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CANADIAN DEBT RELIEF PROGRAM SCAM REVIEW: MASSIVE HARM CAUSED TO DEBTOR

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

Canadian debt relief program: Before you sign up for debt settlement

A Canadian debt relief program: it may seem like a good idea. Missed payments on your credit cards, loans or other unsecured debt, can lead to collection calls and worsen your situation. Choosing a debt relief program is often the last resort for Canadians to escape the grip of their creditors.

As a solution to consumer debt problems, debt relief companies offer debt settlement programs and debt relief programs. As a debt consultant, you do not need any special education or licensing to operate. Often, their actions are detrimental rather than beneficial.

This Brandon Blog is about a case I recently consulted about that is sad but true. This story is about a Toronto man who decided to use a Canadian debt relief program provided by a debt relief company to settle his debt issues. As a result of using that Canadian debt relief program, he is still unable to pay his bills, and is in a much worse financial situation now than he was before he visited the debt settlement company. To make matters worse, the debt relief consultant then got a licensed insolvency trustee to almost go along with his cockamamy scheme. Unfortunately, the Trustee woke up too late, after all the damage was done.

I will explain it all to you.

Canadian debt relief program: Research the company’s reputation

There should be a law that requires all debt relief services companies to be licensed to do debt relief work in Canada. So if they are not licensed they are not allowed to claim they are licensed. Since a debt relief company does not need to have a special license to provide a debt relief solution, it means there are few regulations set in place to control what they can do and what they can charge their customers. A debt relief program is a program set up to help people get out of debt. Debt relief programs always are not designed to help you pay off all your debt.

Debt relief programs run by debt relief services companies often aren’t designed to help you find a permanent solution to the behaviour that got you into your debt problems in the first place. The problem with a Canadian debt relief program put together by a debt settlement company is that it may very well cause the loss of your money or as is the case in the true story I am about to tell you, the loss of your home.

canadian debt relief program
canadian debt relief program

Canadian debt relief program: Are debt relief programs really worth it?

A for-profit debt settlement company charges fees, just like any other for-profit business. Before any of your money is used to settle your personal debts, you must pay most of their fees upfront. No fees are charged by the non-profit credit counsellor. Reputable credit counselling companies do not require you to pay upfront for any tangible services they offer to help you reduce your various types of debt.

You set up an account with the company, where you make monthly payments from available funds to generate the money necessary to pay their fee and then to make settlement offers. There is no guarantee that working with a private debt settlement company will work. Debt settlement companies cannot guarantee that creditors will agree to settle on the outstanding debts when they contact them.

Your creditors may not be able to reach an agreement with them, so you may have to file a consumer proposal or end up filing bankruptcy. For services that the bankruptcy trustee provides for free, debt settlement companies charge debtors upfront fees. While you are in a Canadian debt relief program offered by one of these companies, you do not have any protection from creditors.

Should debt management programs be pursued? A not-for-profit credit counselling agency can provide this service. The answer is NO if it is a for-profit debt relief company. However, the answer is YES if it is a formal consumer proposal with a licensed insolvency trustee.

Canadian debt relief program: When using a debt settlement company goes terribly wrong – a true story

When things go wrong, they go really wrong and fast. We were contacted by a lawyer representing an undischarged bankrupt. The facts as I understood them to be were:

  1. The debtor went to a debt settlement company to get financial advice and help in resolving his debt problems. The company claimed to specialize in helping Canadians deal with their debt problems through a successful Canadian debt relief program. They said they could get him out of his financial mess and save his house. They told him that they would take care of everything.
  2. He was the only owner of the marital home. A real estate agent gave an opinion letter that stated the home was only worth the total of the registered mortgages.
  3. The debtor lost his job and his wife was making the mortgage payments from her employment income. They advised the couple that the wife could get legal protection by taking the position that each of her mortgage and utility payments was a secured advance to the husband. There was no written agreement between them registered on title and she did not register a mortgage against the home. This advice was obviously very wrong.
  4. The debt settlement company could not create any plans for debt forgiveness acceptable to the creditors. It was mainly credit cards and the debtor needed a successful credit card debt relief plan.
  5. The debt settlement company marched the debtor to a licensed insolvency trustee. We could not determine from the documents provided to us if the Trustee did any verification work or merely filed the assignment in bankruptcy based on the work of the debt settlement company. The sworn statement of affairs had the same value for the home as in the real estate agent’s opinion letter. Net of mortgages, the sworn statement of affairs showed no equity in the matrimonial home.
  6. The same day that the Trustee’s section 170 report was prepared, the Trustee wrote a letter to the debtor. According to the Trustee’s letter, after 1.5 years of bankruptcy there is $200,000 equity in the home, the wife has no existing secured claim to the property and therefore, the Trustee opposes the discharge since the asset has not yet been realized. There were no references in the Trustee’s letter to any previous communications or correspondence with the debtor regarding his equity in the home. Therefore, I do not know if the letter was the first time the Trustee discussed with the bankrupt the need to realize the equity in the home.
  7. In the section 170 report, again, dated the same day as the letter, the Trustee opposed the bankrupt’s discharge due to the home equity issue.
  8. A list of licensed credit counsellors can be found on the website of the Superintendent of Bankruptcy. Upon searching that licensed credit counsellor database, we were unable to locate the name of the debt settlement company employee who assisted the debtor.
  9. The undischarged bankrupt’s wife, or any other family member of his, was not able to raise the necessary funds to purchase the Trustee’s interest in the equity of the home. The undischarged bankrupt has no means from which to attempt to do a consumer proposal or Part III Division I Proposal to do a successful proposal out of bankruptcy.
  10. The debt settlement company’s work directly led to the undischarged bankrupt losing his home as it would have to be sold either by the debtor or the Trustee.

    canadian debt relief program
    canadian debt relief program

Canadian debt relief program: My advice

I did a Teranet search of the matrimonial home. The estimated value of the home according to Teranet showed there was more like $350,000 of equity, not $200,000. There was not a lot that this undischarged bankrupt could do. My advice was:

  1. The debt consultant apparently was doing work that a Trustee must do under the Bankruptcy and Insolvency Act (Canada) (BIA) but is not licensed to do that work. The debtor should consider demanding the fee paid to the debt consultant.
  2. Find out who did the mandatory two credit counselling sessions with the debtor; a licensed credit counsellor under the Trustee’s employ or the debt consultant?
  3. Find out if there is a financial arrangement between the debt consultant and the Trustee. Such arrangements are outlawed by the Superintendent of Bankruptcy.
  4. The debt consultant was very “cute” in trying to fix the value of the home so that there was no equity in the home. What verification work did the Trustee do when accepting the value in the sworn Statement of Affairs and beginning the bankruptcy process?
  5. Unfortunately, the undischarged bankrupt is stuck with this situation. The equity in the home belongs to the Trustee. There really was not anything that I could do to change that.

The lawyer thanked us very much and said that his discharge hearing will be quite the show after she examines the witnesses!

Canadian debt relief program: Options you can trust to help you with your debt

A licensed insolvency trustee would have been a better choice for this debtor rather than this debt relief company. Most people with consumer debt problems fall into one of three categories. Using these three categories, I will show what I would have advised this debtor. It is sufficient to say that the earlier you seek the services of a licensed insolvency trustee and avoid the debt consultants and their unrealistic promises, the more options you will have.

Your finances could be better, and you would like some help.

When you realize that you can do things better and wish to avoid trouble, you fall into this category. You can get proper financial advice from a licensed insolvency trustee at this stage. It is likely that if this debtor had approached me at the first sign of trouble, he could have avoided filing for bankruptcy. Things I might have discussed with him include:

  • How to establish and follow a budget for the family.
  • Does he have an adequate credit rating or credit score to be approved for and get a debt consolidation loan so that this loan would enable him to pay off all his unsecured debt in full and have one affordable monthly payment under a debt consolidation program.
  • Having a non-profit credit counselling service assist him with budgeting, assistance with debt management and if required, arranging a debt relief settlement plan with his unsecured creditors. Creditors understand that sometimes life happens and there are situations where people require support for plans for debt forgiveness when it comes to ‘debt-causing’ scenarios such as critical illness, job loss and the death of a loved one.
  • Making monthly payments to the non-profit credit counselling service so that they can make the necessary payments to creditors, as prescribed in the Canadian debt relief program they set up for him.
  • His job includes referring the debt collectors to the non-profit credit counselling service when he receives their calls.
  • His wife should seek independent legal advice about registering a mortgage against the family home as security for all advances she is about to make to her husband for the mortgage, property tax, utility bills, and any other funds related to the home’s maintenance.
  • Is it possible to use the equity in the home to downsize?
  • How filing a consumer proposal or an assignment in bankruptcy affects his finances and his life, including how it affects the equity in his home.

