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CREDIT REPORTING BODY: WILL THE STATUTE OF LIMITATIONS ERASE MY DEBT?

What is a credit reporting body?

A credit reporting body is also known as a credit bureau or credit reporting agency. It collects, saves, makes use of and reveals personal credit scores about individual consumers. The bureau refines these details to report on the credit rating or creditworthiness of a person. Businesses considering extending credit to people subscribe to and make use of such a credit reporting body.

One thing the bureaus do is report a listing and condition of your debts. More on this below. People with financial problems who come to see me many times are confused as to how a credit reporting agency operates. Many times people are confused between the credit reporting agency’s reporting of debts where the creditor can no longer sue. The reason they can’t sue is because of the statute of limitations in Ontario (again, more on this below). Yet, the debt is still listed by the credit bureau.

I recently came across an Ontario court decision, that describes perfectly why debts can still be listed on your credit report, even though the creditor has run out of time to sue you.

What are the major credit reporting agencies in Canada?

In Canada, there are 2 such reporting companies for consumers: Equifax and TransUnion. For companies, one of the most prominent credit reporting company is Dun & Bradstreet Canada.

How do I get a free copy of my credit file?

You are able to get your complimentary credit report once every 12 months from each of the two nationwide rating companies. If you need a current report more often than that, you can pay TransUnion or Equifax to get it. You can get your credit report by phone, fax, online or in person. Each credit bureau provides instructions on how to do it.

There are also two online services that will provide you with your credit score and report for free. They are Borrowell and Credit Karma Canada.

The Court case

This court case was somewhat unique in that it was a small claims court case. The 10-page decision clearly shows that a statute of limitations will not erase the debt. The case is Harvey v Capital One Bank, 2019 CanLII 69716 (ON SCSM).

Mr. Harvey sought $25,000.00 against Capital One Bank for purportedly posting to the credit reporting body firms, defamatory details impacting his professional reputation. Mr. Harvey admits he owed money to Capital One however asserts the debt can no longer be pursued, as it is beyond the 2 year limitation period for enforcement according to the Ontario Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. Capital One Bank confessed it reported the debt but was fully justified in doing so according to the Consumer Reporting Act, RSO 1990, c. C.33.

The agreed statement of facts

Mr. Harvey and Capital One Bank submitted an Agreed Statement of Facts:

  1. Mr. Harvey had two Capital One Bank accounts. The account concerned was opened up on or about March 5, 2009. The second account was opened on or around June 2018.
  2. Mr. Harvey was contacted by collection firms acting on behalf of Capital One from 2015 to 2018 in an attempt to collect the debt.
  3. Capital One provided disclosure regarding the terms of the account when Mr. Harvey was originally authorized. He received duplicates of the account statements created, which were accurate, consisting of the balance owing, repayments, interest and fees or charges. All rates of interest and various other fees were correctly applied.
  4. Mr. Harvey was advised many times that his failure to pay the outstanding balance would be reported to the credit reporting body companies and it can adversely affect his credit rating.
  5. Mr. Harvey paid $200.00 on the account in question on October 27, 2014. He failed to make the minimum payment due on December 4, 2014. He as well failed to make any type of subsequent repayment, other than for a $200.00 payment around August 20, 2018.
  6. When Capital One charged off Mr. Harvey’s very first account on June 2015, the balance owing was $841.78.
  7. All details about the Capital One debt in the credit reports generated by Mr. Harvey were accurate and true, with the exception of one amount of $1,449.00 for a different Capital One account which Mr. Harvey would not admit to. In his testimony, he deposed that he has no particular memory of the components of that account or any understanding of the accuracy of the information.
  8. Other non-Capital One credit accounts referenced in Mr. Harvey’s credit record included unfavourable credit history reports. Some of his other non-Capital One credit rating accounts had actually been charged off and sent to a debt collector.
  9. Mr. Harvey acquired a brand-new Canadian Tire Bank MasterCard around January 2019 with a $300.00 credit line, a brand-new FIDO cell phone account around September 2019, a brand-new credit line for a car loan of $22,465.00 around September 2019 and also a new Capital One MasterCard with a credit line of $300.00 around June 2018.

Capital One Bank’s evidence

Capital One’s evidence was straight forward. Credit cards revolve and are reported to the credit reporting body companies on a regular monthly basis. There is a standard conventional rating system used by all financial institutions when reporting to the reporting agencies:

Rating scoreMeaning
R1Indicates settlement on time or 1 to 30 days delinquent.
R231 to 60 days delinquent
R361 to 90 days overdue
R4120 days overdue
R5121 to 150 days overdue
R6Does not exist
R7Used only for credit counselling and bankruptcy
R8Repossessions
R9Account has been charged off

Mr. Harvey’s Capital One debt was reported to the credit bureaus in conformity with the legislation. By April 9, 2015, the account, 5 months overdue, was completely limited, meaning it cannot be re-opened to make purchases. An R5 score was reported to the credit reporting body companies. By May 9, 2015, it was 6 months overdue. R5 was reported once again.

Once it is 180 days past due, the account is charged off and also an R9 rating is reported. When an account is charged off, it is still reported to the credit reporting agencies and remains an R9 score. After the account was charged off, Capital One engaged various collection companies as normal to attempt to collect the debt.

As the account remains overdue, Capital One continues to report to the credit bureaus up until reporting becomes statute-barred after seven years, based upon the date of the very first payment missed. That was December 4, 2014.

This 7-year reporting period is based on legislative provisions for credit report coverage. After seven years, Capital One makes one final entry in the record which erases the entire line from the credit bureau history. The credit reporting body companies have a similar procedure so they will remove this information also.

The Court’s analysis

The Court’s analysis was simple. It rejected all of the plaintiff’s submissions. The Court stated that the plaintiff never even produced any evidence in support of his claim that he has suffered damages through a loss of reputation.

The Court correctly analyzed the situation. The Deputy Judge found that by Mr. Harvey’s own admission the debt was never paid and stays outstanding. Capital One is not insisting on a claim to title; it is asserting its right to report an unpaid debt throughout the 7-year reporting period under the Ontario Consumer Reporting Act. The Ontario Limitations Act and Consumer Reporting Act serve completely different legislative purposes. They are also not in conflict.

The Court sided with Capital One’s position that the case relied upon by Mr. Harvey entails an argument concerning a right vs. a remedy. In Ontario, the limitation period acts to limit the remedy to sue but not the right to be repaid.

The Court’s decision

Capital One Bank lost the right to sue Mr. Harvey after the 2-year period expired. However, on a mutually exclusive basis, it had the right to report the outstanding amount owing for a 7-year period under different provincial legislation.

The Court further stated that the ramifications to companies extending credit to others might be harmed if such information was inaccessible, merely because the creditor did not commence legal proceedings for repayment of the debt prior to the 2-year limitation period. A person’s failure or refusal to pay their debts is vital details for other creditors, to whom that very same borrower has looked to for more credit.

The Court, therefore, found in favour of Capital One Bank and awarded costs against Mr. Harvey.

Summary

This case perfectly answers the question many people ask me when they come for their free consultation. The question is either: (1) Why is this debt still showing up on my credit report because it is too late for the credit card company to sue me?; or (2) Does the statute of limitations erase my debt? As seen in Mr. Harvey’s case, the limitation period and the reporting period are two different and separate issues.

Do you have way too much debt? Prior to you getting to the phase where you can’t make ends meet and your credit report looks awful, reach out to a licensed insolvency trustee (previously called a bankruptcy trustee). In fact, if you understand that you can’t pay your financial debts, contact us.

We understand the pain and stress excessive financial debt can trigger. We can aid you to get rid of that discomfort as well as address your financial problems offering prompt action and the ideal plan.

Call Ira Smith Trustee & Receiver Inc. today. Make an appointment with one of the Ira Smith Team for a free, no-obligation consultation and you can be on your way to enjoying a carefree retirement Starting Over, Starting Now. Give us a call today so that we can help you get back to stress and pain-free life, Starting Over, Starting Now.

