Tag: Debt

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NEGOTIATING DEBT VS BANKRUPTCY

negotiating debt vs bankruptcy, bankruptcy, bankruptcy faqs, debt, trustee, professional trustee, licensed trustee, debt settlement companies, financial plan, consumer proposals, consumer bankruptcies, bankruptcy alternatives, alternatives to bankruptcy, credit counselling, debt consolidation, Bankruptcy and Insolvency Act, BIA, Office of the Superintendent of Bankruptcy CanadaNegotiating debt vs bankruptcy. Of course you would not pick bankruptcy as your first choice. If you are considering the options of negotiating debt vs bankruptcy, you must be mired in serious financial difficulty and have few options available to you.

You need the help of a professional, licensed trustee now! Don’t be seduced by the bogus claims of debt settlement companies who promise to negotiate with your creditors for pennies on the dollar and get you out of debt in no time flat. Although you are being bombarded with messages like this on radio, television and online, don’t fall prey to these scam artists.

Debt settlement companies have already been banned in the United States and now several Canadian provinces have introduced strict regulations in the debt settlement industry. A professional trustee will evaluate your individual situation fairly and in an even-handed manner, and present you with a solid financial plan for moving forward and getting out of debt, including all of the advantages and disadvantages of negotiating debt vs bankruptcy.

According to the Office of the Superintendent of Bankruptcy Canada, consumers continue to opt in large numbers for negotiating debt vs bankruptcy.

What are the alternatives to bankruptcy? There are 3 Formal Bankruptcy Alternatives:

  1. Credit Counselling
    Credit counselling is in reality debt counselling. Professionals provide assistance with a host of issues related to debt including budgeting, finding debt solutions, working with your creditors and rebuilding credit.
  2. Debt Consolidation
    Debt consolidation is a single loan that allows you to repay your debts to several or all of your creditors at once, leaving you with only one outstanding loan.
  3. Consumer Proposals
    Consumer proposals are formal offers made to your creditors under the Bankruptcy and Insolvency Act (BIA) to modify your payments. e.g. paying a lesser amount each month for a longer period of time and paying a total lesser amount than you owe. In a consumer proposal you are choosing not to go bankrupt so this is actually negotiating debt vs bankruptcy.

Ira Smith Trustee & Receiver Inc. is a professional, licensed trustee who can help you get back on the road to financial health Starting Over, Starting Now. A licensed trustee can properly advise you on negotiating debt vs bankruptcy. If you wish to do some self-study, please review our bankruptcy FAQS. But don’t delay. Contact us today.

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CONSUMER PROPOSALS: WHAT YOU NEED TO KNOW

CONSUMER PROPOSALS: WHAT YOU NEED TO KNOWBefore contemplating a bankruptcy, those who have too much debt should give strong consideration to consumer proposals, one of the alternatives to bankruptcy. As long as you owe less than $250,000, this is possible. This limitation excludes any mortgage you have for your home.

The advantage of consumer proposals

Consumer proposals gives individuals a chance to reorganize their finances and get back on their feet without having to go through a bankruptcy. By avoiding bankruptcy, a person’s credit rating is not seriously damaged. In addition, after all of the debts are dealt with, through consumer proposals, people have a strong feeling of accomplishment and self-worth.

Consulting with a bankruptcy trustee to find out more about consumer proposals

The first step in pursuing a consumer proposal is to meet with a bankruptcy trustee to evaluate your financial circumstances. The trustee will help draft a proposal for your creditors based upon your finances. If the proposal is accepted, you will then make your payments directly to the trustee. The exact form a proposal will take is dependent upon many variables.

In some circumstances, you may be paying only a partial amount of the debt you owe over time. In other circumstances, the debt will not be reduced, but reorganized in a way that gives you a chance to pay it all back. In consumer proposals, no further interest or fees can be charged. Sometimes it is just a longer period of time to pay back the debt. Either way, consumer proposals should be thought of as providing you with the equivalent of an interest-free loan. Whatever the final proposal is, it will help bring needed relief to your financial situation.