My advice would have cost him nothing, and he would be in a much better financial position than he is now. Most likely, he would have avoided the need for a consumer proposal or bankruptcy altogether.

Your finances are beginning to get out of control.

He and I would have discussed all of the above, along with independent legal advice for his wife, and the realistic option of having an affordable payment plan with debt reduction, by filing a consumer proposal as a real Canadian debt relief program for debt reduction and allowing him to make one affordable monthly payment on all his outstanding unsecured debts. Consumer proposals are the only Canadian debt relief program approved by and authorized by the Federal government.

You are in serious financial trouble.

If he hadn’t come to see me before he suffered severe financial difficulties, his only realistic option would be bankruptcy. From the very beginning, he would have realized that the equity in his home was at stake and would be lost to the Trustee. It wouldn’t have been a bad shock to the debtor after filing for bankruptcy. He may even have been able to locate a relative who could have purchased the equity in his home from the Trustee prior to filing so that his life would not have been negatively affected.

canadian debt relief program
canadian debt relief program

Canadian debt relief program: Summary

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

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

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

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

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

canadian debt relief program
canadian debt relief program

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

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CONSUMER PROPOSAL VERSUS BANKRUPTCY: MASTER THIS KNOWLEDGE AND BE SUCCESSFULLY DEBT FREE

We hope that you and your family are safe and healthy.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this consumer proposal versus bankruptcy Brandon’s Blog, please scroll to the very bottom and click play on the podcast.

consumer proposal versus bankruptcy
consumer proposal versus bankruptcy

Consumer proposal versus bankruptcy introduction

The holidays are upon us and we can all ideally get a well-deserved break. This 2020 year truly threw us a curveball in March and it isn’t over yet. Many people have already identified that they need to understand their options in taking care of way too much debt. Hopefully, they will use the period of time during the holiday break downtime to seriously consider fixing their situation.

Maybe their New Year’s resolution will be to once and for all solve their financial situation. That is why I believe this is a good time to write this Brandon’s Blog to help those people who are wondering about the issues surrounding a consumer proposal versus bankruptcy.

Consumer proposal versus bankruptcy: Who qualifies for a consumer proposal?

A consumer proposal is an alternative to bankruptcy. Consumer proposals are for people whose total financial debts do not surpass $250,000, not including financial debts secured by their primary house.

Division 1 proposals are available to both:

  • companies; and
  • individuals whose debts exceed $250,000 (leaving out mortgages on their principal home).

I will focus on the differences between a consumer proposal versus bankruptcy.

Consumer proposal versus bankruptcy: What are consumer proposals?

Consumer proposals are formal ways governed by the Bankruptcy and Insolvency Act (Canada) (BIA) available only to people. Working with a licensed insolvency trustee (Trustee) acting as the consumer proposal administrator, you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a specific period not exceeding 60 months
  • Extend the time you have to pay off the debt
  • Or a mix of both

Payments are made through the Trustee, and the trustee uses that money to pay each of your creditors. The consumer proposal must be completed within 5 years from the date of filing.

Below I will highlight more differences between a consumer proposal versus bankruptcy.

Consumer proposal versus bankruptcy: Is a consumer proposal worth it?

The advantages of a consumer proposal versus bankruptcy are:

  • You keep all of your assets
  • Legal actions that are being contemplated or actually begun against you by unsecured creditors and results of a judgment such as freezing your bank account and wage garnishments are stopped.
  • Unlike informal debt negotiation or debt settlement programs, the consumer proposal forum catches all of your debts and your unsecured creditors must take part in your restructuring process.
  • Of all the debt relief options available to a person, it is the only government-approved program that combines debt consolidation (without having to apply for one or more loans) and debt settlement.
  • You do not need to use the “B” word.

You will definitely pay less than you owe with a consumer proposal. It could be as much as 75% less. All of your unsecured debts will be consolidated right into a simple regular monthly payment. What you pay is based on what your creditors could expect to receive in your bankruptcy and what you can actually afford.

So is a consumer proposal worth it to make one monthly payment that you can afford to pay a portion of the total you owe instead of going bankrupt? I think it is.

What is the impact on my credit rating if I file a consumer proposal versus bankruptcy?

We are always asked, “How will a consumer proposal affect my credit rating?”. The follow-up question is “What is the impact on my credit rating if I file for personal bankruptcy or do a consumer proposal?”.

The person who files for bankruptcy will absolutely obtain R9 status. This is the lowest credit score possible. It will remain on their credit report for 6 years after the person gets their bankruptcy discharge. So for a first-time bankruptcy with no surplus income and the person gets their discharge after 9 months, it is on the credit report for about 7 years. If the person is a first time bankrupt with surplus income, then their bankruptcy discharge cannot be gotten for at least 21 months. This equates to having the R9 for 8 to 9 years.

An individual that files a consumer proposal sees their credit score go to an R7 ranking which is less extreme. It will remain to be on their credit report for around 8 years in total, starting with the filing date.

Through the two mandatory credit counselling sessions that are provided with either a consumer proposal or bankruptcy, we teach you ways you can start rebuilding your credit score right away.

What are the costs and fees of a consumer proposal versus bankruptcy?

When doing a consumer proposal as a debt solution, the Trustee costs are included in the settlement you bargain with your creditors. The calculation of what is reasonable for you to pay is done without any reference to the Trustee costs.

For example, if your consumer proposal has you paying a regular monthly payment of $400 for 60 months, the Trustee’s fee and disbursements are taken from those funds. The consumer proposal fee is a tariff defined in the BIA.

If there is no surplus income or assets that you hand over to the Trustee, the cost for this type of personal bankruptcy is about $2,000. This cost would need to be paid to the Trustee either upfront or over an 8 month period in equal monthly payments.

However, if you file for bankruptcy and you have surplus income and/or assets that you must turn over to the Trustee, the personal bankruptcy cost could be higher. The Trustee’s fee and costs must be taxed by the Court. However, it will be calculated using the hours spent by the level of staff at each staff member’s normal hourly rate. If there are insufficient assets to pay the Trustee’s fee, the difference has to be paid for by the bankrupt person or someone else guaranteeing the Trustee’s costs.

This is another distinction between bankruptcy vs consumer proposal.

consumer proposal versus bankruptcy
consumer proposal versus bankruptcy

What happens to my assets in a consumer proposal versus bankruptcy?

If you do a consumer proposal, you keep your assets. In bankruptcy, other than for exempt assets, your assets are seized by the Trustee. Exemptions depend on the province you live in.

In Ontario the assets you get to keep in bankruptcy consist of:

  • The equity in your home of no more than $10,000.
  • A motor vehicle with an equity value of no more than $6,000.
  • Clothing and medical and dental aids.
  • Household furnishings up to a value of $13,100.
  • Tools of the trade with a value of no more than $11,300.
  • Pensions, RRIF, RRSP (except for any RRSP contributions made within 12 months of the date of bankruptcy).
  • Farmers – no more than $29,100 for animals and tools and equipment.

This difference to your assets between a consumer proposal versus bankruptcy is massive.

What happens if I miss payments and default on my consumer proposal versus bankruptcy payments?

If you do not maintain your payments on a consumer proposal, it defaults and it is over. You then cannot file a new one. Collection action by your creditors will begin again.

If you do not complete all your duties in bankruptcy, you will definitely not be discharged. If your Trustee gets discharged and you remain undischarged, then all your creditors can return to taking collection action against you to try to recover on their loans or other debt payments you owe them.

This is one more consumer proposal versus bankruptcy difference.

When is a meeting of creditors held in a consumer proposal?

A meeting of creditors in a consumer proposal is held if one is requested by one or more creditors who are owed at least 25% of the overall value of the proven claims.

A request for a meeting has to be made by the creditors within 45 days of the declaration of the consumer proposal. The Office of the Superintendent of Bankruptcy (OSB) can also ask for the Trustee to call a meeting of creditors whenever within that specific very same 45-day time frame.

The meeting of creditors is held within 21 days after being called. At the creditors’ meeting, they elect to either approve or turn down the proposal.

If no meeting of creditors is requested within 45 days of the filing of the proposal, the proposal will be regarded to have actually been approved by the creditors no matter any kind of objections received later.

A consumer proposal is fully performed as soon as:

  • the person has made the required payments within the time period called for in the consumer proposal; and
  • the two mandatory counselling sessions with the Trustee have been done.

In a bankruptcy, the discharge relies on various facets, including whether it was the first time the debtor filed for bankruptcy and if they need to make surplus income payments to the Trustee. The calculation for surplus income is based mainly on your household monthly income.