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DEBT CONSOLIDATION IN CANADA: DEBT CONSOLIDATION CANADA REVIEWS

Introduction

In Brandon’s Blog, I will be talking about both the advantages and disadvantages of debt consolidation in Canada. Generally, when we hear the words “debt consolidation”, we recognize that we are talking about a loan. We are taking on a new loan, in order to repay several or many smaller outstanding balances.

What is the smartest way to consolidate debt?

People have several choices when it comes to consolidating debt. It always involves borrowing. The theory is that either:

  • your credit score is good enough so that you can get an unsecured loan; or
  • you are choosing to offer security for the loan.

The primary objective of settling your debt through this kind of borrowing is to decrease the rate of interest you are currently paying. It is very common for people to have debts spread among various credit cards.

For example, you may have amounts outstanding on 5 credit cards. You are pushing the upper limits of your approved credit. The average annual interest rate you are being charged among those credit cards is 19.9%. If you can get a home equity line of credit at say, an annual interest rate of 5.5%, the benefit is obvious. So it would be a smart choice to offer security to get a consolidation loan.

If you didn’t want to or didn’t have security to offer, you may have a good enough credit score to get an unsecured personal loan. Let’s say you could get this kind of loan at an annual interest rate of 8%. The rate may sound high in today’s interest rate environment, but it is a lot better than 19.9%. So this too would be a smart way to go.

But as I will discuss below, there is a difference between being smart about debt consolidation and settling for what makes sense!

Is it a good idea to get a debt consolidation loan?

If you can get this kind of loan and you are wise about it (more on that in a little bit), I say yes. In the example of the 5 different credit cards I gave, you are juggling multiple debts carrying a high rate of interest and are running out of credit room. The debt consolidation loan will lower the interest you are paying dramatically and will term out your payments.

You will stop being a juggler. That is an advantage.

Should I get a loan to pay off my credit cards?

In a typical debt consolidation funding, you need to get a fixed, not variable, interest rate. You also need to have a fixed repayment schedule which offers you a set time to pay it off. You do not want a variable rate of interest or a revolving line of credit. You want the loan to be automatically reduced with every payment you make, with no chance of increasing the loan for any reason.

That is the kind of loan you need to pay off your credit cards. It is that predictability and certainty that you need to work into your life. If you can get that kind of loan to pay off your credit cards, then that is an advantage and you should.

What happens when you consolidate your debt?

What happens depends on the type of loan you get to consolidate your debt. The various types of loans I have seen people get are:

  • an unsecured personal loan from their bank
  • a home equity line of credit or second mortgage
  • A credit card balance transfer at a promotional interest rate of either a 0% or a special introductory very low rate
  • in more recent times, a peer to peer loan

I already spoke about the benefits of either a home equity line of credit or an unsecured personal loan. When it comes to a balance transfer, you can obtain introduction rates that are as low as 0% or 1.99% for a specific period of time, such as 12 or 18 months. You need to have sufficient credit available on such a new balance transfer credit card to assume the total debt spread among the 5 credit cards. With banks competing for your business, it may be possible.

What happens when you are able to consolidate your debts into one loan is that you achieve simplification in your life. You now have just one settlement to make. It’s much less to keep an eye on.

Simply put, simplicity is an advantage. As long as you stay current in your new loan payment, you are working towards paying off your total debt.

How does debt consolidation affect your credit score?

Initially, debt consolidation could improve or at least maintain your credit score. Falling behind on credit card balances hurts your credit score. Paying off those loans and being current on your new debt consolidation loan can improve your credit score. However, there are some traps that you cannot fall into. If you do, then you will not have ended up fixing anything and will end up worse off.

So a debt consolidation loan in itself does not hurt your credit score and could improve it as long as you meet the repayment terms of your new loan. A discussion of the traps leads us into a discussion of the disadvantages of this kind of loan. It is important to recognize that it is not a loan that is the problem, it is the person’s behaviour.

Does a debt consolidation loan look bad?

I would rather have a new loan showing up on my credit report, than have my 5 credit card loans going bad on my credit report. A debt consolidation loan is only a loan. Debt consolidation in itself is not bad, it doesn’t look bad. An experienced financial or credit person looking at your credit report will know what you have done. However, it will also show them that you have been able to get a new loan. So it shows that a lender feels you are a good credit risk. None of that is bad.

What is bad, are the traps that you could fall into. If you fall into one of them, it could be bad for you. This is all about your behaviour, not the consolidation loan.

The disadvantages of debt consolidation in Canada

I will discuss the disadvantages of the type of loan and by behaviour.

Home equity line of credit

If you get a home equity line of credit (HELOC) that is anything other than a fixed interest rate loan that is not a revolving line of credit, you could fall into a trap. You are looking for simplicity and certainty. If your interest rate can rise if the prime rate charged by your bank rises, then you are not getting the full benefits.

Granted a 5.5% loan isn’t going to rise to a 19.9% interest rate, but your room for interest rate increases may be small. If a 1% or 2% increase in the interest rate would make the difference between you being able to afford the repayment and not being able to make them, you will constantly be worried about it in an increasing interest rate environment.

You also want to make sure that the HELOC is not a revolving line of credit. Once you make a payment, you want the principal portion of a paydown by each payment to be permanent. You cannot be enticed about the ability to borrow more on the line. Remember, you took on this loan to pay off debt, not to either remain at the same debt level or to increase it.

So having to pay more interest or being able to go deeper into debt are two traps to avoid with this kind of loan.

A credit card balance transfer at a promotional interest rate

As I mentioned earlier, normally these zero or very low-interest promotional rate is for a fixed period of time. So if you can repay the whole amount, in the monthly payments required, within the time period given, it is a great thing. However, if you can’t, then your promotional interest rate goes up to probably at least the average 19.9% rate in our example. Now you are back to where you started.

Maybe you missed a payment; either because something got in your way or inadvertently. Normally when this happens, you immediately lose your promotional interest rate and a fee is charged. That is a disadvantage.

You may have used this method because you were being chased by a bank for your business, but could have used one of the other methods at the time. If that is the case, and you plan for replacing the promotional interest rate loan balance before it reprices, with one of the other methods, then great. However, if you don’t, then you are back to where you started. Maybe not worse off (see more below), but certainly no better, other than for the principal you were able to pay down.

An unsecured loan

Just like a HELOC, if the unsecured loan cannot revolve and has a fixed rate of interest, that is a good thing. If it does revolve and you have not paid down any principal, and/or your interest rate rose, that is a trap. That is a disadvantage.

Do consolidation loans work?

This is where we talk about the biggest trap or the greatest benefit. It all comes down to answering this one question. Has your behaviour changed?

Debt consolidation in Canada is a terrific device when your behaviour changes. The first step to changing your spending behaviour is to budget. I have written several of Brandon’s Blogs on the topic of the need to have a proper household budget and stick to it.

But what if your behaviour doesn’t change? Did you close out the 5 other credit card accounts when you did the debt consolidation loan? Or, did you keep them open and keep running up the balances for spending greater than your income, while paying down your debt consolidation loan?

They were paid down to zero when you consolidated them. Now you have run them back up and have only made the minimal necessary payments. So, once more, you have overspent and are now back to the same stress-filled life as before. There is only one thing different now – you owe even more money, so your life has worsened. Your credit score is probably worse now too.

So if you change your financial behaviour, debt consolidation works well. If you don’t, then it doesn’t either.

What can you do now that a debt consolidation is no longer an option?

There are various options available. Most will negatively impact your credit score and provide a worse credit report. However, when you have run out of options, perhaps a lower credit score stopping you from taking on more debt might be a good thing. Maybe the fact that no one will loan you more money is what you needed as a wake-up call to once and for all get back on track.

The options include:

Credit counselling and budgeting

Many people require aid with things such as:

  • budgeting
  • accomplishing certain financial objectives
  • a spending plan
  • learning how to use credit wisely

Often times as soon as this assistance is received, people can continue by themselves with no more troubles.

A consumer proposal or Division I Proposal

A consumer proposal and also a Division 1 proposal are alternatives to bankruptcy. Although equivalent in numerous facets, there are some substantial differences. Consumer proposals are used by people whose debts aren’t greater than $250,000, not consisting of any kind of financial debts registered against your home. Division 1 proposals are for both companies, and for people debts exceed $250,000 (again leaving out home mortgages).

