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Category: Bankruptcy

  • Facing Bankruptcy During COVID-19? There are Other Options too.

    If you are faced with tough financial decisions, bankruptcy can seem like the option that will reduce the burden of debt.

    As Bankruptcy Canada puts it, in simplest terms, in personal bankruptcy, you assign everything you own to a Licensed Insolvency Trustee in exchange for the elimination of your debts.

    While many individuals and companies file for bankruptcies, particularly during financial crises, bankruptcies come with their own challenges.

    To begin with, bankruptcy is expensive and can have personal implications if the debt carries director’s liability – such as unpaid source deductions and GST/HST liabilities.

    Also, when you file for bankruptcy, the trustee involved does not represent you. The trustee is an impartial court appointed officer, who has to look out for both your and your creditors’ interests. So, it is always recommended to work with a debt consultant, who can support you through the process.

    Lastly, bankruptcies are likely to cause your credit score to drop to the lowest possible rating at most Canadian credit bureaus.

    This is why it is important to evaluate other options available to you as well.

    Some of these options can not only help you retain your assets but also save your credit rating.

    Mortgage refinancing, for instance, is a popular way to get out of debt.

    When you’re looking to reduce your debt load, having equity can be incredibly beneficial. If you own a home, you can use available equity to consolidate your debts into one payment. This is an effective way to quickly deal with high-interest debt while managing your budget and minimizing the negative impact on your credit score.

    When you have to make one fixed payment on a fixed schedule, it is easier to keep track of what you owe.

    Additionally, given the all-time low interest rates, you could save money on your monthly mortgage payments if you bought your home at a time when interest rates were higher.

    If you do not have home equity, consumer proposals can be a viable option especially when you are facing collection action and have unsecured, non-mortgage debts between $8,000 to $250,000.

    It is a proposal made to your creditors, where your creditors agree to accept a single payment representing a percentage of your overall debt, that you repay monthly, normally over a term of 5 years.

    This helps in consolidating your debt, preventing collection action, and protecting your assets.

    While your credit score does take a hit after you file for a consumer proposal, this is usually temporary. Two years after your proposal is paid in full, your credit score can bounce back.

    Deciding what works for you depends on the level of debt you need to pay off, the worth of your assets, and your current financial standing.

    At DebtCare, we review all these aspects and propose a plan of action that helps you eliminate your debt on terms that are favourable for you. So, if you’re facing insolvency, contact us today for a free consultation on 1-888-890-0888 or visit www.debtcare.ca.

  • Bankruptcy and Consumer Proposal Filings Decreased in March 2020… Or Did They?

    Canadian insolvency statistics — the number of people who file for bankruptcy or for consumer proposal in a month or year — give us a good insight into the state of consumer and business debt in our country.

    The March 2020 insolvency numbers are particularly interesting as this was the first month that our national economy was significantly affected by the novel coronavirus (COVID-19) pandemic.

    In March, public health measures shut many businesses, schools, and public gatherings down. The Canadian Centre for Policy Alternatives reported on March 25 that two million Canadian workers had been laid off or were at “immediate risk” of lay off as a result of the public health measures. The Globe and Mail reported that between March 15 and March 20, Employment and Social Development Canada received about 500,000 applications for employment insurance (EI).

    But what was the impact on insolvencies?

    The Office of the Superintendent of Bankruptcy Canada released the March 2020 statistics this week. At first glance, it actually looks like Canadian insolvencies decreased from February 2020 to March 2020 — and from March 2019 to March 2020.

    • The total insolvencies filed went from 11,575 in February 2020 to 11,198 in March 2020 — a decrease of 3.3%.
    • They went from 12,325 in March 2019 to 11,198 in March 2020 — a decrease of 9.1%.

    However, as we dig into the numbers further, we can see that this decrease isn’t quite what it appears…

    A Closer Look at March 2020 Insolvencies in Canada

    When we break down the March 2020 numbers by province, things get much more interesting.

    Some provinces did see a big drop month-over-month and year-over-year. For instance, Newfoundland and Labrador went from 289 insolvencies filed in March 2019 to 228 filed in March 2020 — a decrease of 21.1%.

    But other provinces actually saw increases — some of them quite significant.

