your principal. It depends what the characteristics of your debt load are. In my example, you would certainly pick the avalanche method, not the snowball method. This highlights the importance of budgeting so that you know what amount extra if any, you can squeeze from your budget towards debt repayment. Also, you can use one of the many free online calculators to figure out both the snowball and avalanche methods. That way you will know what is best for your situation.

The graphs

Let’s look at the graphs of these timelines. As you can see, the avalanche method gives you a steeper downward curve than the snowball method. Again, it is because you are paying off your debt quicker.

debt help

Budgeting and motivation

This also shows us that you have a bit more adaptability if you need to make a reduced repayment one month. Financial instability makes it difficult to toss additional money at debt. So when you’re not obtaining those incentives of getting rid of a kind of debt, it’s a little tougher to be urged. Conversely, seeing that you are chipping away at your debt will motivate you to keep refining your budget so that you can find more money to put against your debt.

The most vital thing is that you have actually developed a budget. Through the budgeting procedure, you found extra savings each month to put towards debt repayment. It’s going to take you a long time to repay your debt if you only pay the minimum monthly amount. Also, you’ll be squandering a great deal of cash on interest if you’re simply paying the minimum.

Are you caught in the debt trap?

Are you caught in the trap of too much debt and only making minimum monthly payments? Do you need debt consolidation Toronto? Are you stressed that future rates of interest increases will make presently affordable debt payments completely unreachable? Is the stress, anxiety, and pain of your debt negatively affecting your health and wellness?

If so, call the Ira Smith Team today. We have decades and generations of experience helping people and companies requiring financial restructuring. As a licensed insolvency trustee, we are the only professionals licensed and overseen by the Federal government to supply financial restructuring solutions.

Call the Ira Smith Team today to make sure that we can start assisting you. We will quickly return you right into a healthy and well-balanced stress-free life. We can create a debt settlement plan just for you to avoid bankruptcy, where we can even make the interest clock stop. This way, all your payments go only against the principal balances owing.

You can have a no-cost appointment to help you to fix your loan troubles. We recognize the pain financial debts and economic distress causes. We can end it from your life. This will absolutely allow you to start a fresh start, Starting Over Starting Now.

debt help

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Brandon Blog Post

DEBT SOLUTIONS: ARE YOU IN FINANCIAL PROBLEMS DUE TO YOUR SPENDING?

debt solutionsDebt solutions: Introduction

Many Canadians are in a hole financially because of their spending habits and don’t realize it. When it hits them in the face, they need the best debt solutions. Many people can’t even afford to seek the help they need. But there is good news. The best fixes are the ones you can do yourself. The purpose of my blog is to describe to you steps you can take by yourself to solve your financial problems, as long as you catch it early enough. My blog will also help you turn any wasteful spending habits into wise spending habits.

Debt solutions: Disposable income

There’s a tendency to look at income as disposable – what we earn, we spend. If that’s your attitude, then you already have the shovel in your hands and you’ve started digging. Before you get in so deep that you can’t get out of the hole, let’s look at what you’re doing wrong and what you can do to get back on track financially.

Debt solutions: My 5 step self-help free plan

  1. Stop spending everything you earn. Living paycheque to paycheque is no way to live. Your income should cover all of your expenses, fund an emergency account and allow you to save for retirement. Look at your budget and see what expenses you can end or reduce. Don’t have a budget?
  2. Make a budget and stick to it. Do you know where your money’s going? Or do you think you have a hole in your wallet? A budget is the most effective money management tool. List all the things that you spend money on each month; and that includes designer coffees. In order to pay down debt and/or save money you’ll have to do some penny-pinching. Eliminate wasteful spending. Spend mindfully instead. Think twice before making a purchase you don’t really need. Make sure you’re getting the best prices on your cellphone plan, car insurance, house insurance, cable and internet. Use coupons at the grocery store. Make a budget and stick to it to meet your financial goals.
  3. Get rid of credit card debt as quickly as possible. High interest debt is the worst kind of debt. Pay off your credit card balances as quickly as possible. Use cash instead. Plastic is too easy.
  4. Check your credit score annually. Do you know what your credit score is? You should. Your credit score will decide whether you can buy a house, buy/lease a car and it can even affect your ability to get a job. Check it annually and go over it thoroughly. It may contain errors that can adversely affect your ability to borrow money.
  5. Save for retirement. Retirement will come quicker than you think. Have you started saving? Government sponsored pension plans will not keep you in the lifestyle you imagined for your retirement. It’s never too early or too late to start saving for retirement.

