Cars can mean many things to us including freedom, status, power, sex appeal or basic transportation. It also seems to mean auto loan debt. Fueled by low-interest rates, 2016 saw Canadian passenger car sales hit a record high for the third straight year. It appears that 2017 is continuing the 2016 trend; not just for car sales, but also for Canadians’ willingness to take on auto loan debt.
But, can you afford that car you’re driving? Or will it put you into debt beyond your means to repay? And in the wonderful world of debt, car debt may be bad debt. So, if you have wanted to start taking on auto loan debt but were afraid to get started, this blog may help you decide what to do.
Auto loan debt: Why may car debt be bad debt?
According to DesRosier Automotive Consultants about 85% of car purchases are by Canadians are purchasing passenger cars with debt. “In Canada, automakers are selling about 41% of vehicles with loans of at least six years or leases of at least five years”, said Mark Buzzell, chief executive officer of Ford Canada.
A new car will lose 60% of its total value over the first five years of its life (CARFAX)
Longer-dated loans significantly increase the chance that an owner ends up owing more than their car is worth (Financial Consumer Agency of Canada)
The share of Canadians trading in vehicles with negative equity rose to 30% in 2015, and on average they were underwater by about $6,700 (J.D. Power)
Auto loan debt: What can be done to prevent Canadians from buying cars they can’t afford?
Ford Motor Co. is seeking to limit the growth in long-term auto loans and leases in Canada. Ford wishes to slow down consumers trying to stretch out payments for as long as eight years to afford a car. However, regardless of what Ford’s doing, low-interest rates and longer amortization makes buying cars we can’t really afford an attractive proposition. People are looking merely at the monthly payments to figure out how large and fancy a vehicle to buy. They are not considering their true needs and affordability.
As of February 2017, sales of luxury cars accounted for nearly 60% of Canadian vehicle sales. This is five times their normal share, according to a March 13 Scotiabank report. The reality is that we need to exercise common sense and financial restraint when purchasing any big-ticket item. And let’s not forget about using a budget to help live within our means.
Auto loan debt: What to do if you have too much debt
Are you now in debt because you purchased or leased a car you couldn’t afford? The Ira Smith Team is here to get you back on track to debt free living Starting Over, Starting Now. We can solve your problems with immediate action and the right plan for moving forward. All it takes is one phone call to book your free, no obligation consultation. Call us now.
Sales of brand-new cars and trucks in Canada struck an all-time high earlier this year. It’s been a constant wonderful market in the car business since interest rates have remained so low. With so many people buying new vehicles financed by debt, that is what has led to Moody’s downgrades Canadian banks.
Exactly what’s great for Canada’s auto dealerships isn’t so excellent for Canada’s most significant financial institutions. Fears stay and are growing about the overheated Canadian real estate market.
Moody’s downgrades Canadian banks: Moody`s concerned over Canadian consumer debt
Credit monitoring company Moody’s fears Canadians have as well too much automobile and credit card debt and home mortgage and home equity loans. Moody’s states those variables have the financial institutions prone to losses.
As you include more consumer debt in the Canadian economy, it ends up being riskier. Moody`s fears that the Canadian banks will be less able to soak up any more shocks to the economy. Simply put, there’s a high danger of funding defaults that would harm the Canadian financial institutions. That’s why the reduction in the debt ranking.
Moody’s downgrades Canadian banks: Don`t worry, they are still extremely highly ranked
The financial institutions affected are all the large ones: Toronto-Dominion, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank as well as the National Bank of Canada. Every one of those huge 6 had their standard credit score ranking devalued by one notch. Still excellent, yet lower to where they’ve been.
The large 6 financial institutions in Canada are still extremely highly ranked establishments. On an international basis, they would certainly stay in the leading 10 percent. This is not a dangerous situation yet; it is a warning for one sector of Canada’s population.
Moody’s downgrades Canadian banks: The Canadian government can`t do anything more
Moody`s states the federal government has done exactly what they could to cool the hot real estate markets. To reduced credit danger further there are only just 2 points that would help: (i) a more powerful Canadian economic climate; or (ii) much less loaning and borrowing.