A consumer proposal is a procedure under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). With the licensed insolvency trustee (Trustee) you make a proposal to:

  • pay your creditors a portion of what you owe them over a certain period of time not greater than 5 years.
  • prolong the time you have to pay what you promise to pay in your accepted proposal.
  • a mix of both

Payments are made to the Trustee. That cash pays the administration fees of your proposal and distributes money to your creditors. When you have made all the required payments, the balance of your debt that you did not pay is written off and discharged forever (with certain exceptions outlined in the BIA).

These are your realistic options, once a debt consolidation in Canada option is no longer viable.

Summary

I hope this Brandon’s Blog has provided you with some insight into when debt consolidation is a useful tool and its advantages. I also hope you can see where it could also be a trap for some people. If debt consolidation relieves the pressure on you because of the state of your finances AND motivates you to budget and bring your spending in line, then it is a good thing.

If it does not change the necessary behaviour pattern that got you into financial trouble in the first place, then things will only get worse. Is it now time for you to take a positive step in the right direction to free yourself from your debts?

Are you in financial distress? Do you not have enough money to pay your creditors as your bills come due?

If so, call the Ira Smith Team today. We have decades and generations of experience assisting people looking for financial restructuring, a debt settlement plan and to AVOID bankruptcy.

A restructuring proposal is a government-approved debt settlement plan to do that. We will help you decide on what is best for you between a restructuring 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 and 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.

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FINANCIAL LITERACY: FINANCIAL LITERACY FOR HIGH SCHOOL STUDENTS IN ONTARIO

financial literacyIf you would prefer to listen to the audio version of this financial literacy Brandon’s Blog, please scroll to the bottom and click on the podcast

Introduction

When I was in high school, I was very fortunate. I thankfully took two accounting courses, in addition to the normal reading, writing and arithmetic. It was in accounting, that I received some financial literacy education. Anyone who did not take accounting did not get any exposure to basic financial education.

When Ontario grade 10 students go back to school next week, their course curriculum is now amended so that a financial literacy course is mandatory. The purpose of this Brandon’s Blog is to discuss why financial literacy is important and what the new course will offer these students.

What is financial literacy and why is it important?

Financial literacy is the education, learning and understanding of different financial subjects related to handling personal money, budgeting and investing. This topic focuses on the capability to manage individual finance matters in a reliable way.

With such education, people gain an understanding of making suitable decisions about their personal money. Without a basic financial understanding, how can people develop their financial skills? Where will you learn about things such as investing, insurance, budgeting, saving, retired life and income tax concepts?

Why is financial literacy important for students?

The typical high school curriculum of education and learning is extremely important. People generally do not get specialist education until they are in a career program. To become a medical professional, an auto mechanic or a web developer requires specialist education for career success. The one area of education that is generally missing to equip our youth to be able to make smart economic decisions in their lives is proper financial education.

Our society values money and entrepreneurship, yet for some reason, our institutions appear to assume you will somehow just know or pick up the proper financial skills to succeed. Perhaps if there was a mandatory financial education system in place we would see the gap between the rich and poor lessen. Teaching basic financial concepts and skills can go a long way to make sure that people can learn good financial habits and keep their heads above water.

How do you get financial literacy?

The Ontario curriculum for Grade 10 career studies for the first time this school year will include a section on financial literacy. The provincial government believes that it is important for students to understand budgeting and financial management. I applaud this effort.

The education system’s overall expectation is that students will get an understanding of responsible monitoring of financial resources and of services readily available to support their financial proficiency as they prepare for post-secondary life. This is an excellent thing.

I remember my first day at university. Day one all the banks have tables to entice students to sign up for a new credit card. Young adults who have student loans and have never been exposed to financial management courses will now have the ability to take on more debt. Not a good thing.

The specific expectations are that students will:

  • Learn the principles of financial responsibility
  • Evaluate the advantages of a variety of financial savings options
  • Explore financial planning tools available with banks and other sources

What are the three main components of financial literacy?

The three main components that the new financial literacy piece to career studies program will cover are:

  • Financial responsibility
    • setup and follow a budget
    • sensibly handling bill payments and using credit wisely understanding the difference between
    • knowing the difference between a bank and a credit union
    • managing their very own bank accounts
    • defending themselves against monetary scams and fraud
  • Financial savings choices
    • types of interest-bearing accounts and their associated rate of interest
    • tax-free savings accounts (TFSAs)
    • registered retirement savings plans (RRSPs)
  • Different kinds of borrowing and their advantages and disadvantages
    • federal government student loans
    • provincial government student financings, such as those available with the Ontario Student Assistance Program (OSAP)
    • loans or bursaries from their local cities and towns
    • personal (unsecured) loans from a financial institution, be it a chartered bank or a credit union
    • lines of credit, credit card and overdraft products
    • recognizing the benefits and disadvantages of the numerous kinds of credit products
    • how the responsible use of a credit card can boost an individual’s credit score ranking
    • how improper use of the same credit card can hamper a person’s credit score ranking
    • that the proper use of bank loans can allow a person to pay for a costly item, such as a car or home
    • how the improper use of loans and excessive debt can lead to a poor credit rating, money troubles and even insolvency and bankruptcy
    • How borrowing from family or close friends can be advantageous, but how defaulting on repayment can negatively impact personal relationships

The teacher’s role

The teacher’s role will be to provide illustrations to drive home these points. In the context of spending and personal finance, the students will learn the difference between “needs” and “wants”. Teachers will ask the students to reflect on exactly how a person’s values will influence their wants or the ways in which they satisfy their needs. Students will learn what “living within your means” really means.

The teacher will lead a discussion on exactly how a person can do this successfully. Students will consider what the impact on a person will be from not paying expenses promptly and from using numerous credit cards.

Students will learn the benefits of beginning to save at a young age. They will be exposed to the advantages of then having a formal financial savings plan. All this will naturally lead to a realization that budgeting for both short-term objectives, such as purchasing clothes, differs from budgeting for long-term goals, such as buying and maintaining a car. Students will also learn about the different types of savings vehicles as well as debt products. They will also learn the proper use of debt.

In my view, the students will learn about the three most important parts of any financial literacy program: 1. proper budgeting techniques; 2. the importance of saving from an early age and the various savings vehicles available; and 3. debt and how to use it properly.

Summary

Hopefully, by exposing grade 10 students to these concepts, they will be motivated to keep learning and using proper financial management techniques. My hope is that more students will come out of high school and begin their post-secondary career, whatever that may be, by having better financial management skills and therefore fewer people will be able to stay clear of insolvency.

Prior to the new mandatory curriculum, the first exposure many people had to financial literacy education was as part of insolvency counselling, which means they already made mistakes before having a chance to learn the basics.

Are you on the edge of insolvency? Are bill collectors hounding you? Are you ducking all your phone calls to the point where your voicemail box is always full?

If so, you need to call me today. As a licensed insolvency trustee (formerly called a trustee in bankruptcy) we are the only professionals licensed, recognized as well as supervised by the federal government to give insolvency assistance. We are also the only authorized party in Canada to apply remedies under the Bankruptcy and Insolvency Act (Canada). I can definitely help you to choose what is best for you to free you from your financial debt issues.

Call the Ira Smith Team today so we can get free you from the stress, anxiety, and discomfort that your cash issues have created. With the distinct roadmap, we establish simply for you, we will without delay return you right into a healthy and balanced problem-free life, Starting Over Starting Now.

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DEBT HELPERS: WHY CANADIANS DO NOT TRUST DEBT CONSULTANTS

Introduction

You may have read or heard about a recent survey. The headline was “Ipsos poll finds half of Canadians don’t trust professional help with debt”. The survey provided some interesting views but did not shed any light on why Canadians do not trust debt helpers.

I regularly speak with people who attend my office for a free initial consultation to try to solve their personal or company debt problems. From those experiences, I have compiled a list of the 10 most common reasons I believe why almost half of those surveyed do not trust debt professionals.