After filing a consumer proposal

From the time your consumer proposal is filed, you will no longer be making any payments directly to your creditors provided that the debt is unsecured. Any wage garnishment that is in place is suspended while the proposal is examined by your creditors. Lawsuits over debt recovery are also placed on hold. The proposal and the accompanying trustee’s report will provide details on your personal finances and will include an explanation of how your debts became such a problem that it has led to a need to reorganize the debt structure. Your creditors will have up to 45 days to decide to accept the offer or not. If one or more of your creditors is owed more than a fourth of the total debt, they have the right to request a meeting with you and the trustee. This request for a meeting must be done in the same 45 day time limit.

If you are in a situation where you are overwhelmed by debt with no hope of paying it back under the current circumstances, there is not much of a downside to pursuing a consumer proposal. The worst thing that can happen is that creditors do not agree to the proposal, and in this situation, bankruptcy is still an option. If it does work then you save yourself the grief of having a bankruptcy on your credit history.

If you wish to compare this information about consumer proposlas to a bankruptcy, start by reviewing our bankruptcy faqs. Contact Ira Smith Trustee & Receiver Inc. as soon as possible regarding your debt problems, to find out more about consumer proposals and Starting Over, Starting Now you’ll be on your way to living a debt free life.

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DEBT IS INCREASING IN CANADA ACROSS ALL DEMOGRAPHICS

DEBT IS INCREASING IN CANADA ACROSS ALL DEMOGRAPHICSThe last few weeks we’ve been discussing seniors in debt and baby boomers plagued with debt, but the sad reality is that debts are increasing in Canada across all demographics, and at alarming rates. In July 2013 we discussed how even high flyers can’t sustain the income to fund their lifestyles, so all demographics means the rich and famous included. According to the Royal Bank’s poll:

  • Canadians’ debt loads have grown 21% in the past year, and more consumers are running into the red.
  • For every dollar Canadians earn, they owe $1.63.
  • Just 24% of Canadians say they are debt free.
  • Canadians who are in debt have increased their non-mortgage burdens to $15,920. That’s an extra $2,779 over the past year compared to growth of just $83 in the year prior.
  • 38% of Canadians are anxious about their debt levels.

Unfortunately Canadians are digging themselves deeper by taking advantage of low interest rates and continuing to borrow, yet wages can’t keep up leading to Canadians being anxious about their debts. As a result debt loads have skyrocketed. A new survey shows debt levels are climbing fast, to a record $1.422 trillion in the fourth quarter of 2013, according to credit agency Equifax Canada. TransUnion reported the average Canadian consumer owes $27,355 – not including mortgages. Installment loans, largely made up of car loans, were the fastest growing segment of debt, up 11% year over year. Credit card debt rose 5.9% from a year ago. It is especially true for seniors with credit card debt, as they can tap into existing credit cards to borrow where they could not longer qualify for new credit.

As Canadian sink deeper in debt, many will be living paycheque to paycheque and struggling to make the minimum payments until eventually they become insolvent. Don’t wait for disaster to strike before seeking professional help. If you are facing a debt crisis, contact a professional bankruptcy trustee as soon as possible. The earlier you seek help the more options you’ll have. Bankruptcy is not the only option for serious debt problems. There are bankruptcy alternatives including credit counselling, debt consolidation, and consumer proposals in addition to bankruptcy as solutions. Contact Ira Smith Trustee & Receiver Inc. as soon as possible and Starting Over, Starting Now you’ll be on your way to living a debt free life.

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BABY BOOMERS DEBT: REASONS WHY IT IS SO HIGH

BABY BOOMERS DEBT: REASONS WHY IT IS SO HIGHThere are various reasons why baby boomers debt is so high. According to the 2011 Canadian Census, 9.6 million persons, or close to 3 Canadians out of 10 (29%), were baby boomers. Baby Boomers, the generation born between 1946 and 1964, face challenges unlike any other generation before them. Sometimes referred to as pre-seniors, the sandwich generation (taking care of children and parents), and the club sandwich generation (taking care of grandchildren, children and parents), many Baby Boomers are finding themselves ill prepared for retirement.