Debt solutions: The most serious financial problems need professional help

If you try my free 5 step debt solutions plan but find you are in too deep and can’t dig out fast enough, then you do need professional help. Many people facing serious financial issues don’t know where to go for professional help or are too embarrassed. There’s no shame in seeking professional, financial help. A trustee in bankruptcy (now called a licensed insolvency trustee) will evaluate your situation and help you to arrive at the best possible solution for your problems.

Ira Smith Trustee & Receiver Inc. is here to help. We’re federally regulated and subject to a strict code of ethics. We offer a depth of expertise and provide a high quality and cost-effective service. I understand your pain and we can end it. You will find that we use a friendly, non-judgmental method.

Give us a call today and let us help you solve your financial problems Starting Over, Starting Now.

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WHAT HAPPENS TO DEBT WHEN YOU DIE CANADA: ARE YOU FREE OF DEBT

what happens to debt when you die canada
what happens to debt when you die canada

If you would prefer to listen to the audio version of this what happens to debt when you die Canada Brandon’s Blog, please scroll down to the bottom and click on the podcast.

What happens to debt when you die Canada introduction

When discussions of debt come up, people often joke around and say they’ll finally be free of debt when they die. But, is that true? Although we’ve written about this issue before, we thought this would be a good opportunity to update you. Does debt survive death? In Brandon’s blog, I want to explore with you what happens to debt when you die Canada.

In this what happens to debt when you die Canada blog, I use the terms Estate Trustee and Executor interchangeably. Here are some previous blogs I wrote on the topic of debt and death.

 

 

 

What are an Estate, Executors, and Beneficiaries?

When you pass away, all of the assets (your life belongings) and obligations (your financial debts) in your name enter into a separate legal entity called your estate. Your will certainly names one or more people or firms to act as your Estate Trustee to sort out the finances, administer the estate and ultimately, make the necessary distributions to the beneficiaries. There are no special requirements to be an Estate Trustee. It is really up to the wishes of the deceased.

The Estate Trustee or executor first needs to be a copy of the Death Certificate. That document is required for the executor to do what is necessary for administering the estate. The will expresses the desire of the deceased in dealing with his or her estate.

The Estate Trustee is in charge of securing, insuring and either selling or distributing your possessions. The Estate Trustee must also collect all relevant documents of the deceased that might indicate the extent of the assets and liabilities.

They are also liable for making sure that the debts of the deceased are also paid off before there is any distribution to the beneficiaries. The Estate Trustee must make sure that they understand what happens to debt when you die Canada. There are specific rules that an executor must follow. Each province establishes its own rules.

Beneficiaries are the parties named in the will of the deceased entitled to receive either specific assets or possessions and/or cash from their sale. An Estate Trustee can be a pal or relative that the deceased had full trust and confidence in who is willing and capable to do the task.

Choosing a close friend or relative to act makes sense because they are trusted. However, not everyone views such an appointment as an honour. Rather, it can be viewed as an obligation they do not feel comfortable carrying out. Anyone thinking of naming a close friend or relative should discuss it first with them to make sure they are willing to take on the role.

It can also be an independent professional or company that is experienced in acting as an Estate Trustee. We have been appointed as Estate Trustee when relatives or friends do not feel comfortable, choose the option to renounce their responsibility and a new executor must be appointed. As you can see, there are many steps that an Estate Trustee must take to properly administer the estate.

what happens to debt when you die canada
what happens to debt when you die canada

What happens to debt when you die Canada: When Debt Collectors Call

Taking care of the financial debts of the deceased person can be confusing. Along with the psychological stress and the countless jobs that require scrutiny, you now have the debt collectors calling trying to collect on the outstanding bills.