Moody’s downgrades Canadian banks: What to do if you have too much debt
Packing up on too much financial debt is never ever a great suggestion. Are you bewildered by financial debt? CallIra Smith Trustee & Receiver Inc. today so we can give you a clear road map on how you can navigate through your financial debt. Our licensed professionals will help you reduce your debt and allow you to reduce stress and regain control and peace of mind. Starting Over, Starting Now you could be on your way to debt free living.
Statistics Canada in March reported that the country’s average household debt-to-income ratio hit a record-high 167.3%. Economic indicators like this drive the Canadian news cycle. It puts fear into the public but doesn’t seem to concern esteemed economists. Are these economic indicators painting an exact picture of the financial state of Canadians or creating unnecessary fear?
Economic indicators: What is the debt-to-income ratio?
Debt-to-income ratio provides a snapshot of what the average Canadian family owes, versus household income. Statistics Canada determines the total value of Canadian household debt and then divides this number by the total amount of disposable income. A debt-to-income ratio of 167.3% means that households owe $167 for each dollar they generate in disposable income. If you look at this economic indicator alone you can’t help but believe that Canadians are living way beyond their means. The conclusion reached is that Canadians are walking a financial tightrope.
Economic indicators: Does the debt-to-income ratio have any value as an economic indicator?
This is true for many Canadians. However, the reality is that debt-to-income ratio doesn’t paint an exact picture of the financial state of Canadians. Although it compares debt with disposable income, not all debt creation is equal. Debt can be long-term debt like a mortgage while other debt can be for a short-term. Therefore comparing disposable income with debt can’t be exact. Debt-to-income ratio doesn’t tell the story. It is only one small piece of detailed financial situations.
The debt-to-income ratio in Canada is definitely a concern. It is also increasing, confirms Carl Lamoureux, Senior Manager, Credit Risk at National Bank of Canada. “But sometimes the media focuses on controversial measurements, without looking at the asset side of the equation for a wider view of what is going on.”
From an individual consumer perspective, calculations such as your Total Debt Servicing (TDS) ratio may be more beneficial. “When you are looking for a new loan, credit bureau information comes first and your debt-to-income ratio is only one of the things they look at,” explains Lamoureux. “Each part of a credit score provides insight into a predictability of something happening in the future, and your TDS is a solid indicator of your borrowing capacity.”
Benjamin Tal, deputy chief economist at CIBC World Markets Inc. has an even stronger opinion about debt-to-income ratio. “It’s probably the most useless economic indicator out there. You’re comparing two different things. That doesn’t make much sense. I’m not asking you to pay off your mortgage in one day or in one year.”
Are you concerned about the amount of debt that you’re carrying?
Although the debt-to-income ratio doesn’t tell the story, it is a stress indicator. What financial shape would you be in if:
you lost your job?
interest rates began to rise?
the hot housing market began to cool?
If any of these scenarios would spell financial disaster for you, now is the time to seek out the advice of a professional trustee. ContactIra Smith Trustee & Receiver Inc. Our commitment to you is to bring value added solutions that fit your unique issues and circumstances. Clients appreciate our knowledge and our ingenuity, the value we deliver, and our speed in responding and taking action.
Make an appointment for a free, no obligation consultation today. You’ll be on your way to conquering debt Starting Over, Starting Now.
Difference between debt settlement and consumer proposal: Forced to pay money they can least afford
Cases handled by a Licensed Insolvency Trustee (LIT) that were referred by these types of settlement companies generally wound up paying much more for their insolvency case.
The debt consolidation companies called for a debtor to authorize a costly contract for speaking with the debt management company before being presented to a “picked LIT”. The people normally comprehended that the only function of the LIT as being restricted to the filing of the consumer proposal created by the settlement company!
In cases evaluated by the OSB, the consulting charge section of the contract contained a large amount for the debt consolidation company’s “help”. It was in the range of $2,400 to $4,200. For smaller consumer proposals, the OSB found that the consulting charge typically varied from 20% to 40% of the amount of the proposal.
Therefore, my read of this leads me to believe that certain LITs cooperated with such settlement companies to force insolvent debtors to pay thousands of dollars more than they otherwise needed to. These people could not afford this and did not deserve to be treated this way.
Debt specialist charges were purported to cover the expense of advising, conferences, recommendations as well as prep work of the consumer proposal. In all situations, the costs paid to the debt management company were IN ADDITION to the fees established under the Bankruptcy and Insolvency Act (Canada) charged by those LITs.