#1 What is a debt professional?

Confusion exists in the marketplace as to what you mean when you say the phrase “debt professional”. Depending on who is doing the talking, and the listening, you could mean:

  • A proper credit counselling agency
  • A for-profit debt settlement company
  • Debt counsellor who has no real qualifications and just acts as an agent for bad credit personal loan companies or worse charges fees just to then take the person to a specifically licensed insolvency trustee (formerly known as a bankruptcy trustee) (Trustee)
  • A Trustee

Unfortunately, the survey does not define what the term “debt professional” really means.

#2 I don’t have a debt problem because I am making all my payments

People believe that if they can keep up all their minimum payments, then they are making all of their payments. So if the person says they are making all payments, they can’t have a debt problem. Therefore, they don’t trust anyone who tells them that they do.

However, especially with credit cards, there is a difference between making all the monthly minimum payments and paying the entire debt off every month. What they don’t recognize is that all they are doing is paying the credit card company interest and never actually paying down any debt. Eventually, it will catch up with them when they have no more credit.

#3 You will ruin my credit score

People with debt problems always tell me that they have a great credit score and either a consumer proposal or bankruptcy will ruin that. So with the belief that if they see a debt professional, all that person will do is ruin their credit score, distrust is born.

Even people who have recently been turned down for debt consolidation loans tell me that. What I tell them is that it is true that an insolvency filing will remain on their credit report for some time after they successfully complete their consumer proposal or get their bankruptcy discharge.

However, I also point out that in return, they will have their debt problems fixed. By fixing their debt problems, they will no longer suffer from pain, stress, anxiety, depression and sleepless nights. Some people then choose to take responsibility, fix their debt problems and rehabilitate themselves. Others choose discomfort, stress and anxiety, and sleep deprivation.

#4 Talking won’t do any good. What I need is a loan

Many people feel that talk is cheap. What they really need is money. The gambler with a gambling addiction thinks the next roll of the dice or the next hand of cards will produce all the winnings they need. In the same way, the debt addict believes that one more personal loan will solve all their debt problems. All it will really do is give them a bit more cash, which will never be enough to repay all of their debt.

Increasing debt is not a good strategy for getting out of debt. That extra bit of cash may feel good in the short term, but eventually, all it really is is more debt. What these people don’t realize is that by talking to a Trustee, when they find the right one for them, a relationship begins. The functioning partnership you create with your Trustee is a connection. As you create that connection, long-term modifications in your financial behaviour start to happen to produce good long term results.

#5 It would be weird speaking about such a personal thing with a stranger

In my experience, this may be an initial feeling but does not in fact happen. The majority of Trustees are competent at making you really feel comfy rapidly. They are neither impersonal nor judgmental.

As I mentioned above, once you find the right Trustee for you, a relationship begins. I have found that many of the people that I have helped, consider me a resource to call upon, even long after our professional relationship ends.

#6 I would rather speak to a friend or family member

I have heard this many times. This is really an excuse for not dealing with their debt problems. It is not a reason why people don’t trust debt professionals.

In fact, a recent Angus Reid poll titled The Awkward Silences Survey 2019 found that 17% of the Canadians surveyed do not like to talk about finances. Of those, the least favourite topics they like to talk about are:

  • Personal debt or bankruptcy – 34%
  • Assets, liabilities and net worth – 22%
  • Their income – 16%
  • How they spend their money – 12%
  • Savings and investments – 11%
  • Their mortgage – 5%

I get it. The topic is not pleasant. Speaking with a debt professional is an admission that you have a problem with debt. However, it is also the first positive step to take to solve your debt problems.

#7 Debt professionals do not truly respect you; they do it for the cash

Yes, there are unscrupulous people in the world who advertise themselves to be debt consultants. They make outlandish promises such as they will eliminate your debt without bankruptcy. I cannot speak for them, but I do know myself and many of my Trustee colleagues across Canada.

The Trustee and staff do earn money from helping people with their debt. Just like you earn money from your job or career. However, there is a common bond amongst all Trustees in Canada. That common bond is that they all enjoy helping people. They enjoy seeing your success from their assistance. If they did not, they would be doing something else.

#8 Everyone will know if I go to see a debt professional

This is a common feeling. Again I can only speak about Trustees. Although there is not the same confidentiality with a Trustee as there is with a lawyer, a Trustee does not blab. As big a country as Canada is and as big a city where I practice is, the Trustee community is small. If a Trustee broke confidences, word would get around quickly and that Trustee would not get any referrals.

Keep in mind that the word “trust” is found in “Trustee”. People trust us with some of their deepest problems and we help solve them. I don’t talk to others about your issues.

It is true that the Office of the Superintendent of Bankruptcy runs a database of all insolvency filings. This is a public database that anyone can search for $8. Also, the two Canadian credit reporting agencies, Equifax Canada and TransUnion Canada, purchase that information for their own databases. I have never had anyone tell me that their brother-in-law searched the government database and found out about their insolvency filing.

So at the end of the day, the only people who will know that you filed are yourself, your Trustee, your spouse and anyone that you have told.

#9 The professional fee is too expensive

That depends on who you go to see. If you go to a community credit counselling agency, it is probably no charge. If you go to a debt settlement company scammer, then every one cent is too expensive because they do not do anything useful for you. If you go to see a Trustee, the entire process may end up being free.

Let me explain. The initial consultation with any Trustee will be free. You should get that confirmed upfront when you make the appointment. Other than for situation where you have no assets and no income, a consumer proposal filing or a bankruptcy administration will probably end up not costing you any money specifically for professional fees. Here is why.

The Trustee will advise you what will happen to you and what your responsibilities are in a bankruptcy or consumer proposal. In a bankruptcy, other than for exempt assets, you have to turn over your assets to the Trustee. If you earn income, you may also have a surplus income obligation to pay. The Trustee, under the statute, will be entitled to a fee for services out of those proceeds. So, you will pay nothing for the Trustee’s approved fee.

In a consumer proposal, the Trustee has to first do the bankruptcy calculation. Under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA), a consumer proposal must produce a better result for your creditors than your bankruptcy. The Trustee will discuss with you his or her best estimate of how much you need to offer to your creditors in your consumer proposal in order to be successful. That calculation has nothing to do with the fee the Trustee is entitled to under the BIA. The statute says that the Trustee is entitled to a statutory fee from the consumer proposal fund.

So, in this way, the Trustee’s fee for a bankruptcy or consumer proposal administration costs you nothing.

#10 I don’t have time

I believe this also is more of an excuse, not a real reason for not trusting a debt professional. It is uncomfortable to face your debt problems head-on. It is more comfortable to ignore them.

A Trustee will provide a 1-hour consultation for free. In that hour, you will gain better insight to your debt issues and the realistic options available to you to fix them. I always have people tell me at the end of the free consultation, that I have helped them feel much better than they did when they first walked in.

So think of all the things that you do in a day or week, and I am sure that you can find 1 hour to help yourself. If you have a job that makes it impossible to see a Trustee during normal business hours, a Trustee will accommodate you. I have held many early morning or evening appointments.

Debt helpers summary

I hope this debt helpers Brandon’s Blog helps you. As previously stated, there is a good reason not to trust certain debt helpers. You don’t need to feel that way about seeing a Trustee. Are you on the verge of bankruptcy? Do not let any misconceptions about being able to trust a Trustee stop you from understanding how you can restructure your financial affairs and avoid bankruptcy. You do not need to be one more person or company declaring bankruptcy in Canada.

As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only specialists certified, accredited and overseen by the federal government to provide insolvency guidance and to apply remedies under the BIA. We will certainly help you to choose what is best for you to release you from your debt problems.

Call the Ira Smith Team today so we can get rid you for you the stress, anxiety, pain and discomfort that your money issues have created. With the distinct roadmap, we establish simply for you, we will without delay return you right into a healthy and balanced problem-free life, Starting Over Starting Now. Call the Ira Smith Team today.