Debt collectors can commonly call the family of the departed to do their best to collect the outstanding debt. Guidelines vary between provinces. Collection agencies will use many deceptions to try to collect debts that only the deceased is responsible for. All such calls should be directed to the Estate Trustee who should request that all communications come only in writing.

If assets pass to you as a beneficiary, the only time a beneficiary, who has not co-signed or guaranteed any debts of the deceased would be responsible for any related debt, is if the debt is secured. For example, if the will calls for you to inherit the home or vehicle of the deceased, there could be a mortgage against the home or vehicle financing involved. Those debts are secured and follow the asset.

Unsecured debt is outstanding debt that is not specific to any asset. The Estate Trustee must make sure that all unsecured debts, including income tax debt, are fully paid off before any distribution is made to the beneficiaries.

What happens to debt when you die Canada if there is a secured debt against specific assets and the beneficiary of those assets cannot afford to maintain the loan payments? If proper estate planning was not done, such as using a life insurance policy to cover secured debts or large unsecured debt like income tax debt, then it is probably best that the Estate Trustee takes the option of selling the asset in question.

The cash obtained from the sale, after paying off the related secured debt, and any income tax liability arising from the sale of the asset, can then be paid to the beneficiary who was entitled to that asset. Obviously, the Estate Trustee will have to discuss this with the beneficiary before taking any action with an asset and get their agreement.

It is clear that the Estate Trustee role is not a simple one. Most often, legal advice is necessary to make sure that mistakes are not made.

What happens to debt when you die Canada: Who is responsible for the debts?

All of your assets that are registered solely in your name make up your estate. Examples of such assets are bank accounts, like savings and chequing accounts, cash, real estate, stocks, etc. Your estate will then go through a process called probate to decide its value.

Before your assets can be bequeathed as you’ve requested in your will, your estate uses them to pay off your financial obligations. An executor takes care of these things. Only after your bills are paid off will your heirs inherit anything.

If there aren’t enough assets in your estate to pay off your liabilities, any co-signer will be on the hook for the specific debts they co-signed on. If the estate is insolvent, then the Estate Trustee would be forced to make an application to the bankruptcy court for authority to assign the deceased’s insolvent estate into bankruptcy.

Yes, a dead person can become bankrupt, believe it or not. I have done several bankruptcies of deceased estates. That is what happens to debt when you die Canada if there are not enough assets that when liquidated, will pay off all of the debts of the deceased.

What assets are safe from creditors?

Typically retirement accounts and insurance policies, as long as they name a designated beneficiary, are safe from creditors. However, they are not safe if the deceased designated his or her estate as the beneficiary.

what happens to debt when you die canada
what happens to debt when you die canada

What happens to debt when you die Canada: There are different types of debt

Mortgages:

Mortgages are secured obligations, meaning that they’re among the first to claim your assets to get paid. If someone inherited the home or the home was owned jointly and each owner was registered as joint tenants, then they’re responsible for the mortgage. It can be considered not only as a secured loan but, in the case of joint tenants, a joint mortgage loan!

UPDATE: Check out our blog

WHAT HAPPENS TO MORTGAGE WHEN YOU DIE CANADA: DEBT PHILOSOPHY EXPLAINED.

Vehicle Loans:

Auto loans, like mortgages, are another example of secured loans, meaning that they’re among the first to claim your asset(s) that were pledged as security for the loan, to get paid. If the estate can’t pay off the amount owing and you have a co-signer or guarantor responsible for what is now a joint debt, they will be responsible for the car loan. If the loan isn’t repaid by the estate or the co-signer (if there is a joint debt holder), the car will likely be repossessed.

When the lender sells the vehicle, if the net proceeds (net of all recovery and enforcement costs) yields insufficient funds to pay off the loan, then the estate (and co-signer) are responsible for this shortfall.

Credit Card Debts:

Credit card debt, unlike a mortgage or a car loan, isn’t secured. This means that if the estate can’t pay back the amount owing on each credit card, the creditors are out of luck. However, if there is a joint credit card holder, who holds a supplementary credit card then they are responsible to pay back the debt.