Difference between debt settlement and consumer proposal: If that isn’t horrendous enough, the debt management company sold them a larger bill of goods!
OSB’s study discovered that debtors were often marketed more products by the debt settlement companies. As a result, there were billings for extra recurring costs throughout the life of their consumer proposal!
The products the debt management companies pushed on these vulnerable people included:
loans charging a high rate of interest;
brand-new credit score tools;
a proposal insurance policy; and
“credit score restoring” loans.
All products carried either high-interest rates or high price tags.
Difference between debt settlement and consumer proposal: Forced to pay more than they should have
A technique identified throughout the OSB’s review entailed advertising and marketing “proposal insurance coverage”. This was normally billed as a month-to-month expenditure at a price of around 10% of the worth of the consumer proposal. This financing had recurring repayments supposedly for “credit rating fixing”.
In one instance, a debtor with a $31,900 consumer proposal signed up for proposal insurance coverage, structured as a loan. That base cost was about $6,300. Various extra fees, the month-to-month management cost as well as a 15% interest rate, the insurance coverage priced out at $9,150.
So, with the debt management company’s management fee of $2,300, the consumer proposal that the creditors voted to accept in the amount of $31,900 cost the insolvent individual $43,350!!! In my view, being merely associated with this type of behaviour is against the BIA, OSB Directives and the Canadian Association of Insolvency and Restructuring Professionals code of conduct for its members. As a LIT, I would never be associated with such disgraceful behaviour.
Difference between debt settlement and consumer proposal: Consumer proposals are like a 5-year interest-free loan, so why would you borrow to pay it off early?
An additional pattern observed in consumer proposals submitted by LITs dealing with debt management companies was the intro of “price cut terms”. This arrangement is for enticing the debtors to borrow money under arrangements made by the debt settlement company.
Incorporation of a discount rate provision provokes a debtor to become part of a brand-new as well as expensive loan scheme. To capitalize on a 25% discount rate condition in a $10,000 proposal, a debtor would finance $7,500. With paying $1,400 in compulsory charges, this brought the lending overall to $8,900. At a promoted rate of interest of 22.99 %, with a payment timetable of $214 over 84 months, the borrower would certainly pay $10,475 in charges as well as a rate of interest, for an overall of $17,975.
A consumer proposal is like an interest-free loan. The same debtor with the same beginning consumer proposal of $10,000, would only pay that amount if they went directly to the LIT first. The debtor would have had a maximum of 60 months to complete making the payments with no interest charges at all. A savings of $7,975 and lower monthly payments.
As you can see, involving the debt settlement company increased the cost for an insolvent person dramatically for no value.
Difference between debt settlement and consumer proposal: Other findings
Other findings by the OSB include:
the LIT files did not contain any obvious evidence of debt settlement company certification or experience in credit counselling or the counselling of insolvent debtors;
consumers who filed with a LIT through the debt settlement company did not have a good understanding of the insolvency process, the options that were available to them or the other charges they were paying to the debt settlement company
the consumers were not aware that they could have avoided charges such as paying a debt consultant to prepare the consumer proposal
that the documentation made ready for the consumer proposal filing by the debt settlement company and used by the LITs contained many errors
Statements of Affairs, as well as Income and Expense Forms submitted, were incorrect in different ways
Debt settlement company fees were not disclosed
Real estate was always undervalued compared to LIT files where there was no involvement of a debt settlement company
Difference between debt settlement and consumer proposal: What you can do
The OSB is considering its next steps. The OSB is requesting comments. We have already provided ours. Our recommendation was that all LITs who cooperated with debt settlement companies as we have described here should be brought up on disciplinary charges by the OSB. If you agree that this way of doing business on vulnerable and unsuspecting consumers who are truly looking for professional help must stop, please click here to offer your own comments to the OSB.
In the meantime, if you have too much debt, please DO NOT be fooled by the debt settlement companies. Stay far away from them. Instead, contact a LIT directly.
We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. We will do so in a free consultation. A consumer proposal is one option; there are others as well.
Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. There is no need for you to pay fees to a debt settlement company when you can get the same information from us for free.
You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.