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BORROW WELL REVIEW GUIDE: BORROWELL REVIEW FREE CREDIT SCORE METHOD

borrow well review

If you would prefer to listen to the audio version of this Brandon’s Blog Borrow Well Review please scroll to the bottom and click on the podcast

Introduction

Have you ever before wondered what your credit score is and what your credit history looks like? I’m certain if you ever before looked for a home mortgage, a loan, to rent a home or apartment or applied for an insurance policy, you recognize that your credit rating ends up being crucial. The loan provider, landlord or insurance provider will certainly decide on you based upon your credit history. This Brandon’s Blog is about the totally free credit report system of Borrowell Inc.; a Borrow Well review.

Inspecting your credit rating has actually generally been a really laborious job and nobody really liked to do it. With the surge of consumer FinTech over the last couple of years, two businesses have actually seen a method to produce an on the internet industry for personal loans in Canada; 1. Credit Karma Canada; and 2. Borrowell Inc. Credit Karma Canada is owned by its United States parent. Borrowell is a 100% Canadian owned firm.

Borrow Well review

I have previously blogged about Credit Karma Canada. Borrowell runs in a comparable way. Borrowell’s goal is quite straightforward. They wish to assist Canadians to make fantastic choices concerning credit and debt. They began life as a consumer lender. Borrowell thought that customers wanted personal loans. They started the firm making loans for people with excellent credit.

Borrowell discovered that it was pricey to obtain customers. Their customer acquisition cost was very high. It was a tough issue to fix. What they did was come to be the 1st business in Canada to supply credit scores absolutely free. They assumed this would be a wonderful method to obtain clients and promote what Borrowell did. They thought that it would certainly be an excellent method to make loans.

How it works

The trouble was that they were thousands of people a week inspecting their credit report, however, few of them either desired or fit the Borrowell standards for, loans. Borrowell found that people desired various financial products and not everyone had good credit. So they invested most of 2017 in developing a marketplace.

They developed an online forum for around 40 various financial institutions and other lenders. That enabled a person to get their credit score with Borrowell, and then they can after that be taken into the sales funnel. Borrowell would after that advise of products, solutions, and pointers customized for every person from their forum of lender members. Borrowell earns a fee on loans made and other financial product sales.

They wound up discovering a high level of product market fit for roughly half a million direct customers that first examine their credit report with Borrowell. Canadians now had a very easy way to regularly see their credit score and inspect their credit history.

Utilizing the Borrowell system does not influence your credit report, unlike when you apply for a loan and the potential lender performs a credit check on you. In order to ask you the setup questions, and to have the ability to provide you with your cost-free credit report and record, Borrowell acquires information from one of our two credit reporting companies, Equifax.

Borowell additionally browses particular public document data sources to try to find various other details such as:

  • Bankruptcy: A legal process used by people and companies looking for particular relief from all or some their debt.
  • Civil Judgment: A non-criminal judgment in a court, calling for the person or company to make full or partial restitution.
  • Registered Items: Other things found in public documents, like a lien against your car or truck or a home mortgage or other loan registered against your house.

Know that you are in the Borrowell sales funnel

In order to stay top of mind, Borrowell updates you on your credit rating on a monthly basis and if it has actually changed for better or for worse. This is, obviously, advantageous for any person trying to enhance their credit history. Borrowell will inform you monthly the result of the activities you are taking to boost your credit score.

Borrowell will also help you recognize what variables are affecting your credit score. In this way, they inform you what you need to do to boost your credit rating. This is particularly great for anybody trying to learn about finances and general money matters. Borrowell also provides recommendations on just how to improve your credit rating.

So their system helps you to learn about:

  • payment history
  • credit usage
  • bad comments on your credit report
  • account inquiries
  • your credit score and report
  • tips for improvement

Borrowell offers you a very easy way to see just how you’re doing financially, just how much money you have invested between credit cards and automobile and various other loans. It likewise

To learn what goes into calculating your credit score and what it all means, check out my blog, WHAT IS A GOOD CREDIT SCORE IN CANADA? THE UNTOLD CREDIT SCORE SECRETS.

Is there any drawback to the Borrowell app?

The positive side is that this is a very easy and effective method of looking into yourself in a reliable way none of our Canadian banks have actually done. Nonetheless, I likewise have some worries.

The financial partners in the Borrowell financial marketplace have to pay a fee. That charge needs to be accounted for in the price of the financial products sold. If there is competition amongst marketplace financial members, this may keep pricing consistent and competitive within the various credit score buckets. Perhaps this marketplace also gives people access to financial products they otherwise may not be able to find or get on their own.

It is safe to presume that people using this system are working on boosting their credit score. The financial partners might be costing their products for those that have actually not attained sufficient credit strength to go and negotiate the price they will be paying with any Bank. So for those with a good credit rating, this may mean that the cost of any kind of financial product via the Borrowell portal could be greater than otherwise readily available to them if they spent the time investigating.

My main concern is more generic. It would be the same as with any system like this. They maintain a great deal of highly personal and sensitive information on Canadians which they regularly update.

There are many criminals around the world who would like nothing better than to hack the Borrowell database in order to get at this information to further their devious and illegal schemes. Stealing your identity, or identity theft is, of course, the big one.

Think no further than September 7, 2017, when Equifax announced that months-long illegitimate access to its credit-report databases had led to the breach of personally identifiable information of over 148 million people, nearly all in the USA. That is the real danger I am talking about. As I mentioned, that is a danger with any computerized system storing highly sensitive information, not just a Borrowell issue.

Borrow Well Review: Do you have a negative credit report?

I hope this Borrowell review has helped you gain a better understanding. Question: Have you lost the ability to borrow because of a bad credit score? Are you having trouble making your monthly payments? Is your business dealing with financial challenges that require to be addressed immediately?

Call the Ira Smith Team today if so. We have years and generations of experience helping people and businesses seeking financial restructuring or a debt negotiation strategy. As a licensed insolvency trustee, we are the only specialists acknowledged, accredited and overseen by the federal government to supply insolvency advice and implement solutions to help you to remain free from bankruptcy.

Call the Ira Smith Team today so you can end your anxiety, anxiousness, and discomfort today. With the roadmap we establish one-of-a-kind to your scenario, we will promptly return you right into a well balanced, healthy and carefree life.

You can have a no-cost evaluation to help you to fix your credit and debt difficulties. With you, we will discover your monetary pain factors and make use of an approach to free them from your life. This will definitely enable you to start with a clean slate, Starting Over Starting Now.

 

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WHAT IS A GOOD CREDIT SCORE IN CANADA? THE UNTOLD CREDIT SCORE SECRETS

What is a good credit score in Canada: Introduction

I have previously written reviews of the two main companies that can give you your credit score for free in Canada. The two are Credit Karma Canada and Borrowell. It is one thing to know what your credit score is. But what does that number mean? Do you have control over how to increase your credit score? To answer those questions, you must know the topic I am writing about in this Brandon’s Blog. What is a good credit score in Canada?

Your credit rating

There are three main points you need to learn about your credit rating. In Canada, your credit score is a number between 300 and 900. Lenders use this to forecast just how likely you are to be responsible with the money they are considering providing you. Will you pay back the cash you are asking they fund you?

The greater your score number, the more probable you are to be an excellent wager to be able to pay back what you owe. Your credit history is composed of five elements:

  1. Your payment history composes 35%.
  2. How much debt you owe comprises 30%.
  3. The length of your history makes up 15%.
  4. 10% comes from the sorts of loans or credit cards you have.
  5. Just how often you typically apply to borrow has a 10% effect.

A better understanding

Let’s drill down on this a little more. The greatest chunk is your repayment history. This checks out whether you’re making your payments on time. If you’re late on repayments, exactly how often are you late or are there financial obligations in the enforcement and collection process. How much debt you owe takes into account how much debt is owed and how much borrowing room is still available to you.

The length of your borrowing history considers how long you’ve had your loan products for. The longer you’ve had them the better it is for your history. Types of credit look at the range of items you have. A brand-new application is when you ask for a new loan. New loan applications stay on your report for three years. Applying many times decreases your score.

The theory is that if you keep applying, you are having 2 problems. The first is that you keep needing new loans for some reason. The second problem is that you must keep being turned down in order for you to need to keep applying.