Many people don’t know that merely holding a supplementary credit card makes that person a joint debt holder who is responsible to repay the balance owing in full. That is a term of a standard credit card agreement of the credit card issuer. Credit card insurance is available to take care of credit card debt, but it is costly. Normally the bank lines up an insurance company to provide that life insurance policy coverage.

UPDATE: Check out our blog

CREDIT CARD DEBT AFTER DEATH IN CANADA: WHO IS RESPONSIBLE?

What happens to debt when you die Canada summary

I hope you enjoyed this what happens to debt when you die Canada Brandon Blog. The Estate Trustee is the administrator charged with the responsibility of properly administering the estate of the deceased.

Don’t pass on your financial obligations to anyone else after your death; it’s important to deal with debt while you’re alive. Give us a call today. The Ira Smith Trustee & Receiver Inc. Team can help you get rid of debt Starting Over, Starting Now.

We understand the pain you are in because of too much debt. We also know how to end your pain. Don’t pass that pain on to your loved ones. You don’t have to wonder what happens to debt when you die Canada.

Contact us today so we can begin healing you to lead a stress-free life.

Being debt-free will give you the peace of mind that all is in order and that you’re not burdening your heirs with financial hardship.

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INTEREST ON CREDIT CARDS CALCULATOR: WHAT A LOSS OF YOUR INCOME MEANS

interest on credit cards calculator

Interest on credit cards calculator: Introduction

As Benjamin Franklin so wisely stated in 1789, in this world nothing can be said to be certain, except death and taxes. Life is full of surprises – not all of them pleasant. Are you financially prepared in the event that life deals you a low blow – job loss, injury or a health crisis? And, if so, would you turn to credit cards to support your lifestyle? Do you really know how to calculate the interest on your credit card balances? Below I will explain how an interest on credit cards calculator works.

Interest on credit cards calculator: And the survey says

According to a recent survey by Forum Research:

A Manulife Bank survey of Canadian homeowners reports that:

  • 9% have access to $1,000 or less
  • 14% have not put away any funds

Interest on credit cards calculator: An alarming Canadian trend

These two surveys bring to light an alarming trend. With no emergency fund, or any savings to fall back on, many Canadians who find themselves in a crisis with a sudden loss of income turn to living off credit cards. According to Bankruptcy Canada:

  • Only 25% of Canadians pay off their credit card debt in full each month which means that 75% of Canadians carry a balance on our credit cards each month
  • This can result in paying several thousands of dollars each year in interest

Interest on credit cards calculator: How the interest is calculated

The annual interest rate on credit cards ranges from 19% to almost 30%. Credit card companies actually calculate interest on a daily basis. Therefore, if you do not pay the full balance on time by the due date, the interest actually compounds on a daily basis. That is why once balances are overdue, or you are only making the minimum monthly payments, you can never get catch up. The daily compound interest accrues too quickly.

The Financial Consumer Agency of Canada provides a free online credit card payment calculator. Check it out by clicking here.

Interest on credit cards calculator: What to do if you can’t keep up with your credit card payments

In fact, it can take a lifetime to pay off a credit card balance of a few thousand dollars if you’re only making the minimum payments. Living off credit cards is not the answer; getting professional help is. You need a trustee now. Many people fear that bankruptcy is the only option for serious financial problems, but that’s just not true. Although bankruptcy is an option, there are bankruptcy alternatives to consider:

Ira Smith Trustee & Receiver Inc. is here to help. We approach every file with the attitude that your financial problems can be solved given immediate action and the right plan. Give us a call today and Starting Over, Starting Now you can put your financial problems behind you and look forward to living a debt free life.

 

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CREDIT CARD DEBT TRAP: OUR REVOLUTIONARY 4 STEP PLAN TO START BECOMING CREDIT CARD DEBT FREE IMMEDIATELY

Credit card debt trap: Introduction

Many people I help are caught in a credit card debt trap. It’s always good to repay your credit card debt, and now could be a better time compared to ever before to do so.

I have previously written about the Canadian household debt crisis as Canadians take on more debt and average canadian household debt levels increase. Rates of interest are beginning to increase so combining the two creates a mix that can place people in a bind.