In these challenging times it’s even more important to stay on top of things financially. Sticking to your budget, saving money and getting organized should be top of everyone’s mind. I know it’s difficult but there are some free personal finance apps that can help. Everyone is looking for the best personal finance app and the ones I noted below are good.
Our favourite 3 free personal finance apps to help you save money
Flipp: Flipp combines all the flyers in your area (when you register you input your postal code) and allows you to search by item, showing you the best deals. For added convenience, shop at a store that allows price matching (Superstore, Wal-Mart, No Frills and others). Use Flipp at the cash (instead of paper flyers) to get the lowest prices. Flipp is not just for groceries; it’s good for just about everything including electronics, home and garden and pet needs.
GasBuddy: GasBuddy lets you comparison shop for the best gas prices in your area. When you register you input your postal code. With the prices at the pumps, who doesn’t want to save a few bucks painlessly?
Canada Post’s epost: Did you know that Canadians are paying between $495 million and $734 million a year to receive paper bills or statements from communications and banking companies? This is according to a report by the Public Interest Advocacy Centre.
It makes good sense to get all of your bills online. You can contact each of the companies that you do business with individually or get all of your bills online and in one place with Canada Post’s epost. It will also store your statements for up to seven years. So, if you ever get audited by the CRA, you’ll have proof of your expenses.
Of all the free personal finance apps, Wally is our favourite to help you get organized, budget and Control your money seamlessly
Wally: Wally allows you to enter your expenses and organizes them into categories. It has a handy feature called InstaScan that captures relevant details from a photo of your receipt. It then populates your budget with the information. If you want to see where you’re spending money, Wally can show that to you using GPS. Another plus for Wally is that you’re not sharing your financial information with a third-party.
I think Wally is one of the best, if not the best personal finance app for 2017. It is a great best budget app for iPhone or android.
Free personal finance apps: What to do if you have too much debt and can’t get on a budget
If you’re experiencing serious financial issues, I’m afraid that there isn’t an app to magically save you. There is help available in the form of a professional trustee. Ira Smith Trustee & Receiver Inc. is an insolvency and financial restructuring practice for people and companies in the Greater Toronto Area (GTA) facing financial crisis. Our specialty is serving people and the private company entrepreneurial market, regardless of size. We offer a high quality and cost-effective service. The fact remains that if you do not earn enough it will be difficult to save enough, try this site out for size, modernize your income sources with what is available on the internet. Give us a call today and Starting Over, Starting Now you can put your financial problems behind you.
Debt settlement or consumer proposal Canada: Introduction
In this Brandon’s Blog on debt settlement or consumer proposal Canada, I want to tell you about a recent Government of Canada study. On April 28, 2017, the Office of the Superintendent of Bankruptcy (OSB), released its report of its investigation. The investigation began in May 2016, of Licensed Insolvency Trustee (LIT) business practices in administering consumer insolvencies. The report is titled: “Review of Licensed Insolvency Trustee business practices in relation to administration of consumer insolvencies”. The OSB was becoming increasingly concerned about debt settlement vs consumer proposal Canada and the influence debt settlement companies may have had over certain LITs. I must say that after reviewing the report, I found it shocking.
The purpose of the investigation arose out of concerns over the relationship between debt settlement companies and certain LITs. The OSB wished to decide if LITs were practising per the Bankruptcy and Insolvency Act (BIA), associated policies and OSB Directives. In 2016 they made up over half of all consumer insolvency cases filed.
The aim of the OSB’s evaluation was to recognize as well as analyze possible threats related to the honesty of some elements of the consumer bankruptcy procedure. Specifically in situations where LITs have become part of companies’ connections (or, other inappropriate business relationships) with fee-charging debt management companies.
Prior blogs
We have warned you for years about the dangers of using these types of companies, including:
We, however, had no idea the harm caused to those most vulnerable consumers by a debt management company.
What relationships did the OSB investigation find?
The OSB report indicates that in 2016:
17 % (9,660) of all consumer proposal filings, the borrower reported having spent first for liability counselling advice from a debt settlement company before being guided to a LIT.
57 % (5,500 of 9,660) of the consumer proposal filings for which earlier settlement advice was obtained from LITs that had connections with 2 large-volume debt management companies. These 2 companies represented 64 % of the overall LIT fees reported in 2016 consumer insolvencies filings for debt settlement advice before filing an insolvency proceeding with a LIT.