If the debtor has actually never ever declared bankruptcy before as well as they do not have to make surplus payments, the bankrupt is entitled to be released 9 months after declaring bankruptcy. Nevertheless, if the bankrupt has surplus income, they will require to make payments for 21 months before they can be discharged.

This is one more distinction between a consumer proposal versus bankruptcy.

Consumer proposal versus bankruptcy: How to file for bankruptcy?

In order to file, you need to engage a Trustee. This is a person or company accredited by Industry Canada to administer the insolvency process in Canada.

The 11 steps below are a guide to the filing for bankruptcy process:

  • Contact a Trustee and attend a meeting with him or her to speak about your personal situation and your options. This will include all your options to avoid bankruptcy.
  • Deal with the Trustee to complete the necessary bankruptcy documents.
  • The Trustee will after that submit the bankruptcy paperwork to the OSB and get back a certificate evidencing your bankruptcy.
  • The Trustee notifies your creditors of the bankruptcy.
  • You attend a meeting of creditors if one is called.
  • You participate in 2 counselling sessions.
  • Based on your provincial exemptions, the Trustee sells your non-exempt assets; you may likewise need to make surplus income payments to the Trustee.
  • In certain conditions, you might have to participate in an evaluation by an officer at the OSB.
  • The Trustee prepares a report to the OSB describing your activities during the bankruptcy.
  • You go to the discharge hearing if required.
  • You get your discharge from your bankruptcy and afterwards, the Trustee completes the management of your bankruptcy file, including paying a dividend to your creditors, if available.

As you can see from the description of how a consumer proposal works and from these 11 steps, there is a difference in how a consumer proposal versus bankruptcy works.

Consumer proposal versus bankruptcy: Get back to a stress-free life

I hope you have enjoyed this consumer proposal versus bankruptcy Brandon’s Blog. Both a successfully completed consumer proposal or obtaining your discharge from bankruptcy lets you get back on the road to financial health, relieve the stress you face and bring you:

  • Freedom by getting out from under garnishments;
  • The ability to live better than just hanging on one payday to the next;
  • Improved credit ratings; and
  • Improved health and well-being.

You are worried because you are facing significant financial challenges and you don’t fully understand the options available to you, including, filing a consumer proposal versus bankruptcy. It is not your fault that you are in this situation. You have been only shown the old ways that do not work anymore. The Ira Smith Team uses new modern ways to get you out of your debt troubles while avoiding bankruptcy. We can get you debt relief freedom.

Ira Smith Trustee & Receiver Inc. offers a full range of insolvency services to people facing a financial crisis. Whether you need help with a proposal to your creditors to avoid the worst case, financial counselling or advice about insolvency options, our goal is to make sure that you understand the process, your choices, and what steps will get your life back on track.

Call us for your free first consultation. We will inform you about all the choices readily available so you can make a proper decision about the very best plan to deal with your financial obligations.

Call Ira Smith Trustee & Receiver Inc. today. All you have to lose is your debt!

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

We hope that you and your family are safe and healthy.

The Ira Smith Trustee Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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BANKRUPTCY IN CANADA: THE STEP-BY-STEP CANADIAN PERSONAL BANKRUPTCY PROCESS

Introduction

The purpose of this Brandon’s Blog is to explain to you the personal bankruptcy in Canada process. By doing so I hope it will be a less scary topic for you.

Are you insolvent?

The first step is meeting with the trustee to explore options. The first thing the licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee) needs to determine is if the person is insolvent.

Insolvent means that you cannot pay your debts as they come due and that if you liquidated all of your assets it would not be enough to repay all of your liabilities. If you’re not insolvent then you cannot take advantage of the provisions of the Bankruptcy and Insolvency Act (Canada).

What are my options?

If you’re not insolvent the options that are available to you are:

  • help with your budgeting;
  • perhaps credit counselling mixed in with that to help you better understand your income and expenses; and
  • how to live within your means

Perhaps also there is the opportunity, if you still have a good enough credit score, to get a debt consolidation loan. This would be a loan that would be equal to the total of all your other debts but at a lower interest rate and with a smaller monthly payment than the total monthly payments you currently need to make to stay current with all your debts.

If you are insolvent then the options available to a person is either a:

bankruptcy in canada
bankruptcy in canada

The purpose and topic in this blog are bankruptcy so that is what I will focus on. There will be other videos made on the topics of a consumer proposal, budgeting, credit counselling and debt consolidation.

How does bankruptcy in Canada work?

So the personal bankruptcy in Canada process as I mentioned starts with meeting the Trustee to explore your options. Then with the Trustee, determining whether or not you are insolvent and then making the right choice. Does that mean that bankruptcy is the best process for your needs, or can you avoid bankruptcy?.

So given that we’re talking about bankruptcy in Canada, what are the steps? First, the Trustee will prepare the documentation for your review. The documentation consists mainly of the assignment in bankruptcy document, your statement of affairs and your monthly family budget.

The statement of affairs is a multi-page document that indicates what your assets are and the names and addresses and individual amounts owing to each of your creditors. Your monthly family budget shows your monthly cash in and cash out.

An important part of the bankruptcy in Canada process is rehabilitation. Financial rehabilitation. So it is expected upon entering personal bankruptcy in Canada that your monthly family budget will balance. That is your income after tax will be sufficient to pay your monthly family expenses.

What does declaring bankruptcy mean in Canada?

Once that is all prepared and you’ve sworn your statement of affairs the Trustee can begin the bankruptcy process itself. That includes e-Filing the documentation I just spoke about with the Superintendent of Bankruptcy’s local office.

The Superintendent of Bankruptcy local office representative will review it to make sure that it is all in order. Then the local office will issue a certificate confirming your bankruptcy and the appointment of the Trustee.

It is at the time when the Superintendent actually issues the certificate that the person’s bankruptcy starts.

So when bankruptcy occurs then certain things must happen. The bankruptcy administration takes place. The bankruptcy administration will include:

  • Providing the trustee with any non-exempt assets that you may own. The Trustee will sell those assets to raise money to be able to make a distribution of some sort to your creditors.
  • The next part of the bankruptcy administration is that the bankrupt person must attend 2 counselling sessions for personal bankruptcy in Canada. These two counselling sessions are meant to help the person financially rehabilitate themselves.

You will discuss with the Trustee things such as budgeting, issues that led you into bankruptcy and how you can correct that behaviour and any problems you might be experiencing during the bankruptcy process.

  • Finally, if all goes well there is the bankruptcy discharge. That is where the person has made it through and upon their discharge, they are discharged of all of their debts other than those that might be secured, have a trust claim status or meet the definition of those few types of debts such as court fines and penalties that cannot be discharged by way of bankruptcy.

But things like credit card debt and income tax debt are discharged through the bankruptcy process.

Personal bankruptcy Canada

So if you have debt issues meet with a Trustee. There is no charge to do so and you will walk away with a better idea of how to fix your debt issues with or without resorting to personal bankruptcy in Canada.

I hope you enjoyed the bankruptcy in Canada video. The Ira Smith team is available to help you at any time. We offer sound advice and a solid plan for Starting Over Starting Now.

We understand your pain. We will make sure that no bill collectors call you. We will take all the headaches and stress you are experiencing off of your hands and put it onto our shoulders. We will fix things so that you can move forward in a healthy way, pain-free, guilt-free and debt-free.

It is not your fault that you are in this situation. You could not fix it yourself because you have only been taught the old ways. The old ways do not work anymore. The Ira Smith Team uses new ways that will return you immediately to a stress-free life while getting rid of your debt.

So that you can immediately be well on your way to debt and stress-free life in no time, for more information on a no-cost basis, please call us now.

The Ira Smith Team comprehends just how to do a complex restructuring. However, more notably, we understand the needs of the business owner or the person that has too much personal financial debt. You are worried due to the fact that you are encountering significant economic obstacles.

It is not your mistake that you are in this scenario. You have been only shown the old ways which do not function anymore. The Ira Smith Team utilizes new contemporary ways to take you out of your financial debt problems while preventing bankruptcy. We can get you financial debt relief.

The stress and anxiety placed upon you is massive. We comprehend your discomfort factors. We look at your entire situation and also devise a technique that is as special as you and also your issues; economic as well as emotional. The methods we use takes tons off of your shoulders. We devise a financial debt negotiation strategy, we understand that we can help you.

We understand that individuals encountering monetary troubles need a reasonable lifeline. There is no “one solution fits all” method with the Ira Smith Team. That is why we can create a restructuring process as unique as the financial problems and also discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

Call us now for a no-cost appointment. We will certainly get you or your firm back driving to healthy stress-free operations as well as save you from the discomfort factors in your life, Starting Over, Starting Now.

bankruptcy in canada
bankruptcy in canada
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FILING BANKRUPTCY VERSUS DEBT CONSOLIDATION IN TORONTO ONTARIO

filing bankruptcy versus debt consolidationIntroduction

Financial obligations of any kind of size can be stressful. Most of us have some existing debt. It is when debt is out of control that gives people problems. People with debt problems ask me for my opinion on filing bankruptcy versus debt consolidation. So, I thought I would share my thoughts with you.