Credit card debt trap: A storm is brewing

In December, Statistics Canada reported that the Canadian household debt ratio struck a brand-new high. The ratio of household credit-market debt to disposable income (the key gauge for measuring Canadians’ debt loads) rose to 171.1%.

“Everyone has this sense that there is a storm brewing,” said Bruce McClary, spokesman for the National Foundation for Credit Counseling in the U.S.

“All indications that we’ve seen are that people are carrying higher balances from month-to-month and more are behind on their monthly payments. That’s not a healthy mix.”

Climbing debt levels could suggest people really feel better about the economy. Our concern is that people could be over-extending themselves. Both the US Federal Reserve and the Bank of Canada expect to raise rates later this year, so the cost of lugging credit card debt is most likely to increase.

What can you do try becoming credit card debt-free? Our revolutionary 4 step plan can help get you there.

Step 1. Credit card debt trap: Take control

It isn’t easy to take a difficult look at your financial position, but it is a necessary one. Analyze your financial obligations, and the rates of interest connected to each debt, as well as minimal repayments. Track your costs to get a feeling of what your credit card charges get you every month.

This is the first step in understanding your expenses and cutting back on the ones that are not necessary. To understand where you are going, you should understand where you have actually been.

Step 2. Credit card debt trap: Minimize rates

The typical interest rate on a bank card is about 19 percent. That’s quite high, so you might wish to think about transferring your credit card debt to a card with a reduced or zero-interest first offer rate to help pay it off much faster.

A word of caution: you’ll most likely need to pay a transfer cost in doing so. Also, you will need to pay off the debt prior to that promo rate finishes. Otherwise, the balance at that time is charged a higher interest rate, probably the same or higher than the card you transferred the debt from.

Although I don’t hold out a lot of hope, you can ask your credit card firms if they will decrease your interest rate.

credit card debt trap
credit card debt trap

Step 3. Credit card debt trap: Plan choice

If you simply cannot earn enough to fund your repayments, think about a non-profit credit counselling service. Do not go to any of the debt settlement companies that advertise regularly on television or social media.

All they do is charge you a fee to take down basic information, and then send you to a licensed insolvency trustee. Going first to a licensed insolvency trustee will do more good for you in a first free consultation than the debt settlement company will.

There are 2 typical debt settlement approaches– avalanche as well as a snowball. The avalanche method of getting out of the credit card debt trap works by placing all your money towards your highest possible rate of interest debt. As soon as that’s settled, you begin repaying the following most costly debt till it’s all gone.

In some cases, the snowball approach offers much more inspiration. With this technique, you repay the tiniest debt initially, to increase your spirits. You make use of that energy to pay off what is not the smallest outstanding debt and so on. You are picking up steam like a snowball rolling downhill.

It does not matter which method you use. The important thing is that you start now and stick to it.

Step 4. Credit card debt trap: Adhere to it

Remember your single emphasis ought to be lowering debt, so do not plan any kind of elegant getaways or huge acquisitions in the meantime. You could backslide or strike some roadway bumps yet do not allow that to sap your inspiration.

Now for the tough part. When possible, save some money to aid with unforeseen expenditures that you would normally place on your credit card. This will lessen the amount you would have to charge by paying with cash.

Credit card debt trap: A lengthy and painful trip to get out of it

It’s an incredibly lengthy and painful trip to get out of the credit card debt trap. It also can be a very lonely one. People don’t get into the credit card debt trap overnight, so you can’t get out of it without some hard work.

The Ira Smith Team has helped many people stay the course and be stimulated by their successes. We have helped many people avoid bankruptcy.

Contact the Ira Smith Team today. Your first consultation is free. We will be there with you every step of the way to help you out of the credit card debt trap so you can begin living credit card debt-free. If it isn’t credit card debt you are worried about, but rather other kinds of debt trap you may be caught in, we can help free you from those too.

To deal with debt you need the help of a debt professional – a trustee. Dealing with debt is not something that you can put off any longer. Start the New Year off right by calling Ira Smith Trustee & Receiver Inc. today and make an appointment for a free, no-obligation consultation.