Thirteen LIT companies, which included one national-level company, were discovered to have several LITs running in a constant and continual partnership with large-volume liability management companies.
For roughly 50 individual LITs within these 13 companies, greater than 40% of their consumer proposal filings were sourced from these settlement companies. For roughly 20 of those LITs, greater than 90% of their consumer proposal work comes from with these 2 companies.
Insolvent debtors sourced through these third parties
Insolvent debtors sourced via these settlement companies had the tendency to go after consumer proposals instead of bankruptcy. On the surface, this is a good thing. As you will read further and in next week’s vlog, you will see the reason was so that these companies could charge in many ways the unwary consumers more money than they should be paying.
The OSB’s investigation showed that the debt settlement companies wrote up the necessary documents. The LITs never met the debtors beforehand.
The OSB investigation determined that:
Before the LIT meeting, consumer borrowers connected and had 2 to 4 conferences with the management companies.
The LIT relied upon the settlement companies’ staff to do all the work relative to the gathering, evaluating as well as confirming the borrower’s information and reviewing and recommending on the bankruptcy alternatives.
In situations where the LIT had a regular relationship with the settlement companies, all facets of the procedure before declaring were normally executed at the offices of the management companies.
Information needed for the filing was typically sent straight from the settlement companies’ management team to the LIT’s management team, usually soon before the meeting at which the consumer proposal filing was to occur.
Debtor conferences with the LIT (a variety of which included the settlement company) varied in the period from 5 to 30 minutes. In some circumstances, the meeting took place just after submitting the proposal with the OSB.
LITs normally met the borrower to file at the settlement companies’ premises.
Sometimes, the authorizing of legal papers likewise happened in many casual areas as well as cities where the LIT did not have an authorized workplace.
Interaction with borrowers on legal obligations, creditor meetings, evaluations by an Official Receiver, proposal changes and voting by creditors, was practically solely performed by the settlement companies’ management staff, that communicate with the debtor.
The debtors reported that succeeding interaction throughout the management of their consumer proposal was additionally with the debt settlement company as opposed to with the LIT.
It appears that these LITs who had these close relationships with the debt settlement companies may have shirked some of their responsibilities under the BIA. These LITs had to sign off confirming to the OSB that they had done the necessary work. By relying upon the work done by unlicensed debt settlement companies, did the LIT really do the work that they are signing off for?
Debt settlement or consumer proposal Canada: So what does this mean?
In next week’s vlog, we will go into detail about what the effect was of all this. For now, you should know that a summary of the results for the consumer included:
Consumers paid thousands of dollars more than they needed to.
Unscrupulous debt management companies (and their cooperating LIT firms) talked consumers into high rate loans under the guise of shortening the time they were under an insolvency administration and improving their credit score.
The debt settlement companies had no certification or experience to give the type of insolvency guidance they were providing.
Legal documents contained countless errors and false attestations.
Creditors received less than they were otherwise entitled to.
Debtors had no idea of either their responsibilities under the process they were undertaking. They were not given the opportunity to experience one of the most important aspects of the Canadian insolvency system, financial rehabilitation.
Debt settlement or consumer proposal Canada: What should you do if you have too much debt?
Consult a LIT first and don’t go to one of the debt settlement companies. There is no federal government approved debt settlement companies. The only government approved debt settlement program is a consumer proposal.
We are debt professionals who will evaluate your situation and recommend which debt relief options are right for you. A consumer proposal is one option; there are others as well.
Contact Ira Smith Trustee & Receiver Inc. today for a free consultation. There is no need for you to pay fees to a debt settlement company when you can get the same information from us for free.
You’ll be in good hands and Starting Over, Starting Now you can be well on your way to living a debt free life.
Like it or not, our lives are ruled by our ability to get credit (and hopefully use credit wisely). We need credit to buy a house or lease a property, buy or lease a car, have a credit card, get a line of credit and in many cases, get a job. Yes, ladies and gentlemen, many companies check your credit score before offering you a job. There are even online dating sites who match you according to your credit score. And, as we move towards becoming a cashless society, our ability to get access to credit will become even more important. So, having no credit history can hurt you in many ways.