What is debt consolidation?

The first step is understanding what debt consolidation is (and isn’t). Debt consolidation is a do-it-yourself strategy that you control. Debt consolidation is a form of debt restructuring that combines several loans into one, mainly for two reasons: (i) to lower the interest rate charged on your debt; and (ii) to lower your monthly payment amount.

When you have multiple debts to different creditors and loans to pay at varying interest rates, debt consolidation is an option that allows you to combine them into one loan at a lower interest rate. Debt consolidation can be a good plan, particularly if your credit is decent enough to land a new loan and if your new consolidated monthly debt repayment amount won’t overwhelm your monthly after-tax income.

Getting that new loan

Applications for debt consolidation are not always accepted. It will depend on the lender you chose to work with and what their lending guidelines for debt consolidation are. Overall, make sure you are open and honest about where you are financially and what your goals for debt consolidation are during your loan meeting. Because the purpose of debt consolidation is to lower the cost of debts, any additional fees the lender may add on top are not helpful.

The most common type of debt consolidation loan is an unsecured loan. It can also be accomplished through a home equity loan or even transferring credit card balances from high-rate cards to a lower-rate credit card.

One of the goals of debt consolidation is to get the lowest interest rate possible applied to your debts. It is a simple, safe, and effective way for people with excess debt to responsibly pay off their debts without filing for bankruptcy.

How does debt consolidation affect my credit score?

While it can save you money, it might negatively impact your credit score at first. However, it will make managing your bills easier, as you will only have one bill to pay each month. This method is a powerful way to take control of your bills, pay off your debts sooner and simplify your payments.

Eventually, your credit score will improve because you are paying off your debt with each monthly payment. Every month your lender is reporting to the credit bureaus that you are making your payments on time and living up to your obligations. This is a much better position to be in than your debts overwhelming you and not being able to afford your monthly payments.

The side benefits

Debt consolidation can help you pay off what you owe faster and more conveniently, with one payment instead of many. This process may offer the relief you are looking for. Remembering to make each payment at the right time on all your debts can be taxing for some people. This makes the concept of such a program that much more appealing.

Choosing the right solution for consolidation is highly dependent on your unique financial situation. In most cases, if consolidation is the right option in your financial situation, then there shouldn’t be too many downsides to using the process in general. If you are overwhelmed by keeping up with multiple bills and loans, it will be able to help. Reviewing your current debts and total income will also help you determine exactly what your financial goals should be. It will also start to get you thinking about saving for your future also.

It is not the same as debt settlement

Consolidating your debts is not the same as a debt settlement negotiation. Consolidation reduces the number of financial institutions for your financial debts. Settlement will use an authorized credit counsellor to bargain with lenders in your place.

I have previously written about the dangers of using a debt settlement company. For example, you can read about it in my blog HOW DOES DEBT RELIEF WORK: APPARENTLY NOT GREAT 4 EVERYONE.

There is only one debt settlement program in Canada that is sanctioned by the federal government. It is called a consumer proposal and can only be administered by a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee). To read all about how a consumer proposal works to avoid bankruptcy, read my blog WHAT IS A CONSUMER PROPOSAL? OUR INSOLVENCY FAQ PRIMER.

Filing for bankruptcy

The bankruptcy process varies based upon whether or not you have previously been bankrupt and if you do or don’t have surplus income. An important attribute of personal bankruptcy is that a freeze or automatic stay is placed on all collection actions against you. The automatic stay initially includes repossession. Although you have to be able to pay your expenses going forward, the basic needs for a living cannot be denied to you because of your bankruptcy.

Debt consolidation cannot secure you from collection actions. But, either a consumer proposal or bankruptcy does invoke that automatic stay. While bankruptcy will initially harm your credit score, it ultimately will discharge you from your financial obligations. This positions you in the most effective way to start rebuilding a good credit rating.

Just like in a consumer proposal, only a Trustee can administer a bankruptcy. In a bankruptcy, the Trustee will need to take possession of your assets, other than those that are exempt under provincial law.

To find out more about the bankruptcy process, check out our TOP 20 PERSONAL BANKRUPTCY FAQS.

Filing bankruptcy versus debt consolidation: Is it better to file bankruptcy or do debt consolidation?

It is of course always better to avoid bankruptcy. Figuring out which alternative is much better for you will ultimately rely on your unique scenario. So, you should meet with a Trustee for a no-cost consultation to get advice on all of your options, tailored specifically to your financial situation. Filing bankruptcy versus debt consolidation is a serious decision. It should only be made with the assistance of professional Trustee help.

I hope you found this Brandon’s Blog, filing bankruptcy versus debt consolidation, useful.

Do you have too much debt? Are you in need of financial restructuring? The financial restructuring process is complex. The Ira Smith Team understands how to do a complex restructuring. However, more importantly, we understand the needs of the entrepreneur or the person who has too much personal debt. You are worried because you are facing significant financial challenges.

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

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

We know that people facing financial problems need a realistic lifeline. There is no “one solution fits all” approach with the Ira Smith Team. That is why we can develop a restructuring process as unique as the financial problems and pain you are facing. If any of this sounds familiar to you and you are serious in finding a solution, contact the Ira Smith Trustee & Receiver Inc. team today.

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

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CANADIAN DEBT RELIEF: WHAT ABOUT “Government Approved” GRIPPING DEBT PROGRAMS?

canadian debt reliefIf you would prefer to listen to an audio version of this Canadian Debt Relief Brandon’s Blog, please scroll down to the bottom and click on the podcast.

Canadian debt relief: What is debt relief Canada?

Canadian debt relief is the reconstruction of debt in any kind of form so as to give the indebted person or company a measure of breathing space.

Canadian debt relief measures can take a number of forms. It can be through an informal process or formal process (discussed below).

I just read a recently issued Scotiabank Economics report that says Canadians are going deeper into debt. With that in mind, I believe it important to describe the Scotiabank findings and then discuss the options available for reliable Canadian debt relief.

Canadian debt relief: The Scotiabank findings

The main Scotiabank findings are:

  • Canadian home credit increased to a 2-year high in August 2019.
  • Residential mortgage growth posted a 2-year high, supported by a mid-July 2019 decrease in the mortgage rate used for qualification under the stress testing as well as a decline in posted home mortgage pricing.
  • Consumer credit growth struck a 10-month high on the whole but the year over year pattern was the same as July 2019.

The increase in overall household credit was boosted by a much easier borrowing environment. The main types of debt were fuelled by a strong acceleration in both mortgage loans as well as non-mortgage consumer liability growth. Right now Canadians’ household debt-service ratio is at an all-time high. According to the Scotiabank findings, that has not stopped Canadians from continuing their borrowing binge. It seems that super-low interest rates and a strong job market are providing Canadians with either confidence or blind ignorance, to continue to borrow.

With unpredictability staying at raised levels and worldwide demand weakening, business financial investment and exports are not going to be a force to keep the Canadian economy strong. Therefore, it is essentially up to people buying homes primarily in the Vancouver and Toronto housing markets and general consumer credit demand, with government spending, to keep the Canadian economy strong. So, it seems that for the foreseeable future, the Bank of Canada will keep interest rates low. It seems that interest rates will only increase in reaction to events from outside the Canadian economy.

How debt relief works in Canada

It is not that difficult to qualify for real Canadian debt relief services. You need to be insolvent, or at least, be unable to pay your financial obligations as they come due. I am not talking about a consolidation loan that you need to apply for. If you are trying for approval from one of the debt consolidation loans providers, you also need to be able to qualify for a new loan. If you are applying for a Canadian debt relief program that requires you to get a consolidation loan, and you don’t qualify for the loan, then you will not qualify for that type of debt management plan.

However, for financial relief that does not involve you borrowing money, the bar to qualify is set very low. All you need is to admit that you have a debt problem. Once you do that, you can certainly get help from one of the Canadian debt relief alternatives.

I will describe the various levels of Canadian debt relief programs, but first, I want to answer a question I am asked regularly. The question is: Can you get credit card debt forgiven?canadian debt relief

Canadian debt relief: Do credit card companies ever forgive debts?

I have never seen complete and full credit card forgiveness given by a credit card company (except for two situations described in this section). It is possible, to achieve partial credit card forgiveness, but it is not easy. Credit card companies generally will not give any form of forgiveness.

If you stop making your minimum payments, the credit card company will ultimately “ charge off ” a person’s credit card amount owing after giving them an R9 rating on their credit report. A charge-off takes place when an account is seriously overdue for credit card bills. That will be after 180 days of not making the minimum repayment.