They expected to have their children off their payroll prior to retirement and never anticipated the financial burden of caring for aging parents and sometimes their grandchildren. Their defined pension plans have all but evaporated and they are left with huge financial responsibilities and a diminishing income. And sometimes, life just got in the way due to divorce or illness. These are many reasons why baby boomers debt is so high.

According to a BMO study:

  • Baby Boomers are about $400,000 short of their retirement goals.
  • The average Baby Boomer feels they need about $658,000 to retire on, not including Canada Pension Plan and Old Age Security money they’ll also get coming to them. However, the average amount they have saved so far is about $228,000.
  • 71% Baby Boomers said they plan to work part time in retirement to earn extra income.
  • 44% will sell off their valuable goods, such as antiques or possessions they don’t use.
  • 33% plan to sell their home to help make ends meet.

The Canadian Payroll Association (CPA) came to similar conclusions. Their study showed that the long term financial outlook for many Canadians is troubling because there is a huge gap between how much money people say they will need to retire and how much they are actually saving for retirement. In addition 40% of employed Canadians still are spending all of or more than their net pay and many are living paycheque to paycheque. Many Baby Boomers of retirement age are retiring with alarming levels of debt, or not able to retire because of their baby boomers debt.

If you’re a Baby Boomer with serious baby boomers debt issues, contact Ira Smith Trustee & Receiver Inc. today. Starting Over, Starting Now we will evaluate your situation and offer practical advice so you can clearly see the way to move forward.

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BANKRUPT: EVEN A PRESIDENT CAN BECOME ONE

BANKRUPT: EVEN A PRESIDENT CAN BECOME ONEBankrupt. This word still carries a stigma with it, but did you know that 4 American Presidents became bankrupt? So even a President can become bankrupt. They’re really not so different from average working people who find themselves drowning in debt. In fact American presidents became bankrupt at a rate at least 20 times the national average. And, their financial downfall was largely due to ill conceived real estate speculation, poor crop yields on the lands that they held, and high risk business deals that ended badly.

Which American presidents became bankrupt?

  1. Thomas Jefferson (1801-1809), America’s 3rd President: Jefferson inherited debt from his father-in-law. He managed his own money poorly and by all accounts lived a very opulent lifestyle which sadly, his main source of income – Monticello – was inadequate to support. As a result Thomas Jefferson struggled with debt issues for most of his life and went bankrupt several times. He died owing $107,000. After he died, his estate was auctioned off, and his surviving daughter was forced to rely on charity.
  2. Abraham Lincoln (1861-1865), America’s 16th President: Abraham Lincoln’s business venture in his 20s left him in financial ruin. He opened a general store in the 1830s with a partner, but it was a financial disaster. Lincoln sold his share in the store before it went bankrupt but his former partner died not long after and Lincoln became liable for the outstanding debts. The sheriff seized his only assets which were a horse and some surveying equipment to repay some of his creditors. It took another 17 years for the insolvent debtor to satisfy his remaining obligations.
  3. Ulysses Simpson Grant (1869-1877), America’s 18th President: Ulysses S. Grant lived well beyond his means. After leaving office he and his wife went on a very costly round-the-world tour. In 1881, Grant’s son, Buck, convinced his father to invest $100,000 with one of his associates, Ferdinand Ward. The money was mismanaged and embezzled, resulting in the bankruptcy of the firm of Ward and Grant. Ulysses S. Grant went bankrupt and ultimately had to sell his civil war memoirs to provide for his family.
  4. William McKinley (1897-1901), America’s 25th President: Although William McKinley did nothing personally to bring financial ruin upon himself; he co-signed a $100,000 loan for a friend who later went bankrupt. This in turn forced McKinley to declare bankruptcy on the $100,000 debt while he was Governor of Ohio in the 1890s.