We can give you back peace of mind and put you on the road to debt free living Starting Over, Starting Now.

credit card debt trap
credit card debt trap
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CREDIT CARD DEBT PROBLEMS: ARE YOUR LOYALTY REWARDS CREDIT CARDS GETTING YOU INTO DEBT?

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credit card debt problems

Credit card debt problems: Introduction

Canadians obsess over loyalty programs, which contributes to credit card debt problems. The only way to get more points and rewards, is to keep buying things with the loyalty program credit card.

It’s no surprise since we’re constantly bombarded with advertisements telling us that we can get FREE trips, movies, discounts, merchandise; who could resist such tempting offers? From airlines to fast food chains, it seems that new loyalty programs are cropping up faster than weeds in your garden.

Credit card debt problems: Would you like 10% off your purchase today?

How many times have you gone to make a cash or debit purchase and be told, “If you sign up for our credit card today, we’ll take 10% off your purchase”? Pretty soon you’ll be signed up to a stack of loyalty credit cards trying to accumulate enough points for all of those wonderful things that you’re planning to get free.

Credit card debt problems: How obsessed are Canadians with loyalty credit cards?

  • There are 130 million loyalty memberships in Canada. This averages out to more than four memberships per person (2015 study from Colloquy Loyalty Census Canada).
  • Canadians are currently hoarding $16 billion worth of points. This is an average of $629 per person (Bond Brand Loyalty).
  • The number of loyalty memberships per Canadian has grown 25% since 2013 (Bond Brand Loyalty).

Credit card debt problems: Here are our top 3 risks associated with loyalty credit cards

  1. The more credit cards you apply for the worse your credit score can become. Every time you apply for credit the lender requests a credit score. Each inquiry places a record on your credit report. Too many inquiries is often associated with higher rates of default.
  2. You may get sucked into the cycle of buying things because of the amount of points you’ll get. Have a good look at your credit card statement and be honest about how many items you bought because of the points.
  3. Are you paying your balance in full every month? If not, the high interest you’re paying will more than wipe out any benefit you’re getting. These discounts may be costing you a lot of money and the free stuff could actually be quite expensive.

Credit card debt problems: Are you caught in the loyalty credit card trap?

Is your obsession with accumulating points getting you into credit card debt problems? If so, you need professional help and you need it now. Contact the Ira Smith Team. We can help you get out of credit card debt problems, or any other kind of debt problem. We will put you back on track to debt and stress free living Starting Over, Starting Now. Book an appointment for a free, no obligation consultation today and take the first step to ending the cycle of debt.

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credit card debt problems
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DEBT ELIMINATION: ARE YOU SABOTAGING YOUR WEALTH BY SAVING AND REDUCING DEBT?

debt elimination
debt elimination

Debt elimination: Introduction

What’s more important – saving or reducing debt? Should I focus on debt elimination or invest excess funds? Should I invest or reduce debt.

These are age-old questions that I’m frequently asked and there isn’t a one-size-fits-all answer. Let’s get back to basics and figure out what your income and expenses are before I can answer whether it’s better for you to save or reduce debt.

Debt elimination: Create a budget

Everyone should have one. The reality is that many people spend what they earn but don’t really know what they’re spending their money on. A budget will find how you’re currently allocating your money – which may be very different from how you should be allocating it.

  • Detail your income
  • Itemize your fixed expenses which are the same each month – housing, insurance, payments on loans, etc.
  • List your variable expenses which are flexible and will vary from month to month – groceries, gas for the car, cell phone, etc.
  • Identify your optional expenses which are non-necessities – meals out, clothing, vacations, etc.

The good news is that to ask “Should I invest or reduce debt”, that means your budget should confirm that you have an excess of income over expenses each month. It also means that you can see that monthly cash excess in your bank account.

Debt elimination: Determine what type of debt you’re dealing with

The reality is that not all debt is created equal. Credit card debt could be costing you 20% interest or more per annum. And, if you have any payday loans, the interest rate could be over 500% (no, this isn’t a typo). High interest debt costs a fortune; pay it off as quickly as possible.

Debt elimination: Create an emergency fund

I always recommend that you have an emergency fund of three to six months worth of living expenses. Job loss or an unexpected expense can put you in a financial danger zone if you’re not prepared.