Charging off the amount owing on the credit card is not writing it off or forgiving it. It is just a way for the credit card issuer to mark it as uncollectible and eliminate the debt from their active books. What is done when the debt is charged off, is that it is either given or sold to a collection agent. You may be able to make a deal with the collection agency to pay less than the full amount you owe. However, it will still be a substantial sum and has to be paid all at once.

There are only two exceptions to this I ever heard. One is a recent feel-good story. In August 2019, it was reported that Chase Bank announced that it was leaving Canada. Chase Bank issued and administered the Amazon.ca Rewards Visa and the Marriott Rewards Premier Visa in Canada. In order to exit Canada quickly, Chase Bank announced that it was forgiving all credit card amounts owed by clients of its two Canadian charge cards. Highly unusual.

The only other exception is not such a feel-good story. If a person dies and the deceased Estate has no cash available after the funeral and testamentary costs or worse, has no assets including cash, then the credit card company is going to have no choice but to write off the liability. The Estate Trustee will, of course, have to provide proof that there are no funds available.

Canadian debt relief: Informal options

There are various informal debt-relief options available in Canada. The most common options are:

Debt consolidation

When when we hear the words debt consolidation we understand that it is the process of qualifying for and taking on a brand-new loan, in order to repay many or numerous smaller debt obligations.

Consolidating debt involves borrowing money. The concept is that either:

  • your credit rating is good enough so that you can take on the new unsecured debt; or
  • you have decided to offer security for the loan.

The primary purpose of resolving your debt via this type of borrowing is to lower the overall interest costs you are currently paying across many credit cards and other debt.

Credit counselling

Credit counselling can solve debt problems and supplies you with the skills to live debt-free. Credit counselling solutions consist of teaching proper budgeting, how to use debt sensibly, rebuilding credit and debt management programs.

A word of caution. Please make sure that if you want a credit counselling program that has a qualified and licensed non-profit credit counsellor, you reach out to a real Canadian debt relief provider such as a credit counselling agency and not a debt settlement company.

The Financial Consumer Agency of Canada has provided a stern warning for consumers to be careful when considering using a debt settlement company. Do not be pulled into what looks like the cheapest Canadian debt relief company. The danger signals and warning signs that the Agency warns consumers about are:

  • High-pressure sales
  • Unrealistic assurances
  • High costs
  • Companies collecting monthly payments from you to pay to your creditors supposedly for an agreed-upon settlement amount but postponing repayments to the creditors and never coming up with a real Canadian debt relief plan.

Debt settlement

I have also written about the dangers of debt settlement companies. In 2017, I wrote about the study by the Office of the Superintendent of Bankruptcy (OSB) on debt settlement companies. The main findings of the OSB report were that in 2016:

The OSB record indicates that in 2016:

  • 17 % of all consumer proposal filings, the customer reported having spent first for debt counselling from a debt settlement firm before being directed to a Licensed Insolvency Trustee (LIT) (formerly called a bankruptcy trustee).
  • 57 % of the consumer proposal filings for which earlier debt settlement guidance was obtained, the LITs had connections with 2 large-volume debt settlement businesses. These 2 companies stood for 64 % of the total LIT fees reported in 2016 consumer insolvency filings for debt settlement advice before submitting to an insolvency proceeding with a LIT.
  • Thirteen LIT firms, that included one national-level business, were discovered to have numerous LITs operating in regular partnership with large-volume debt settlement firms.
  • For about 50 individual LITs within these 13 firms, better than 40% of their consumer proposal filings were sourced from these debt settlement organizations. For about 20 of those LITs, more than 90% of their consumer proposal work originates from these 2 businesses.

Debt settlement companies have long used scare tactics with consumers to attract business. They tell consumers that all a LIT wants to do is put them into bankruptcy. Nothing could be further from the truth. As seen by the OSB study results, consumers were paying debt settlement firms fees with money they could not afford to pay. When they could not pay any longer, the debt settlement company then referred the people to their favourite LITs! Now that is the pot calling the kettle black. The OSB was also concerned about the business arrangements being made between debt settlement outfits and LITs.

Since then, the OSB has introduced amendments to practices that LITs must follow concerning credit counsellors and business arrangements with a view to curb this behaviour. For the record, I and my Firm have no relationship with any debt settlement company.

Canadian debt relief: What about “Government Approved” debt programs?

There are only 2 Canadian government debt relief programs in our country: (i) consumer proposal; and (ii) bankruptcy, which is the most drastic one.

I have written about consumer proposals many times. A consumer proposal is the only structured formal procedure sanctioned by the Government of Canada under the Bankruptcy and Insolvency Act (R.S.C., 1985, c. B-3) (BIA). This process permits insolvent people to make an official offer with specific terms, to pay their creditors less than the full amount owing in full settlement of all debts. This federal government authorized debt settlement strategy is to pay back only a portion of what you owe and you can take as long as 5 years of routine monthly payments to do so.

To qualify, a person must be insolvent and owe $250,000 or less to all creditors, other than for any financial debts protected security against their principal home. The most common examples are either a home mortgage or home equity line of credit registered against the real estate. The consumer proposal process provides protection from creditors. It is aimed at compromising unsecured consumer debts, including income tax debt, while the debtor makes regular payments. The end result of a successfully completed consumer proposal is debt cancellation of your remaining outstanding debts.

A consumer proposal is a streamlined process meant to either reduce or totally eliminate the need to go to Court. A successful consumer proposal allows the person to avoid bankruptcy while ultimately discharging all of his or her debts for an amount much less than the total amount owed.

Canadian debt relief summary

Since the purpose of this Brandon’s Blog is about eliminating your burden of debt before having to consider bankruptcy, I won’t discuss the bankruptcy topic here. Of course, anyone wanting to find out more about either a consumer proposal or bankruptcy can always call me.

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 by offering prompt action and the ideal plan to give you freedom from debt.

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 a stress and pain-free life, Starting Over, Starting Now.

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Brandon Blog Post

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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CREDIT COUNSELING: EVEN FREE MAY NOT GET YOU TO TALK

Introduction

In my May 3, 2017, Brandon’s Blog, DEBT SETTLEMENT OR CONSUMER PROPOSAL CANADA: REPORT SAYS CONSUMERS HARMED, I told you about a Government of Canada research study. On April 28, 2017, the Office of the Superintendent of Bankruptcy (OSB), released its study. It revealed the OSB’s concerns about credit counseling services in Canada who were doing more than just counselling, be they for-profit or non-profit.

The concerns

The concern was that the consumer was being harmed. The main areas of concern for the OSB were:

  1. Consumers paid more money than required if they had first seen a licensed insolvency trustee (previously called a bankruptcy trustee) (LIT or Trustee) rather than the debt settlement company.
  2. Dishonest debt relief firms chatted customers right into expensive car loans under the scare tactic that they would not qualify once they filed either a consumer proposal or for bankruptcy so now was the time to improve their credit score.
  3. The debt negotiation firms had no accreditation or experience to provide the sort of financial advice they were offering.
  4. Creditors obtained much less than they would have received if the insolvent person went first to see the LIT.
  5. Debtors had no idea of their obligations under the insolvency process they ended up filing for. They were not offered the chance to experience one of the most essential facets of the Canadian bankruptcy system, economic recovery.

Public consultation

On November 24, 2017, the OSB sought public consultation on amending the process by which a LIT must perform credit counselling as part of the administration of consumer proposal filings. Changes were implemented and given time to see how they would work in practice.

On June 17, 2019, the OSB announced that it was seeking public consultation on a new Directive for LITs on credit counselling. These changes are meant to streamline the administrative structure for insolvency credit counseling.

All the changes are to better control the Trustees who receive referrals from debt settlement companies that charge the debtors for services that they really do not require before handing them over to a LIT to administer a consumer proposal.

Why not just go see a Trustee first?

It makes the most sense when you realize you are in financial trouble to see a LIT. A Trustee is only professional licensed, recognized and supervised by the federal government to provide insolvency advice and to administer insolvency filings to eliminate debt problems. A restructuring proposal is a government and court approved debt settlement plan to do that. In a first consultation, a Trustee will listen to all the issues and then provide a debtor with all the available alternatives. The aim is to avoid bankruptcy. This first consultation is also free! No charge! Gratis!

So why don’t more people do so? I believe the answer is in a recent Angus Reid poll titled The Awkward Silences Survey 2019. The survey says one-in-five Canadians claimed they least like to talk about:

  1. Embarrassing health and wellness concerns – 20%
  2. Sex – 18%
  3. Finances – 17%
  4. Religious beliefs or politics 17%
  5. Small talk – 15%
  6. Family and relationships – 13%

The unwillingness to talk about humiliating health and wellness problems was more widespread amongst males (23%) than females (17%).