Things really haven’t changed much since the 1800s; living beyond your means, making bad business investments and co-signing a loan are still common causes of people becoming bankrupt. Any of this type of debt, along with credit card debt, can cause you to live paycheque to paycheque. If you are considering bankruptcy contact a professional trustee as soon as possible. Ira Smith Trustee & Receiver Inc. is a full service insolvency and financial restructuring practice serving companies and individuals throughout the Greater Toronto Area (GTA) facing financial crisis or bankruptcy that need a plan Starting Over, Starting Now. There is life after bankruptcy. Contact us today.

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CREDIT CARD DEBT IS MORE THAN A 4-LETTER WORD

 

CREDIT CARD DEBT IS MORE THAN A 4-LETTER WORDCredit card debt. There’s a lot of discussion about it in the news these days and the news is all bad; but the reality is that there is good debt and bad debt. As you will read, debt, including credit card debt is more than a 4-letter word. However, no one is denying that debt is a serious issue for many Canadians. According to the Canadian Institute of Chartered Accountants surveys conducted in December and June, 2012:

  • 50% of Canadians think reducing debt is a high priority
  • 48% of Canadians would have difficulty making mortgage payments if interest rates rose significantly
  • 43% of Canadians carried over a balance on their credit cards
  • 17% of Canadians borrowed to cover day-to-day living expenses

According to Statistics Canada, between 1984 and 2009, household debt (which includes credit card debt) in Canada more than doubled from $46,000 (in 2009 dollars) to $110,000. In February 2011 the Vanier Institute of the Family reported that the average Canadian family had hit $100,000. If there is such a thing as good debt and bad debt, what’s the difference? The distinction is based on the purpose for which it is taken on. Good debt can be defined as anything that builds your assets or increases the potential for you to earn more money. Bad debt is typically incurred to purchase things that have no value or quickly lose their value and usually carries a very high interest rate – which more often than not is found in credit card debt.

Some examples of good debt:

Some examples of bad debt:

If you are having trouble paying the monthly bills, and have out of control credit card debt, it really doesn’t matter if you have good debt or bad debt; it’s time to see a professional trustee. Ira Smith Trustee & Receiver Inc. will evaluate your situation and help you to arrive at the best possible solution for your problems, whether that solution are bankruptcy alternatives like credit counselling, debt consolidation or a consumer proposal or bankruptcy. Starting Over, Starting Now you can be debt free with the help of a professional, licensed trustee in bankruptcy. You can even do some advance study with our bankruptcy faqs. Contact us today.

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FINANCIAL INFIDELITY IN MARRIAGE LEADS TO DIVORCE

FINANCIAL INFIDELITY IN MARRIAGE LEADS TO DIVORCE

Financial infidelity in marriage: Introduction

Financial infidelity in marriage is a recurring problem. Couples heading to divorce argue about many things – the kids, sex, in-laws, the house, division of labour – but a study from Utah State University and recent statistical findings from online divorce service MyDivorcePapers.com (MDP) have re-confirmed that the cause of money, not sex, is the top predictor of divorce. The study and the data show that couples who engage in financial infidelity in marriage routinely argue about their finances are setting a steady course for divorce. Many studies echo these findings, including a 2012 longitudinal study that found that money is the number one cause of tension in relationships and as a result, it’s also the top predictor of divorce.

Financial infidelity in marriage: Our definition

Financial infidelity in marriage occurs when a spouse commits to serious spending that affects the entire household without first consulting their mate. To avoid becoming a statistic couples should be doing a lot of talking about finances before saying I Do and throughout the marriage. It may not be romantic but avoiding the conversation may doom your relationship to failure. You are no doubt discussing your compatibility in many areas of life. You are more than likely not discussing your financial compatibility. The likelihood of financial infidelity in marriage may be increased as a result.