Hard and soft hits

When you apply for a new loan, the potential lender performs a check on you. This produces what is known as a hard hit which can negatively impact your score. When you pull your own reports, such as through Credit Karma Canada or Borrowell, this makes what they call a soft hit. This won’t negatively impact your score.

How often should I check my score?

You might be wondering do you need to look at your own score monthly? I am here to tell you that you don’t. Your rating adjusts throughout the month based on the five items I spoke of above. So your rating can look different from month to month.

If you’re exercising excellent credit rating behaviour a new report will certainly show that. Likewise, if you are not acting responsibly, your report and your score will show that. What I do recommend you do is check your rating by pulling an annual credit report. You do this to ensure that your record is exact and there are no errors in it.

The most effective time to check the accuracy of your report would certainly be prior to you making a huge purchase for something like a home or vehicle. You recognize that your lender will certainly perform a check. It is to your benefit to make sure everything on your rating profile looks good and is error free.

In that situation, where a lot is riding on the precision and completeness of your report, you would go directly to the two main score rating companies in Canada; Equifax Canada and TransUnion Canada. You will certainly have to pay for them to generate an Equifax or TransUnion score and history report for you. What you pay them to understand that your record is precise and totally error-free is worth that peace of mind.

4 things you must know about your score

To summarize, the 4 things you must know about your score are:

  1. Your credit score in Canada is a number between 300 and 900.
  2. Lenders use your credit score to forecast just how likely you are to be responsible with the credit they are considering providing you.
  3. The greater your credit score number, the more probable you are to be an excellent wager to be able to pay back what you owe.
  4. Your credit history is composed of five elements:
    1. your payment history composes 35%;
    2. how much debt you owe comprises 30%;
    3. the length of your credit history makes up 15%;
    4. 10% comes from the sorts of credit you have;
    5. just how often you typically apply for new credit has a 10% effect; and
    6. lastly, you don’t need to check the credit score all the time.

You might have a concern about, and ask yourself, is Credit Karma Canada safe? Is Borrowell safe? The answer is yes, but you still may have a concern. You are providing each of them with very personal information about yourself when you first sign up for their respective services. Then they do on a regular basis perform a credit score check on you. These are soft hits, so it won’t affect your score. However, they are updating your private personal information which stays on their database. Anytime such sensitive information is on a computer server, there is, of course, a danger from hackers.

The reason they regularly check your credit situation is so they can then send you an email about any change to your credit score – good or bad. They do this for two reasons. The first is to alert you about their latest finding of your credit report. The second reason is to give you a reason to go to their website. Their hope, of course, is while you are on their site seeing the change to your credit score, perhaps you will stay and look at some of the products they offer to produce revenue for themselves.

What is a good credit score in Canada: What about you?

I hope this what is a good credit score in Canada blog has helped you gain a better understanding. Question: Have you lost the ability to borrow because of a bad credit score? Are you having trouble making your monthly payments? Is your business dealing with financial challenges that require to be addressed immediately?

Call the Ira Smith Team today if so. We have years along with generations of experience aiding people and companies looking for financial restructuring or a debt settlement plan. As a licensed insolvency trustee, we are the only professionals recognized, licensed and supervised by the Federal government to provide insolvency advice and services to assist you to stay clear of bankruptcy.

Call the Ira Smith Team today so you can end your stress, anxiety and pain today. With the roadmap we develop unique to your situation, we will swiftly return you right into a balanced, healthy and carefree life.

You can have a no-cost assessment to assist you to repair your credit and debt troubles. With you, we will uncover your financial discomfort points and use a method to rid them from your life. This will absolutely allow you to begin a fresh start, Starting Over Starting Now.what is a good credit score in canada

 

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FINANCIAL DISASTER PREPAREDNESS: 4 STEP PLAN TO STOP FINANCIAL DISASTER

Financial disaster preparedness: Introduction

The people drowning in debt are always scared of the thought of speaking to a licensed insolvency trustee (formerly known as a bankruptcy trustee (Trustee). The purpose of this Brandon’s Blog is to allow me, a Trustee, to give you some basic points on financial disaster preparedness in a non-scary way. Hopefully, it can help you avoid a financial disaster.

On the 27th day of the United States Federal government closure, many federal employees that are already under money stress and anxiety are not surprisingly asking whether an insolvency proceeding is the only alternative.

These people did not ask for this. Although they will eventually receive all their back pay, that doesn’t help their cash flow today.

Some personal bankruptcies are started by events beyond somebody’s control. The US government shutdown is such an example. Alternatively, unlike the shutdown, a number are completely within an individual’s control.

Here are four ideas on just how to maintain your finances from falling off the edge right into insolvency.

Financial disaster preparedness: #1 – Keep an eye on your credit cards

Try to pay your monthly credit card bill, and all your expenses, on or before their due date. If timely payments cannot happen, pay it back asap or arrange a repayment strategy to decrease late charges as well as interest charges.

Never ever carry over a credit card balance. Attempt to pay your balances, including all your expenses, promptly.

Similarly, be conscientious what your credit history is. Almost every person will certainly have a time in their lives when they’ll need to borrow cash for some major expenditure.

Your credit score will affect the borrowing rates you are offered. Knowing one’s credit history can aid people to make a better decision on when to jump, or hold back, on a choice to borrow.

Financial disaster preparedness: #2 – Know your monthly expenses (and savings too)

When I do credit counselling and speak to people about loan basics, I discuss spending behaviours and always talk about the difference between wants and needs. I always encourage people striving for economic self-reliance to begin with a straightforward exercise: document every single expense in a month.

By mapping out all the spending, people can rank where their cash should, as well as shouldn’t, be going. For example keep an eye out for the daily latte, which is a habit because, it builds up, A more expensive specialty coffee is a want, not a need. A less expensive plain coffee could suffice.

There is one routine I always urge. Make a routine that you will set aside a particular percentage of your income for an emergency fund. The same goes for socking away, at the very least a little, to an RRSP. Work these savings into your budget.

In my experience, all consumer insolvencies commonly entail inadequate financial savings to cover the unanticipated. This is a common problem among Canadians that I have previously written about in my blogs.

Credit cards are also a significant cause of personal insolvencies. Many of our personal insolvency clients use credit cards to supplement their income. Rather than budgeting, they use their credit cards for various expenditures that they really cannot afford and are unable to pay down their credit card balances.

Financial disaster preparedness: #3 – Boost your financial literacy

There are various ways to begin early in life to prevent financial disaster problems. If these guidelines sound familiar, that’s because they are. However, yet few individuals appreciate them. That’s partly because they’re not taught it in the schools.

Canadians have a financial literacy problem. Many people think that some people are born rich and others aren’t. The reality is that those who are well off just have a more realistic understanding about spending and saving within one’s earnings.

Financial literacy, like civics education, needs to be a requirement in all elementary school, high school and university educational programs.

Financial disaster preparedness: #4 – Preserve your financial self-reliance


Those who lived through the great depression understand how fragile funds can be. Clipping coupons and looking for the most affordable prices is just part of their normal behaviour.

Insolvency filings have been at their lowest point since 2007, and there are varying explanations for the decline.

During the last decade, Canadians have amassed debt. Now that interest rates are rising, it is expected that personal insolvency filings will rise. Personal insolvencies will be more a part of our world as a result of unexpected disasters and negative decisions.

Corporate bankruptcies will always be a part of the system as markets change and businesses experience threats they cannot survive.

We must all be financially vigilant. I hope these tips will help you in avoiding any form of financial distress.

Financial disaster preparedness: What about you?

Do you have excessive debt? Are you in need of financial disaster preparedness? Does your business have way too much financial debt and is in danger of shutting down? Are you concerned that the future rate of interest hikes will make currently workable financial obligations totally uncontrollable? Is the pain, stress and anxiety currently adversely influencing your health and wellness?

If so, contact the Ira Smith Team today. We have years and generations of helping people and businesses seeking financial restructuring. As a licensed insolvency trustee, we are the only specialists certified and overseen by the Federal government to offer financial restructuring solutions.