When asked which one money and finance subject people like discussing the very least, personal debt and bankruptcy led by a big margin with one-in-three stating it was off limits to discuss (34%). This number is significantly greater in Quebec (42%) and least in Ontario (28%).

The survey says Canadians said that in the money and finance area, the least favourite topics they like to talk about are:

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

I don’t do government approved and free

I always knew that going to see a Trustee to talk about financial problems was not high on anyone’s list. This recent survey is the first time that I have seen it studied with anything other than anecdotal stories. This could explain why even though it makes the most sense, people avoid it for as long as they can. It also explains why people will search out companies that try to candy coat the topic and call it something nicer. Unfortunately, as the OSB studies have shown, consumers do so to their own detriment.

People would rather pay good money they can’t afford to be hoodwinked by an unscrupulous debt consultant until they realize they have no choice but to see a Trustee. At that point, most of their various options are no longer available and bankruptcy is more often than not inevitable.

Whether it is a business or a person, corporate or personal, it will help to talk about it to a Trustee. Sticking your head in the sand will not make things better. There are various options to look at depending on how early on you seek help.

Corporate financial problems

For corporate financial problems, the options may include:

Refinancing with a new lender who has not grown weary.

Sometimes relationships, including business relationships, just run their course and fatigue sets in. I was recently consulted by a company whose banker grew tired of their turnaround plan, that was working. By introducing this company and its senior management to a new lender, who saw the long term benefits of lending to a company that was successfully turning itself around, the company was able to refinance and continue their business.

Corporate restructuring.

Sometimes a more formal plan needs to be put into place using one of Canada’s two federal statutes: (i) Companies’ Creditors Arrangement Act (Canada) (CCAA); or (ii) the proposal provisions of the Bankruptcy and Insolvency Act (Canada) (BIA). We have done many.

Receivership or bankruptcy proceedings to take assets from a sick company and get them into a healthy one to save jobs and the business.

Sometimes the corporate body is just too sick and weak and cannot continue. However, taking healthy assets and employees and transferring them to a new or different corporation can revitalize a business and save jobs. The old shareholders may or may not be associated with the new company. However, the highest value will be obtained for creditors, employees and all other stakeholders.

Personal financial problems

For personal financial problems, the options may include:

Credit counseling and budgeting.

Many people need help with items such as:

  • Budgeting
  • achieving financial goals
  • spending habits
  • responsible use of credit

Many times once this help is received, people can continue on themselves without any further problems.

Debt consolidation.

Debt consolidation is the process that permits you to roll your varied financial debts owing to many creditors into one single loan, leaving you with just one creditor. If you are starting to have troubles staying on top of your minimum month-to-month payments, and the amount of your debt is frustrating you, debt consolidation is a choice worth thinking about.

A consumer proposal and Division I Proposal.

A consumer proposal and a Division 1 proposal are options to filing bankruptcy. Although comparable in several aspects, there are some significant distinctions. Consumer proposals are offered to people whose financial debts aren’t more than $250,000, not including any debts registered against your personal house. Division 1 proposals are readily available to both companies and people whose financial obligations go beyond $250,000 (omitting mortgages registered on their primary home).

A consumer proposal is an official process under the BIA. Dealing with a Trustee you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a specific amount of time
  • Extend the time you need to repay the debt
  • A mix of both

Repayments are made via the Trustee, who makes use of that money to distribute to each of your creditors. The agreed to a lesser amount of debt has to be repaid within 5 years.

Bankruptcy.

Sometimes when there are no other options, but the pain and stress of your debt load are just too much for you to handle, and you can’t see any other way, bankruptcy may be the only answer. The purpose of bankruptcy in Canada is to return the honest but unfortunate debtor back into society, so that they may be a productive member going forward.

Are you ready to talk about finances now and get some real credit counseling?

Don’t be like those people who took part in the Angus Reid survey. Take a positive step in the right direction to help your company and yourself.

Is your business in financial distress because you cannot collect your billings? Do you not have adequate funds to pay your creditors as their bills to you 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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Brandon Blog Post

MY BILLS ARE HIGH: 6 THINGS TO IMMEDIATELY DO

my bills are too high

If you would prefer to listen to the audio version of this my bills Brandon’s Blog, please scroll to the bottom and click on the podcast

My bills are high: Introduction

It is very common when I sit down with a person who has come to my office for a free consultation to hear them say “my bills are high”. As a licensed insolvency trustee, my role is to first understand the person’s entire situation. It is quite possible that I can recommend a few alternatives to avoid bankruptcy.

The purpose of this Brandon’s Blog is to talk about the importance of budgeting and more things a person with financial problems can do before even considering the “B” word.

First thing – household budget

I will show you how to catch up when you are behind on your financial obligations by using a proper household budget plan process. I must warn you that there is no magic wand to wave to make things right. You will have to learn the budgeting technique and be willing to invest a great deal of effort, time and personal and family sacrifices. But it will be worth it. When you are back on track and living within your means, you will have a new stress-free outlook on life.

To start the monthly budget plan process, it does not matter if you use an electronic spreadsheet, a paper listing of income and expenses or a clean calendar. Whatever you are most comfortable using. The process will be the same.

The starting point is for you to list all your bills with their due dates. Don’t forget to make note of any special expenditures during any specific month, such as a spouse or child’s birthday present. Make sure you list all of your expenses regardless if you pay them by cheque, cash, credit card or online payment.

Next, list your monthly income by the date(s) during the month your wages or salary end up in your bank account. Make sure that you are listing your net take-home pay, net of income tax. That is the actual amount of income that you have to spend in any given month.

The 4 corners

Now that you know exactly how much money is coming in every month available for you to pay your expenses, you have to organize your expenses. You first need to know what I call your four corner expenses. These are the expenses that you will have to pay before anything else. This is true whether you continue working at the same place or you lose your job and are looking for new work. The expenses that I call the four corners are:

  • Rent or mortgage payment.
  • Food costs.
  • Heat and electric bills.
  • Clothing expenses.

These are your essentials. Nothing else can be considered before them. So fill in your regular monthly amount for each one. Total up the amount of your four corners expenses and deduct it from your take-home pay. The difference is what you have left over each month to spend on other expenses.

Now go down the list of the rest of your expenses. Car payments, gas and vehicle maintenance, insurance, cable, internet, credit card payments and anything else that you have listed. See what all those expenses total. If the total of those is more than you have leftover cash from the four corners exercise above, then you have to make adjustments. You either have to reduce your other expenses or you have to increase your income. Perhaps it may even be a combination of the two.

If you are behind on any of your payments, because your bills are too high right now, you are going to have to work into your budget increasing the amount of the monthly expenses that you are behind on. However, there is an exception. The exception is that you start with your four corners payments you are behind on.

It won’t help you to bring your credit cards current if the gas company is about to shut off your ability to heat your home. Bringing a life insurance payment current won’t help you if you are behind on your rent or mortgage payments. So again, your four corners payments have to be brought current first. Then you can focus on your other expenses.

Do not worry about anything else. You put it on hold due to the fact that at the end of the day, if you were to have lost your job, the four corners is what you require to make it through, not a credit card payment. You don’t need to fret about your credit rating decreasing since if you are starting this trip you are not looking to borrow more money that needs your credit score to be spot-on. That will come over time after you have your financial house in order.

You worry about taking care of your four corners first. That is a good mind trick to getting yourself out of the loop of being addicted to letting your bills go late. imagine if you would have lost your job you would have no other choice but to not pay the credit cards.

Balance the rest of your expenses

Now, normally when you’re behind on payments that mean that you don’t have enough money to cover all your bills and that is totally fine. I need to emphasize that is totally fine. You will be able to catch up eventually. Most people find ways to catch up by either:

  • Further reducing expenses.
  • Selling stuff.
  • Using an annual bonus.
  • Increasing income with overtime, a part-time job or side hustle.

You need to take care of business. That way you are treading water, not sinking in it!

Now, what about the non-four corners monthly payments that you are deferring. Yes, eventually the credit card company, such as, is going to start hounding you. You will have to explain your temporary problems, tell them what you are doing to correct things, and when you think you will really begin to resume payment. It doesn’t matter who the creditor is. The process of explaining the issues and getting a deferment or grace period is the same. Do not hide from your creditors. Explain the situation and show them that you have a solution for your common problem.

For additional ways to pay down your debt, take a look at my blog DEBT HELP NEAR ME: OUR TORONTO DEBT REPAYMENT CALCULATOR STRATEGY. In it I explain the two most common methods of paying down bills you are behind on; the debt snowball method and the debt avalanche technique.