Financial infidelity in marriage: Some important considerations

Have you considered:

  • How you’re planning to pay for your lifestyle?
  • Saving for retirement?
  • If your spending habits are compatible?
  • What your financial priorities are?
  • Your assets?
  • Your debts?
  • A prenup?

Financial discussions need to be frank and transparent. The health of your marriage may depend on your financial health. If in the course of your financial discussions you uncover serious debt issues, it’s better to deal with the debt sooner than later.; stay away from divorce by not committing financial infidelity in marriage.

Financial infidelity in marriage: We can help you

Start your life off debt free and with a go forward plan to stay that way. For sound professional help and advice contact Ira Smith Trustee & Receiver Inc. today. We can’t guarantee you a happy marriage but Starting Over, Starting Now we can help you deal with serious debt issues and put you on a path to living a debt free life.

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A GREAT CREDIT SCORE DOESN’T MEAN YOU WILL GET THAT LOAN

A GREAT CREDIT SCORE DOESN’T MEAN YOU WILL GET THAT LOANCredit score. If you’re not concerned about your credit score, you should be. Our lives revolve around our ability to access credit – car loans or leases, co-signing a loan for others, mortgages, rental agreements, lines of credit, credit card. In addition to affecting our ability to borrow, credit scores can impact our insurance rates and even our love lives.

What is a Credit Score? According to TransUnion, one of Canada’s largest credit reporting agencies, “A credit score is a statistically derived prediction of an individual’s credit risk at a particular point in time. Credit risk is typically defined as the likelihood of an individual becoming seriously delinquent (i.e. 3 payments past due or worse) within a 12-24 month period in the future). The score is a three-digit number that lenders use to help them make decisions. A higher score indicates that the individual is a better credit risk to a lender”.

I have always advocated to clients that having a good credit score is more of a risk/reward indicator for lenders as opposed to a true measure of “credit responsibility”. Credit scores don’t really evaluate credit worthiness, but instead whether a company can make a profit from the person. The good credit score they are looking for is in a range where you don’t pay things on time, but you eventually pay. That way they can charge interest, but feel comfortable that ultimately you will pay them in full. If you pay all your bills off in full and on time every month your credit score may indicate to the credit card issuer or lender that they may not be able to earn enough profit from you and therefore your credit score may not be as good as someone who carries a balance and pays the minimum every month. Although it may sound counterintuitive, having a great credit score doesn’t necessarily mean you’ll get that loan. However, it goes without saying that if you have a very poor credit score, then with certainty we can say that you will not obtain the approval of your banker. Unfortunately, there is not an online tool such as a Canadian credit score calculator.

If you’re having credit problems, it may be indicative of serious debt issues. Contact Ira Smith Trustee & Receiver Inc. today. Starting Over, Starting Now we can help you deal with your debt issues and restore you to financial health.

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BABY BOOMERS DEBT CRISIS: WAITING FOR AN INHERITANCE TO BAIL YOU OUT?

BABY BOOMERS DEBT CRISIS: WAITING FOR AN INHERITANCE TO BAIL YOU OUT?Baby boomers debt crisis. The subject of inheritance is always highly charged – especially if you are in a Baby Boomers debt crisis. Parents seem to be divided into several camps. There are those who are self made and who believe that their kids will learn more from making it on their own than by receiving it on a silver platter. Others have spoiled their kids with a lavish lifestyle that only an equally lavish inheritance will be able to support. And there are those like billionaire Bill Gates who fall somewhere in the middle. This is his take on his wealth and inheritance for his children.

“It will be a minuscule portion of my wealth. It will mean they have to find their own way. They will be given an unbelievable education and that will all be paid for. And certainly anything related to health issues we will take care of. But in terms of their income, they will have to pick a job they like and go to work. They are normal kids now. They do chores, they get pocket money”.

Sadly there are many people who are living well beyond their means and waiting for an inheritance to bail them out of serious debt issues. They are living the life they believe is their right and as a result have an enormous mortgage, leased cars, maxed out credit cards and nothing but a mountain of debt to call their own.