We provide a free consultation to assist you to solve your problems. We know the discomfort financial obligations causes. We can end it as soon as possible from your life. This will permit you to start a fresh start, Starting Over Starting Now.

Call the Ira Smith Team today so that we can start helping you get back into a healthy and balanced, stress-free life.

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REBUILDING CREDIT CANADA: USE OUR PAINLESS 3 STEPS TO REBUILD CREDIT SCORE

Rebuilding credit Canada: Introduction

After fully completing a consumer proposal or receiving a discharge from bankruptcy, it is important to start immediately rebuilding credit Canada. The purpose of this Brandon’s Blog is to provide you with our foolproof and painless 3 step plan to eliminate those negative credit checks and fix your credit trouble by rebuilding credit Canada.

Rebuilding credit Canada: Step 1 – Create good habits with a plan for discipline and self-control

After your discharge from bankruptcy or the full completion of a consumer proposal, you must create good habits of discipline and self-control. You won’t have any credit accounts and your goal is to show the credit bureaus that you can use credit responsibly and work your way back from bad credit score.

To do that, you need good new financial habits. You need to start creating a good payment history. A lack of these habits might have been partly responsible for your current situation, so working on changing bad habits, and creating new ones will lay the groundwork for a successful financial future.

Research has shown that on average, it takes more than 2 months before a new behaviour becomes automatic – 66 days in fact. So, while at the beginning, having to be disciplined and exert self-control over spending money mistakes might seem like hard work, stick with it for a couple of months, and very soon it will just become part of your daily routine.

Learn discipline through budgeting. You may be able to find a pretty good yet simple budget calculator spreadsheet. Aside from rebuilding your credit, learning how to create a realistic budget by looking at your essential expenses compared to your current level of everyday purchases. This will allow you to get a good handle on what your income requirements are and then sticking to it is the most important step of rebuilding credit Canada after bankruptcy or consumer proposal.

You’ll be looking closely at your money and personal income anyway, so use this time to get a real grasp on your entire financial situation. Take a look at credit cards and related statements. By only making the minimum monthly payment you are being charged interest. Look carefully at what the rate on purchases is that you are really paying.

Understand where your money comes from, and, more importantly, where you spend every penny. You’re going to need to make friends with spreadsheets and familiarize yourself with all your bank and bill statements. Create categories of all your expenses (e.g. rent, electrical bills, car insurance, groceries etc.) Using your past bank statements, look at your current spending plan in each category. You’ll probably be surprised at how much money you spend in some!

Set limits for how much you will spend per month in each category. This will likely mean making some sacrifices to ensure your budget balances (the total amount being spent does not exceed the total amount coming in). However, be realistic – don’t tell yourself you’re going to stop doing things you enjoy together. Instead, cut down on how often you do them. E.g. the budget spending plan for a meal out could be once a month rather than a couple of times a week.

Get in the habit of planning and recording every single expense, no matter how small. Keep receipts and go over where your money has gone every month. Plan rewards for different milestones along the way. It’s important to have things to look forward to and motivate you along the way.

Budgeting takes discipline and sacrifice but stays focused on the goal. You’re doing this to ensure you don’t fall back into the same bad habits as before. You are going to have to change some things – and what better time than while you’re starting over? You’re already doing the work, now the trick is to make this disciplined.

Practice self-control in your spending (and saving!) The golden rule of spending? Learn to live within your means – it sounds simple, but it can very hard to do. However, those who live within their means do not get into trouble with debt, and that’s what you’re working towards for the future! You’ve created a budget, you know exactly what you can spend in each category, now you need to execute on that. By following your

While in bankruptcy or a consumer proposal, any excess money you earn is going to go to your debtors. That may make it seem impossible to save. However, saving money should always be in your plan.

As soon as you are discharged from bankruptcy or your consumer proposal, start saving money every month. Work a specific amount (we recommend 10%) into your budget so that you learn to live within that new budget spending plan. Setting up automatic payments and transfers into your savings account on payday will ensure your money goes where it needs to before you even have time to think about spending it.

So where should this money go? First, establish an emergency fund so that you can avoid facing bankruptcy again in the future. A good emergency fund should cover at least 3 months of living expenses. Once your emergency fund is built, continue to save by contributing to your RRSP or TFSA as much as you possibly can while still meeting your month-to-month expenses.

Forming good habits of discipline and self-control is key to your permanent financial rehabilitation. Once you do so, you’ll find that building your credit will be relatively easy!

Rebuilding credit Canada: Step 2 – Work to rebuild your credit after bankruptcy or consumer proposal

It is true that a record of your insolvency filing will stay on credit reports. This is so for both a consumer proposal (3 years!) or a bankruptcy (7!). However, you can actually start rebuilding credit Canada right away.

There’s an old saying that goes “The best time to plant a tree was 20 years ago. The second-best time is now.” We recommend that you don’t wait 20 years, or even 3.

Here’s what you need to know to start building credit and improving your credit reports today:

Secured Credit Card – A secured credit card looks and functions just like a regular unsecured credit card, with your lender reporting to the credit bureaus on a regular basis. The only difference is that you put up an initial deposit as a security deposit in the form of cash. The minimum deposit or the maximum deposit you can afford to make acts as collateral upfront makes it a secured credit card. The amount of cash you put up as a deposit dictates your credit limits.

rebuilding credit canada
rebuilding credit canada

This protects the lender from the possibility of you defaulting on what you owe because your security fund will be used to cover any outstanding amounts. When you use this type of card, as far as the vendor is concerned, it acts just like an unsecured credit card. Every month when you pay off the balance by making your payments on time, it is reported to the credit bureaus. Then each credit bureau can update their records showing you are paying it off on time. That is how it can rebuild credit Canada.

A Secured Line of Credit – Much like a secured card, a secured line of credit is a revolving credit that is secured by the money or other security, you offer up in the beginning. As you use your line of credit and you make your payments on time, you will establish a picture of good money reminders habits which will both boost your credit score. These lines of credit are available through most banks. Again, creditworthiness and collateral, if required, set the credit limits.

Create Your Own Credit Building Programs – Credit building programs are one of the most effective methods for rebuilding credit after bankruptcy or consumer proposal. Programs like borrowing a small amount to invest in your RRSP. Then repay the loan in full before the next RRSP year.

This is beneficial in 3 ways: You don’t have to come up with the funds, you are investing in your future and by repaying the loan, you are showing you can handle credit properly which improves your credit score. This should also be combined with a secured card or line of credit, do double up on your credit score building program. Paying your bills on time also improves your credit score.

You want to follow your budget carefully. Avoiding late payments, making the full payment each month on your monthly credit card balance, not just the minimum payment, and don’t have a missed utility payment. Having timely payments and no late payments on your Canadian credit history, will take a poor credit score and start improving your credit rating by creating a new positive credit history.

An improved credit rating and improving credit reports will overturn the negative effects of your bad credit history, get your credit score ranges to improve, get you the credit score increase you deserve and catch the attention of the credit card company and improve your chances of access to credit products.

These new types of credit becoming available to you, and perhaps even existing credit card issuers giving you a credit limit increase, all go towards your rebuilding credit Canada. But you still need to stick to your spending plan. Just because you are getting access to credit again, does not mean you can abandon your proper budgeting. You don’t want to go back to the old habits that produced the poor credit history.

Whatever kind of credit loans you are looking to take out to help rebuild your credit, make sure you understand things properly. Read the credit applications carefully to see what you are really signing up for. If approved, read the credit agreement carefully so you will fully understand all the terms of the rebuilding credit Canada loan product.

As your credit reports improve, you will find new companies offering you new credit accounts and credit card providers either increasing your credit card limit or sending you applications for new credit cards lines. Again a word of caution. Don’t get carried away with all sort of credit products in your daily life. Keep it simple and stick to your budget. You really may only need one regular credit card from amongst the wide range of Canadian credit cards becoming available to you.

rebuilding credit canada
rebuilding credit canada

Rebuilding credit Canada: Step 3 – Maintain your spending plan good habits for the rest of your life

Rebuilding credit Canada is not a one-time event. Think of rebuilding your credit after bankruptcy like losing weight. In the beginning, dragging yourself to the gym and making kale smoothies is hard work. However, as you start to see the weight drop, it becomes easier and easier.