If you budget properly and stick to your budget, you will get caught up and your credit will recover with time. Now that you actually have control over your expenses and you know to the day of every month what you earn and what you pay, you can then look at some alternatives if you cannot get current before a creditor stops waiting and is beginning to take action against you.

Once you have the budget process mastered and you are following your budget, you won’t have to say “my bills are high”.

Second thing – rebuilding credit

Rebuilding credit is essential. There are many points beyond your control that could have contributed to you’re getting behind on your bills and your resulting bad credit ranking – losing your job, an illness or a divorce. The most vital thing is to recognize what is within your control that got you into difficulty and ensure that you don’t repeat the same mistakes twice.

There are many strategies that you can use to restore your credit score. Here are a few suggestions:

  • Continue with the budget plan I showed you above and continue to pay down your debt.
  • Pay your expenses in a timely manner
  • Contact a creditor instantly if you are having a problem making payments to advise them and work out a payment plan that you can honour.

If you do not qualify for any type of loan, apply for a secured credit card and stop using the normal credit cards that got you into trouble.

Third thing – credit counselling

The first two things I have mentioned are for those who can do it on their own. If you discover yourself experiencing money problems and feel that you need the help of an expert, credit counselling is a great place to start.

A certified credit counsellor professional, can look at your current situation and offer you many alternatives for taking care of the debt.

Credit counselling can solve debt problems. It will also give you the skills to properly budget, pay down your debt and then go on to live debt free. Credit counselling solutions consist of the budgeting process and credit repair that I have already talked about. It also will include lessons on how to use debt wisely. It may also include a proper debt administration program.

Debt administration programs are made to aid you to repay debt. You enlist willingly in a debt administration program; it is not court mandated. When you enlist, a debt counsellor will contact your creditors and ask for their participation in lowering your debt. Your lenders might agree to decrease the amount of debt owing or eliminating or reducing the interest owing. Not all financial debts are covered under a debt monitoring program. Secured debts are generally not included. This is because the creditor can repossess the house or car if you do not make your payments.

One word of caution. We have had cases where certain debt administration firms failed to provide any type of purposeful solution for the people. They charged costs and didn’t give any kind of results. We suggest that you contact what you believe to be a reputable credit counselling firm, you do not retain them until after getting and vetting a couple of references of people who have gone through the program you are considering and you receive positive reviews.

Fourth thing – debt consolidation

Debt consolidation is a loan that allows you to settle all your financial obligations to several or all of your lenders simultaneously, leaving you with just one loan payment. Your debt consolidation loan interest rate must be less than the average interest rate of the debts you are settling.

Not all debts can be included in a debt loan consolidation financing. Secured financial debts like your home mortgage or car loan cannot be included; however unsecured debt like credit card debt and other regular monthly bills that you are now behind on can be.

In order to qualify for a debt loan consolidation, you will require to have an acceptable credit score and sufficient income to show to the lender that you can make your new month-to-month payment in addition to your other regular monthly expenses. Debt consolidation is something you ought to consider before you are in more significant financial troubles. If you have a poor credit score you will certainly not qualify.

There are many benefits to a debt loan consolidation financing that include yet are not limited to:

  • Interest rates are less than the rates of interest on credit cards
  • Your unsecured creditors will be paid in full
  • You will have the benefit of making only one monthly payment
  • You ought to be able to keep a good credit report rating

Fifth thing – consumer proposal

Your financial problems may have gotten to the point where you just don’t have enough time to get current using one or a combination of the 4 things I have already explained. Worse, you may have gotten breathing room and accommodation from your creditors. However, you were not able to keep current on your new payment plan. If this is the case, do not fret because there is a solution.

By using a licensed insolvency trustee (formerly called a bankruptcy trustee) (Trustee), you can reach a binding deal with your creditors to settle your debts at less than the amount you owe in total. The process for this debt settlement plan is called a consumer proposal.

Consumer proposals are options to avoid bankruptcy. A consumer proposal is available to people whose total financial debts do not go beyond $250,000. This limit is not including financial obligations for mortgage or line of credit loans registered against your principal home.

Consumer proposals have formal rules governed by the Bankruptcy and Insolvency Act (BIA). Dealing with a Trustee you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a specific time period (not more than 5 years).
  • Extend the time you need to pay off the debt.
  • It could be a combination of both.

Payments are made to the Trustee who is the administrator of your consumer proposal. The Trustee then uses that money to pay each of your creditors their part of the payments.

The advantages of a consumer proposal are:

  • You maintain all of your possessions
  • Collection actions against you by unsecured creditors, such as garnishments are stopped
  • Unlike informal debt settlement, the consumer proposal is a legal process where every one of your creditors must heed your restructuring
  • You do not have to claim bankruptcy

Sixth thing – bankruptcy

If you have left things too late, or other reasons why none of the 5 things I have already described will work for your situation, then the sixth thing is bankruptcy. Personal bankruptcy is meant to allow the honest but unfortunate person shed themselves of their debt. That way you can start over fresh and new.

Our goal as a Trustee is to ensure that you understand the bankruptcy process and how it can be used to get your life back on track.

We will first help you understand the 5 things I have already described that might be available to you to avoid bankruptcy. If bankruptcy is the only solution, we will guide you back on the roadway to financial health and wellness. We design solutions to ease the stress you meet and bring you:

  • Relief from bothering calls from debt collectors.
  • Freedom by extricating you from garnishments.
  • Provide you the ability to live better than just hanging on one paycheque to the next.
  • Improve your credit scores.
  • Give you an improved and enhanced wellness and well-being.

My bills are high: Do you have too much debt and need help?

If so, call the Ira Smith Team today. We have years as well as generations of experience aiding individuals and companies needing financial restructuring. As a licensed insolvency trustee, we are the only professionals accredited and followed by the Federal government to provide debt restructuring options.

You can have a no-cost appointment for us to gather the necessary information to advise you on how to fix your debt difficulties. We can end your pain so that you will begin your clean fresh start, Starting Over Starting Now.

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Brandon Blog Post

BANKRUPTCY HELP: SIGNS YOU NEED HELP

bankruptcy help

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

Bankruptcy help: Introduction

When people ask for bankruptcy help, they really don’t want to talk about bankruptcy. What they are really asking for is help in eliminating the pain, suffering and stress they are going through dealing with their unmanageable debt. They want solutions to avoid bankruptcy. In this Brandon’s Blog, I discuss the debt danger signals and provide solutions to avoid bankruptcy.

As a licensed insolvency trustee (formerly known as a bankruptcy trustee), we are the only professionals licensed and monitored by the Federal Government. We provide options and proposed solutions to people and companies with too much debt. Our main goal is to help people and companies AVOID bankruptcy while solving their debt problems.

Bankruptcy help: 10 signs that you need help

  1. Your total debt has increased over the past year. You may be making minimum payments on some debt, paying down other debt, but increasing your debt in total. You have not accomplished anything in reducing your debt in the past year and this means you need help.
  2. Justified purchasing a new vehicle even though your existing one is fine, just not new. Taking on more debt just because of a “want” but not a “need” is irresponsible. You need help.
  3. Bought a new house with a larger mortgage, or mortgages, because you expect your income to rise in the future. Wages and salaries are not increasing in any real way. They are flat. Voluntarily carrying a larger debt load hoping that sometime in the future your income will catch up to your cash needs is not a responsible way of handling your affairs. You need help with your debt.
  4. Have borrowed money to go on a vacation. You should never go into debt to purchase something that is going to vanish in a week or two. The vacation will be gone but the debt will remain. If you can’t afford a vacation, you can’t go on one.
  5. Justify purchases based on what your peers are buying. Again, going into more debt because you want things your friends are buying is not a good reason. Their situation is not your situation. Maybe they can afford those things but you can’t. Maybe they can’t afford those things and will end up in bankruptcy. You just don’t know. Again, you can’t go into debt for “wants”.
  6. You have no emergency fund saved up. Recent surveys have shown that Canadians may be a few hundred dollars away from a financial disaster. Many Canadians are living paycheque to paycheque. You don’t know when a medical emergency, job loss or the need to replace a major appliance will happen. You need an emergency cash fund to cover those emergencies. If you have too much debt and no emergency fund savings, you need debt help.
  7. No retirement savings. It is never too soon to start planning to save a certain part of your take-home pay for retirement. A proper household budget will allow for such savings. If you are constantly battling your debt and have no money for savings, you need debt help.
  8. You quit your job without having another one lined up. This is probably the most irresponsible thing you can do. It may seem obvious to you, but trust me, I have seen it. The best way to land a better paying job or position is when you already have one. Trying it any other way is pure folly, especially when you have too much debt. Your regular monthly debt payments will not wait for you to have your income stream rolling again. Keep in mind that I am not talking about someone who is downsized and was given a package. I am talking about someone who quits without having new employment ready to go to.
  9. You are always borrowing from one source to pay down another. There isn’t enough money from your earnings to make your required debt payments. The fact is that you are borrowing from Peter to pay Paul. You’re in trouble and need debt help.
  10. You ignore your partner’s bad money habits or worse, financial infidelity. Your money habits may be impeccable. However, ignoring your partner’s money problems will bring you down too. You both need debt help.