  • An HSBC Bank report released in September, 2013, found 39% of working people are banking on some type of inheritance with the median value expected to be $77,213.
  • A report by Moneyville calculates that baby boomers are poised to inherit about $1 trillion over the next two decades as their parents and other close old relatives die.
  • According to MoneySense, 36% of the wealthiest families have received an inheritance; the average amount of that inheritance was $136,000.

However a BMO report shows that what many Canadians expect and what they may receive are quite different:

  • About 1.5 million Canadians are relying on their inheritance as the primary source of capital to fund their retirement.
  • On average, Canadians expect to receive a total of $150,600 in cash or cash equivalents, and $151,200 in non-cash inheritance.
  • In reality, inheritance sums received were significantly less – the average inheritance received was $56,000; certainly not enough to provide a solution to the question – Will I ever be able to retire?

Waiting for an inheritance to bail you out of a baby boomers debt crisis or other serious financial problems is clearly not a sound plan. If you have serious debt issues you need a professional. Contact Ira Smith Trustee & Receiver Inc. today. As professional trustees we can offer a sound financial plan and a way out of your baby boomers debt crisis for Starting Over, Starting Now. Take the first stop towards living a debt free life.

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REDUCE DEBT: 5 NEW YEAR’S RESOLUTIONS TO REDUCE DEBT IN 2014

REDUCE DEBT: 5 NEW YEAR’S RESOLUTIONS TO REDUCE DEBT IN 2014Reduce debt now to have a Happy New Year! This is the time of year that we vow to take charge of our lives and get healthy, lose weight, join a gym, find love, get a new job…. I’d like you to expand your thinking to include your “financial health” and reduce debt. According to RBC, Canadians are getting deeper in debt – non-mortgage debt in Canada jumped 21% in the past year alone to $15,920 per capita. Don’t become a statistic. Here are 5 New Year’s Resolutions to reduce debt in 2014.

1) I will live within my means: With interest rates low, you may be lured into taking advantage of what you perceive as a great deal. Borrowing, even with low interest rates, is only a good deal if you can afford to make the payments. There are many multimillion dollar houses in foreclosure and many repossessed luxury cars. Buy what you can afford. You can reduce debt this way.

2) I will create a budget and stick to it: A budget can be your best friend. RBC reports that Canadians’ total debt burdens, including mortgages, now stand at 163% of household income, or $1.63 owed for every $1 earned. This is a recipe for financial disaster. A budget will show you what your income is and what you can really afford. You may have to go a strict spending diet in order to get your finances back under control and reduce debt.

3) I will not max out my credit cards: It’s easy for spending to get out of control when you’re using credit cards. Spending takes on a whole new meaning when you actually use money to pay for things. If you want to buy something, pay for it with cash. Keep those credit cards out of sight for day to day spending and use them for emergencies only. This will allow you to reduce debt.

4) I will monitor my credit report. As we discussed in a recent blog – YOUR CREDIT RATING CAN BE RUINED EVEN IF YOU DON’T DO ANYTHING WRONG – it’s very important that you monitor your credit report and take immediate action if there are any errors. Don’t wait until your credit rating is ruined and you no longer have the ability to borrow.

5) I will start an emergency fund: I know that you’re going to say that you can’t afford to save; but telling you that you can’t afford not to save. Do you really need the expensive lattes and cappuccinos every day? Sell the stuff sitting in your garage or basement collecting dust. One man’s junk is another man’s treasure. See if you can negotiate a better deal on your cable TV package or cell phone plan. Can you cut out a few restaurant dinners and cook at home instead? All of these little things will help you establish your emergency fund while you reduce debt. And, remember, this money is for emergencies, not an all inclusive get away to Mexico.

If you’re experiencing serious debt issues, take control of your life and contact Ira Smith Trustee & Receiver Inc. today. Starting Over, Starting Now there is a way out of debt. Let us show you how. Let’s all make 2014 a great year and a year where you reduce debt!

Call a Trustee Now!