No credit history: Unless you use credit you may not get credit
It’s a Catch 22, isn’t it? In order to set up even a limited credit history and get a credit score you have to use credit. Your credit worthiness is established by your ability to repay. If you pay for most things with cash or by cheque, you aren’t demonstrating your ability to repay. Therefore, if you apply for any type of loan and a credit check is done to decide credit worthiness, you won’t score well if you haven’t been using and repaying credit. Believe it or not, this may put you in the same boat as someone with a poor credit history or even a delinquent credit history.
No credit history: What is your credit score used for?
Your credit score is used to figure many things including:
Whether to extend credit
How much credit to approve
Whether to increase or decrease a customer’s credit limit
Determine the interest rate charged on a loan
There are now two ways you can get your credit score online free. One site is Credit Karma Canada and the other Borrowell.
No credit history: The moral of the story is the best time to use credit is when you don’t need it
Many retirees think they don’t need credit anymore so they tend to pay by cash and cheque instead of credit. Then a situation arises where they need credit and they don’t have a credit history to show their credit worthiness. It’s never too late to set up a credit history. The easiest way is to have a credit card and use it (wisely). Even a secured credit card will work.
No credit history: Use credit wisely!
Using a credit card and paying off the monthly balance in full is not the same as accumulating credit card debt that you can’t afford. Using credit cards wisely can be convenient and beneficial. Credit card debt can ruin you financially.
If you’re dealing with credit card debt, or any debt that you can’t afford, you can count on The Ira Smith Team to set you on a path to a healthy financial future Starting Over, Starting Now. With our cumulative 50+ years of experience dealing with diverse issues and complex files, we deliver the highest quality of professional service. Contact us today.
One of our current insolvency assignments teaches creditors a valuable lesson if they wish to take part in a debtor’s restructuring proposal. Every licensed insolvency trustee maintains a website listing their current insolvency assignments that are noteworthy or of public interest. Today I want to tell you about a recent case of ours. It is not of public interest, but it is noteworthy, especially for trustees and lawyers practicing in the insolvency area. Notwithstanding the large volume of receivership and bankruptcy case-law, the issue we came across was novel and never decided in Court before.
Mr. R was the sole shareholder of a company that serviced the construction industry. Both Mr. and Mrs. R were both Officers and Directors of the company. The company became insolvent, could not continue and ceased operating. Mr. and Mrs. R., in addition to their personal debts, which were significant, were now also faced with extensive claims against them in their capacity as Directors.
Mr. and Mrs. R’s litigation lawyer referred them to us. We advised them that they should not declare bankruptcy, but rather attempt to avoid bankruptcy and restructure by filing a joint proposal under Part III Division I of the Bankruptcy and Insolvency Act (Canada) (BIA). Their had a complicated situation and they required an immediate stay of proceedings to deal with all the lawsuits against them.
Therefore, we first filed a joint Notice of Intention to Make a Proposal (NOI) on June 8, 2016. This first step provided Mr. and Mrs. R with a first 30-day grace period, where no creditor could begin or continue legal proceedings or enforcement against them while we were working with them to finish developing their restructuring proposal.
As Trustee, we served the NOI on all known creditors by ordinary mail, as we are required to under the BIA. We served one creditor, Royal Bank of Canada (RBC) at two addresses: i) legal counsel for RBC; and ii) BH, an agent for RBC that we regularly deal with. At the time of mailing out the NOI, we did not know if this agent would be on the file, but we provided them with notice out of to be extra cautious. We mailed the NOI on June 9, 2016.
The NOI sent to the creditors, including RBC, did not contain any proposal whatsoever, because it had not been written yet! This is standard for the filing of an NOI before the proposal.
In response to the NOI, by letter dated June 20, 2016, we received, from another agent for RBC that we had never dealt with before and who was not on our original mailing list, two proofs of claim, each in the amount of $438,434.31; one proof for each of Mr. and Mrs. R, individually.
This agent also sent a voting letter. It asked the Trustee to count RBC’s vote “with respect to the proposal” of Mr. and Mrs. R “against acceptance of the proposal made as of the 08th day of June, 2016.”
On June 22, we wrote to the agent advising that the Trustee’s position was that because no proposal was yet in existence, the RBC “vote” was invalid and that RBC would have to offer a proper voting letter once it received the proposal. This was also sent to RBC’s counsel. The Trustee received no response to this communication.