Bankruptcy help: How we provide debt help

The first thing we offer is a free first consultation. You explain to us the financial issues you are facing. Then we talk to you about your family assets, liabilities and income. We then describe to you some possible options to help you overcome your debt problems. More information will be needed from you, but at least we start by setting your mind a bit at ease by telling you that your situation is not hopeless and we can give you solutions. All of the solutions we offer, except maybe one, are all so you can avoid bankruptcy.

The takeaways we want everyone to get from this free consultation is that you feel:

  1. We have empathy for your situation.
  2. A rapport has been built.
  3. We are the kind of people you can see yourself working with.
  4. You trust us.

If you wish to go ahead with our solving your financial and debt problems, the next step is that we have you complete our standard intake sheet called the Debt Relief Worksheet. A fully completed worksheet, complete with backup documents, allows us to drill down into all the issues and come up with our definitive recommendations.

Bankruptcy help: What are some possible solutions

The range of possible solutions depends on when we get to speak with you. Most people wait until they have no more credit line to use. Sometimes it takes a major event like the Canada Revenue Agency garnisheeing their bank account or wages before they realize they have a debt problem. The earlier you recognize there might be a problem and come speak with us, the more options we will have for you to solve your debt problems.

The range of options might include:

Credit counselling

Credit counselling is in fact debt therapy. We give advice with a host of concerns connected to debt consisting of budgeting, debt remedies, working with your lenders as well as restoring credit scores.

Debt consolidation

Debt consolidation is replacing all of your debts with new single financing at a lower overall interest rate so that you only have one debt to focus on reducing.

Consumer proposal

A consumer proposal is an official deal made to your creditors under the Bankruptcy and Insolvency Act (Canada) to customize your repayments; e.g. paying a lesser amount every month for a longer amount of time and paying in total less than you owe. Another benefit is that the interest clock stops the moment you file your consumer proposal.

If none of the above 3 possible solutions to avoid bankruptcy will work for you, then you are a candidate to file for bankruptcy so that you can end the pain and stress your debts are causing you. This way you can be Starting Over, Starting Now.

Bankruptcy help: Do you have too much debt?

Do you have too much debt? Are you stressed that future interest rate increases will make currently affordable payments completely unaffordable? Is the pain, stress and anxiety hurting your wellness and health?

If so, speak to the Ira Smith Team today. We have decades and generations of helping people and companies looking for financial restructuring. As a licensed insolvency trustee (formerly called a bankruptcy trustee), we are the only experts licensed and supervised by the Federal government to provide insolvency services.

Call the Ira Smith Team today for your free consultation and to make sure that we can begin assisting you to return right into a healthy, balanced, hassle-free life.

 

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Brandon Blog Post

DEBT CONSOLIDATION: DEBT CONSOLIDATION LOAN MAY START PLAYING HARD TO GET

 

Debt consolidation

Debt consolidation is a form of debt refinancing that entails taking out one loan to pay off many others. This commonly refers to a personal finance process

Introduction

On November 16, 2018, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) issued a press release on the state of consumer insolvencies in Canada. Hidden in the information was data which leads me to believe that debt consolidation may be tougher in 2019 and certainly in 2020.

A perfect storm is brewing

A historically low rate of interest and accessibility to credit have enabled some Canadians to stay up to date with debt and debt payments that would otherwise have gone into default. Interest rates are now rising and it is expected that the Bank of Canada will continue to raise its benchmark rate into 2019. Canadian household debt is on average at its highest level ever and is forecast to continue to rise. Rising household debt combined with rising interest rates is not a good combination.

Until now, Canadian real estate values have continued to rise, so consumers have been able to combine unsecured credit card and other debt into new mortgage or home equity line of credit debt secured by Canadian real estate. However, times have changed. Effective January 1, 2018, a new mortgage stress test came into effect. We described it in our blog “CANADA MORTGAGE STRESS TEST: WE EXPOSE THE SECRET TO TURN YOU FROM ZERO TO HERO”.

The mortgage stress test has resulted in one of its prime goals; a noticeable downturn in new mortgage loans. The second result is a slowing down of the runaway real estate markets in Vancouver and Toronto. If Canadian household debt continues to rise, interest rates keep rising making debt payments tougher and Canadians can no longer combine their unsecured debts by taking out a new loan by borrowing against their homes, debt defaults are going to rise.

That is why I say that debt consolidation loans may start playing hard to get.

The important relationships to consider

Below is a chart displayed in the CAIRP press release which I have reproduced here.debt consolidation 3

 

CAIRP came to some interesting conclusions about interest rates and consumer insolvencies, based on the trends shown in these charts. However, I believe they overlooked what I think is the central issue.

In the top chart, it shows that insolvency filings increased in the 2009-2010 years. CAIRP surmised that there was a lag between the time interest rates rose in the years 2006 through 2008 and the increased filings. This is true. However, the increase in filings mirrors the increase in unemployment in the 2009-2010 period. My personal view is that the more important finding is that the unemployment rate lagged the interest rate increase and it is the increase in the unemployment rate that produced a higher level of insolvencies.

With higher interest rates, corporations are paying more on their debt. Corporations want to show a steady increase in their profits year over year. If debt costs rise, companies have to find other costs to save. One cost that can be reduced in the short-term is labour costs. The forecast shows that as employees are terminated, the unemployment rate rises. Not everyone can find new work in the same time frame. This leads to increased consumer insolvency filings. In my view, the unemployment rate is a more important relationship to consumer insolvency filings.

Looking at 2019 and 2020

The bottom chart shows the relationship between household debt to income and the inflation rate. As you can see, the household debt to income ratio has kept a steady climb in 1996 through 2017 years. This steady climb has continued in 2018 and is forecast to rise even more in 2019 and 2020. The forecast also shows that inflation will nudge up to the 3% rate in 2020. So prices are expected to rise with inflation, and the household debt to income ratio is expected to rise also. This will put more pressure on Canadians trying to keep up with their debt payments.

The upper chart shows us that in 2019-2020, the forecast is that GDP stays flat, while interest rates continue to rise. In the same time frame, the downward trend in the unemployment rate bottoms out and begins to rise. Again, more unemployment and higher interest rates lead to problems for people trying to pay off debts. If you agree with my hypothesis that Canadians won’t be able to merge debt by borrowing more against their homes, this will lead to more financial problems and presumably an increase in consumer insolvency filings.

What you can do now

All is not doom and gloom. There are many things a person with a lot of debt can do now before things get out of control. There are many things that you can do right now to avoid a disaster down the road. My 5 steps for anyone who wants to resolve debt issues now are:

  1. Review your household budget now and cut spending on “wants” vs. “needs”. If you don’t have a household budget, develop a realistic one NOW!
  2. Rework the budget so that you spend less each month than you are currently spending. Look for ways to economize. Use that extra cash to paying down debt.
  3. Start paying more than the minimum monthly payment on your credit card and other unsecured debt. The more you can pay, the faster you can pay it off.
  4. Pay down the debt with the highest interest rate first. The less you pay in interest the better. That means more is going to pay down the principal debt.
  5. Perhaps you need to consider taking on a part-time extra gig to bring in more income.ira smith trustee

What if I can’t pay off my debts?

For Canadians that discover themselves not able to handle their debt on their own, there is a range of alternatives to take into consideration:

  • striking a deal with each of your major unsecured creditors through an informal debt settlement negotiation;
  • don’t give up on trying to combine all unsecured financial debts into one regular monthly payment;
  • a more formal debt settlement strategy with a consumer proposal; or
  • bankruptcy.

Identifying which choice is most appropriate depends upon a person’s scenarios as well as their unique asset and liability structure.

Debt consolidation: How we can help you

Licensed Insolvency Trustees (formerly called bankruptcy trustees) are the only experts accredited, licensed and supervised by the federal government to handle debt restructuring. As a licensed insolvency trustee, our personalized strategy will assist you to recognize all of your alternatives. The alternative you pick based on our recommendations will take away the stress and pain you are feeling because of your debt problems.

The Ira Smith Team has decades and generations of experience people and companies in financial trouble. Whether it is a consumer proposal debt settlement plan, a larger personal or corporate restructuring proposal debt settlement plan, or as a last resort, bankruptcy, we have the experience.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our front door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life. Call us today for your free consultation.

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