Debt elimination: Where can you find the money to pay off high interest debt and create an emergency fund?

Go back to your budget and have a good hard look. How many of your optional expenses can you cut or cut back on? E.g. Forgo the vacation for now, don’t buy those really cute shoes, etc.

How much of your variable expenses can be reduced? E.g. Shop at a discount supermarket and price match/use coupons, comparison shop for better cell phone plans, drive less/take public transit more, etc.

You’d be amazed how much money you’ll be able to save and put toward paying off high interest debt and creating an emergency fund.

Debt elimination: Should I invest or reduce debt?

The answer to the question about what’s more important – saving or reducing debt, lies in your budget. If you have high interest debt, pay it off first. If you don’t have high interest debt then you can work on both reducing debt and saving and investing at the same time.

Debt elimination: Are you struggling with debt elimination?

If you’re struggling with too much debt, give the Ira Smith Team a call. We can help with budgeting and credit counseling so that you can get back on track Starting Over, Starting Now.

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FINANCIAL SECURITY PLANNING PROCESS: PREPARING AND FOLLOWING A PROPER HOUSEHOLD BUDGET FORM WILL FORCE YOU TO ACHIEVE FINANCIAL SECURITY

financial security planning processFinancial security planning process: Introduction

We can’t stress enough how important a household budget form is to your financial security planning process. Many Canadians are under the mistaken impression that budgets are only for people in debt.

Nothing could be farther from the truth. Everyone, regardless of your net worth or the amount of debt you’re carrying needs a budget. It’s the only way to control your money and make sure that you and your family are financially secure and achieving long-term financial security.

Financial security planning process: 6 great reasons why you need a household budget form

Still not convinced? Here are 6 great reasons why you need a household budget form:

  1. A budget gives you control over your money: A budget is a list of all revenues and expenses. It allows you to plan how you want to spend your money. Instead of money just flying out of your wallet, you make intentional decisions on where you want your money to go. You’ll never have to wonder at the end of the month where your money went or look for a hole in your wallet.
  2. A budget keeps you focused on your financial goals: Budgeting will allow you to meet your financial goals – paying down debt, funding a retirement savings plan, buying a house… – as long as you follow it religiously. With a budget you’ll know exactly what you can afford and you can divide your money appropriately. E.g. If your immediate goal is to save for the down payment of a house, then you may have to forgo that vacation you wanted to take. Your budget will tell you exactly what you can or can’t afford.
  3. A budget will make sure that you don’t spend what you don’t have: Credit cards are a great convenience but they also make it really easy to spend because there is no cash exchanged in the transaction. Many Canadians rack up serious credit card bills and land up deep in debt before they realize what’s happened. When you use and stick to your budget you have to account for everything you spend, even if it’s a credit card purchase. You won’t wake up deep in debt, wondering how you got there.3bestaward
  4. A budget will prepare you for the unexpected: Every budget should have a rainy day fund for those unexpected expenses. It’s recommended that you should budget for three months worth of expenses for when there may be an unexpected lay off or other unplanned for major expense. Don’t be alarmed; you don’t have to put away all the money at once. Build your fund up slowly.
  5. A budget reduces stress: Many Canadians panic every month about where the money will come from to pay their bills. A budget will give you peace of mind. It shows you how much you earn and what your expenses are. If need be you can reduce unnecessary expenses or take on extra work to live within a balanced budget. No more panicking at the end of the month.
  6. A budget can help you afford the retirement you’ve been dreaming of: Saving for your retirement is very important and your budget can help you save for your future. Set aside part of your income every month for retirement savings. Start early and consistently stick to it. The money you save now will dictate the kind of retirement you can expect.

Financial security planning process: What to do if you don’t have a household budget form and know you need one

A budget is your ticket to financial security. If you don’t have one yet, start budgeting today. Below you will see the link to download our free household budget form.

If you’re trying to get out of debt, contact Ira Smith Trustee & Receiver Inc. We can help you get out of debt and back on track to saving for your future. Make an appointment for a free, no obligation consultation today. You’ll be amazed at how bright the future can look Starting Over, Starting Now.

Call a Trustee Now!