The debtors, Mr. and Mrs. R, filed a proposal July 7. We served the proposal on all creditors. The Trustee served RBC three ways to: i) RBC’s counsel; ii) RBC’s agent BH; and iii) the agent who wrote us the June 22 letter with enclosures. Our package included not only the proposal but notice of the first meeting of creditors and forms for proof of claim and a voting letter.
We received nothing further from RBC. The meeting proceeded on July 27. RBC did not attend. One creditor, with a claim of $278,561.29, attended and voted for the joint proposal. The joint proposal was deemed to have been accepted. Consistent with our position, as Trustee, we did not count the RBC June 22 “vote”.
After the acceptance of a proposal by the requisite majority of the creditors, a licensed insolvency trustee must make application to Court, for approval of the proposal. The proposal is not binding until there is a valid and subsisting approval order of the Court.
Our motion for approval of the joint restructuring proposal of the debtors, Mr. and Mrs. R, was heard on August 9, 2016. RBC opposed. RBC opposed on the basis that its vote against the joint proposal was not counted. RBC’s vote, if counted, would have defeated the proposal and Mr. and Mrs. R would be bankrupt.
Our lawyer made various submissions, including, that the “vote” of RBC:
was not valid;
that RBC was advised of this and did nothing to file a valid vote; and
RBC failed to attend the meeting of creditors.
As indicated above, only one creditor voted; it voted in favour of the joint proposal.
RBC claimed its vote was valid and ought to have been counted. The Court did not go so far as to say a creditor could never lodge a valid vote against a proposal before receiving it. In this case, the Court agreed with us and found the vote was not valid. The Court went on to say that the Trustee was correct in not counting it.
The threshold question was whether the Trustee was right to reject RBC’s purported “vote.” Section 53 of the BIA permits a creditor to assent or dissent “from a proposal” before a meeting. Section 54 says the creditors may accept or refuse “the proposal” at the meeting. However, the statutory scheme for creditor voting assumes there is a proposal.
The Court found that:
the agent’s purported “vote” was on its face defective;
there was no proposal of June 8;
RBC or its agent had never seen the joint proposal when it voted;
the Trustee was right to reject an obviously defective “vote”;
the Trustee made its position abundantly clear to RBC’s agents; and
RBC had every opportunity to cure the defect and it failed to do so.
What this means is very simple. Make sure that in anything you do, you understand what the rules are, don’t take your eye off the ball and never fall asleep at the switch. If this creditor’s agent and legal counsel had merely reacted to the mailing of the joint proposal and cast a proper vote, we never would have ended up in this situation.
There was nothing wrong with the proof of claim (although it was filed unnecessarily in duplicate). All RBC’s agent or lawyer had to do when it received the joint proposal mailing, was take 2 minutes to complete a new voting letter and send it in to the Trustee. If they had done this simple step, assuming they voted against the joint proposal, Mr. and Mrs. R would now be bankrupts. Instead, they are making their proposal payments to the Trustee to restructure themselves and avoided bankruptcy.
Mr. and Mrs. R have each secured full-time employment, and are making more money than in the last few years of running their company.
Being a Director of a corporation can be risky business. If the corporation is insolvent and continues to carry on business, and you continue to act as a Director, it can land you in a personal financial mess.
Are you experiencing financial distress because of acting as a Director or otherwise? Is your business struggling and you can’t seem to find a way out?
Co-signing on a credit card for a family member or a friend may seem like the right thing to do. However, do you really understand what you’re getting into? Too many people do not fully understand the co-sign credit card meaning. This is risky business that can cost you a lot more than you bargained for.
Co-sign credit card meaning: What does co-signing on a credit card involve?
The co-sign credit card meaning is that when you co-sign on a credit card it’s the same as getting a credit card yourself. You are 100% responsible for the debt. It doesn’t matter that none of the charges are yours and that you are not the primary card holder. The minute you co-signed on the credit card, you guaranteed repayment. If the person you co-signed for doesn’t make a payment for any reason, you’re on the hook for the money – all of it.
Co-sign credit card meaning: Why are you being asked to co-sign?
If you’re being asked to co-sign on a credit card it’s typically for one of three reasons:
The person asking you to co-sign has a poor credit history and is deemed too great a risk by the credit card company. This should give you cause to pause.