What happens when you reach your goal weight? Do you stop going to the gym and start eating pizza for breakfast? No! You just carry on as you are now – because it’s become a habit, and if you slip back into old habits, you’re quickly going to see all of your hard work come undone.

Regularly checking your full credit reports from both credit reporting agencies will help you see how your good habits are paying off. Kinda like weighing yourself to make sure you’re still where you want to be. If you start seeing negative results, take stock of what’s happening in your life that could be causing it and make changes to quickly get back on track. You want to keep seeing improvement in your credit reports.

Ultimately, whether you’re declaring bankruptcy or entering into a consumer proposal, it will be emotionally difficult. There is a light at the end of the tunnel though. Many people don’t realize that you can start building credit while going through both a bankruptcy or consumer proposal so that at the time of discharge, you’re already a few steps ahead. Follow these steps and you’ll find that rebuilding your credit after bankruptcy isn’t that difficult.

Rebuilding credit Canada: Do you know anyone who needs to get back on the road to financial recovery?

If you have too much debt, are unhappy with your debt situation and need someone to talk to about how a consumer proposal or even personal bankruptcy can fix your credit issues and improve your financial life, call the Ira Smith Team. We are professional credit counsellors and can help you learn good spending habits. Through consumer proposal payment arrangements you can make steady payments on prescribed payment dates. This will allow you to avoid bankruptcy by paying only a fraction of your total debt yet eliminate all of your debt. It will also get you credit repair.

We will listen to your issues and provide you with our thoughts and recommendations for free. That’s right; a no-cost initial consultation. We will look at your debt utilization and make recommendations to you on how to fix it. So why not? All you have to lose is your stress while rebuilding credit Canada. Why not fix things now so that your credit checks improve.

We will advise you whether or not we think you are a candidate for either a consumer proposal or bankruptcy. If we feel you can solve your financial problems without an insolvency process, we will tell you straight. The Ira Smith Team understands the stress you are under and the pain it is causing you and your loved ones.

We can eliminate your pain. I guarantee that you will start feeling better right away after our free initial consultation. Taking action after that will put you on the right path, Starting Over Starting Now

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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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Brandon Blog Post

FILING FOR BANKRUPTCY IN CANADA: INTENSE MENTAL HEALTH & DISCHARGED BANKRUPTCY

anthony bourdain

Filing for bankruptcy in Canada: Introduction

With filing for bankruptcy in Canada, if a person’s discharge is opposed, there must be a court hearing. At the hearing, the court will decide if the discharge will occur. Once the discharge is granted, the person will be relieved of his or her debts as of the day he or she filed for bankruptcy (with certain exceptions) and will be free to start rebuilding his or her credit rating and financial future.

Filing for bankruptcy in Canada: Court of Appeal for Ontario decision

The purpose of my blog is to describe a March 2018 Court of Appeal for Ontario decision, Kuczera (Re), 2018 ONCA 322 (CanLII). This is an important decision in how mental health issues intersect with the bankruptcy discharge process.

Mr. Kuczera’s financial problems began with a costly and hotly contested divorce proceedings. With his debts mounting and the divorce proceedings continuing, Mr. Kuczera filed a consumer proposal. As a result of the ongoing family law battle, his mental health deteriorated and he became clinically depressed. He was no longer able to cope with life and was unable to work.

Filing for bankruptcy in Canada: Defaulting on the consumer proposal

Up to this point, he was making the consumer proposal payments. His default in the consumer proposal caused it to be annulled. The consumer proposal was his attempt to get out of bankruptcy, as he first used filing for bankruptcy in Canada with an assignment in bankruptcy first. So, Mr. Kuczera now remained an undischarged bankrupt.

filing for bankruptcy in canada

Filing for bankruptcy in Canada: The bankruptcy discharge hearing

Mr. Kuczera represented himself in Bankruptcy Court on his discharge hearing. He tried to show the Registrar in Bankruptcy that he tried his best to live up to all of his bankruptcy obligations to the licensed insolvency trustee, but due to his mental health issues, he could not. Unfortunately, his evidence was only a basic report from his psychiatrist.

The Registrar did not grant an absolute discharge. Rather, based on the evidence in front of her, she ordered that a discharge be granted only after payment of the outstanding balance under the consumer proposal, and one other minor condition. The Registrar went on to state that he was held responsible for his situation.

Filing for bankruptcy in Canada: Appeal of the Registrar’s decision

Mr. Kuczera was able to hire a lawyer to appeal the Registrar’s decision to a Judge sitting in Bankruptcy Court. The Judge refused to consider fresh evidence in the form of more descriptive psychiatric reports supporting the summary findings presented at the original discharge hearing. The Judge dismissed Mr. Kuczera’s appeal.

Filing for bankruptcy in Canada: Appeal of the Judge’s decision

He now had his lawyer appeal the Judge’s decision to the Court of Appeal for Ontario. The Court of Appeal disagreed with the approach of the appeal judge. The Court of Appeal could not understand why the appeal judge would not allow the more detailed reports from Mr. Kuczera’s treating psychiatrist. These new detailed reports were further to the summary report provided to the Registrar.

The Court of Appeal went on to say that neither the Registrar nor the appeal judge gave proper weight to the psychiatric evidence. It also went on to say that a discharge condition requiring Mr. Kuczera to pay the payments due under the consumer proposal would not be “difficult”, as described by the Registrar. Rather, the Court of Appeal said that it would be “crushing”.

filing for bankruptcy in canada

Filing for bankruptcy in Canada: What the Court of Appeal found

So the Court of Appeal found that:

  • the appeal judge erred by not considering the fresh psychiatric report evidence;
  • The need for the bankrupt to pay the balance of the consumer proposal payments would be crushing; and
  • The fresh psychiatric evidence was compelling.

Given the length of time that Mr. Kuczera remained in bankruptcy, and considering the above factors, the three-judge panel in the Court of Appeal for Ontario unanimously agreed that Mr. Kuczera gets his absolute discharge from bankruptcy.

Filing for bankruptcy in Canada: Mental health issues

Mental health issues are at the forefront of the news. Most recently, both Kate Spade and Anthony Bourdain committed suicide because of mental health issues. I believe that as society recognizes mental health issues as a legitimate illness or disability, you will see it influencing Bankruptcy Court decisions. That certainly was the case for Mr. Kuczera.

Filing for bankruptcy in Canada: Debt after your bankruptcy discharge

After receiving your bankruptcy discharge, NOBODY can try to collect this debt again. Discharged debt cannot appear on your credit report as anything other than a zero balance. Sometimes collection agencies report a discharged debt to the credit bureaus, hoping you will pay off the debt and not correct the information with the credit bureaus. The debt will still incorrectly appear on your credit report.

Filing for bankruptcy in Canada: Discharged debt and your credit report


When discharged debt re-appears on your credit reports, it affects your credit score and can result in higher interest rates or credit denials. Sometimes debt collectors buy discharged debt, knowing they can’t collect on it, but hoping you don’t know that.

These debt collectors may tell you that the discharge doesn’t apply to them because they are not the original creditor. Don’t be fooled. Creditors who attempt to collect a discharged debt are violating a court order. The court can stop them, and they may even have to pay damages.

Discharged debt should not show on your credit report except as a zero balance – Monitor your credit report and be proactive. A discharged debt is not valid and is not collectible.

Filing for bankruptcy in Canada: Do you have too much debt?

I hope that you have found this information helpful. Bankruptcy is the last thing we try to do for a person in financial difficulty. If caught early enough, we can get involved in a debt settlement restructuring program for you.

The Ira Smith Team knows that you are worried because you are facing significant financial challenges. The stress placed upon you is enormous. We understand your pain points.

Contact the Ira Smith Team today. We know how to solve your financial challenges, remove your pain and put things back on a healthy path. Contact us today for your free consultation so that we can save your life, Starting Over Starting Now.filing for bankruptcy in canada

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