The person is very young and has no credit history (and not earning enough money to be considered a good credit risk). This should also give you cause to pause.
You are co signing for your child for a credit card with a very low limit as part teaching your child to use credit wisely and to help them get a good credit score. This includes the parent willing to cosign for a credit card for a child under the age of 18.
The only one of these three possibilities that we actually think is good is number 3; a parent willing to co sign a credit card with a very limited credit limit while monitoring their child’s use as part of giving a financial education.
Rather than co-signing, you may wish to consider helping your friend or relative get a secured credit card. Put up a modest deposit for them. At least this way you limit your potential exposure.
Co-sign credit card meaning: How can co-signing on a credit card negatively impact you?
As we’ve already mentioned, you will be on the hook for the money if the primary card holder doesn’t pay. However, there are several other ways in which you can be negatively affected.
If there are any late payments on the account for which you co-signed, that can also negatively impact your credit score.
The credit card company can increase the amount of available credit on the card without with the co-signer’s permission (if the borrower is over the age of 21). You could be on the hook for a lot more money that you anticipated.
Co-signed debt Is part of the calculations that decide whether you’ll get approved for any kind of borrowing, including a mortgage.
Co-sign credit card meaning: What to do if you have debt problems
Co-signing on a credit card can be risky business and land you in financial hot water. Are you experiencing financial distress as a result of co-signing on a credit card or otherwise?
How to improve credit score: The Financial Consumer Agency of Canada alert
The Financial Consumer Agency of Canada (FCAC) is alerting people who could no longer stay current with their debt payments to be mindful when looking how to improve credit score.
Some businesses are misleading consumers by guaranteeing quick and easy solutions to help settle their financial debt or improve credit score. In many cases, consumers could wind up in a worse economic scenario compared to before they got aid.
How to improve credit score: Beware of credit repair firms
It’s crucial to understand that these firms:
cannot make sure they will solve your debt problems
could not swiftly and quickly repair your credit rating
need to not motivate you to get a high-interest loan as a service until other loan alternatives are available
How to improve credit score: What you should do before starting to repair your credit
Before registering for help to repay debt or repair or improve credit score, customers need to:
get suggestions from various reputable sources such as an accredited financial consultant, an approved credit counsellor or a licensed insolvency trustee
do inquiries and compare options
never be pressured to register right away
check out the small print and recognize the conditions before authorizing a contract or an arrangement
How to improve credit score: What the FCAC financial literacy leader warns
Jane Rooney, Financial Literacy Leader, FCAC warns:
“It’s important for consumers to understand what companies can and can’t do when offering services to help with debt repayment or credit repair. The Financial Consumer Agency of Canada has information to help consumers better understand the types of services available to them and where to get help. Having the necessary information is the first step to empowering consumers to make informed decisions and meet their financial challenges head on.”
How to improve credit score: Beware of credit repair firm tricks of the trade
Some firms or agencies declare that they can swiftly fix your credit report. It’s difficult to change or erase info that’s part of your credit rating, unless a detail is incorrect. Improving your credit history will take some time. You need to prove that your credit practices have enhanced by repaying your financial obligations on time.
Some firms could likewise offer you a loan suggesting it will certainly aid in fixing your credit history. The firm could assert that making timely payments on this loan will repair your credit report. When you sign up for this type of loan, you never in fact receive any cash because the company will tell you the financing will cover its services or programs. Rather, you make normal payments to the company to pay off the loan.
Be aware; this type of loan generally has a high rate of interest. This solution does not help cut any of your other financial obligations. You are required to keep making your payments on any other financial debts you owe. You could only be left with even more debt and no change to your credit rating.
How to improve credit score: What the Canadian government advises you to do
The Canadian government recommends that you speak to a licensed insolvency trustee. Although the challenges are enormous, they are not insurmountable. If you and your spouse have too much debt because of financial infidelity or for any other reason, you need to contact a licensed insolvency trustee (LIT) now. Through financial counselling, a LIT can aid in getting the resources you need to fix the root causes of the financial infidelity and to deal with the debt that you and your spouse cannot repay.
You need the Ira Smith Team. We’re experts in dealing with debt. No matter how you got into difficulty we can help return you to financial well-being. Contact us today and free yourself of debt Starting Over, Starting Now
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Co-sign credit card meaning: Introduction