    Alberta, for instance, had 1,402 insolvencies filed in February 2020 and 1,491 filed in March 2020 — an increase of 6.3%.

    And when we look at consumer proposals year-over-year, we see another rising trend. Albertans filed 964 consumer proposals in March 2019, but 1,081 in March 2020 — an increase of 12.1%.

    We can see some similar trends happening in other provinces, such as Ontario, Manitoba, and New Brunswick:

    • In Ontario, the number of bankruptcies filed increased from February 2020 (1,066) to March 2020 (1,105) — a rise of 3.7%.
    • In Manitoba, the number of bankruptcies filed went from 69 in February 2020 to 79 in March 2020 — an increase of 14.5%.
    • In New Brunswick, bankruptcies filed went from 137 in February 2020 to 173 in March 2020 — an increase of 26.3%.
    • Not only that, but New Brunswick also saw a rise in consumer proposals filed. In February 2020 there were 2019 proposals filed and in March 2020 there were 236 — a rise of 7.8%. This also increased year-over-year, going from 193 in March 2019 to 236 in March 2020 — a rise of 22.3%.

    What Does This Mean for Debt?

    While it appears positive that insolvency filing numbers did not skyrocket during March 2020, this could be a false positive.

    The decreases in filings could also be related to several alternate factors, including:

    • Insolvency filings increased in February by 2.1% month-over-month, which could indicate that people who were already close to the brink filed earlier and did not need to in March.
    • In March, as the COVID-19 pandemic came on, we saw many economic measures come into place, such as deferring bills or payments, which could lessen the debt burden — or at least buy some time. (Find out the truth about debt deferrals or suspensions.)
    • It may also have just been too early for the true economic impacts to be known. Some of the public health measures that affected income and jobs did not come into place until the second half of March, or even closer to April.
    • People struggling may also have turned to other debt management solutions first, such as using home equity or consolidating payments.

    The increases that we did see show that there are still people struggling — and March may only be beginning. It will be interesting to see what the April 2020 statistics bring.

    What to Do If You are Struggling Financially

    If you are dealing with a high debt load, or worried about making ends meet due to COVID-19 impacts, you might be thinking about filing for bankruptcy or a consumer proposal.

    If you do, you need an advocate on your side. A debt counsellor, like the ones at DebtCare Canada, will help evaluate all of your financial options. If you decide to file, we will make sure that you are protected, and your best interests are kept in mind throughout the process. (See how a trustee in bankruptcy is different from a debt counsellor.)

    Learn more about our services and solutions today. DebtCare Canada is open 100% remotely during the COVID-19 pandemic. Reach out to us by phone or text at 1-888-890-0888 or visit www.debtcare.ca.

  • Consumer Proposal vs. Bankruptcy – We Break It Down

    Consumer proposal vs. bankruptcy – what is the difference, and which one is the best choice for you? If you want to find out the answer, read on!

    For Canadians struggling with debt, both filing for a consumer proposal and filing for bankruptcy can be a way out. But how can you tell which one is right for your situation? We’re breaking it down.

    We’ll look at:

    • What is a consumer proposal?
    • What is bankruptcy?
    • Consumer proposal vs. bankruptcy – main differences
    • Bankruptcy or consumer proposal – which one is best for you?

    Consumer Proposal

    A consumer proposal is a form of insolvency filing where you make a settlement offer to your creditors. That’s where the name comes from — it is a proposal to creditors from you, the consumer.

    In your proposal, you offer to settle your debts for less than you owe, but more than your creditors would receive if you filed for bankruptcy, instead.

    The majority of your creditors must accept your proposal for it to be approved.

    Generally in a consumer proposal, your assets are not sold off to pay your debts. A consumer proposal is only available for unsecured, non-mortgage debts between $8,000 to $250,000. If you are carrying more debt than that, you might consider another type of proposal, or filing for bankruptcy. You also must be able to demonstrate your ability to repay a portion of your debt.

    Bankruptcy

    In personal bankruptcy, you assign your assets in exchange for the elimination of your debts. Every province has certain exceptions for what you can keep but, depending on the amount of debt you owe, some assets may be sold.

    You can file for bankruptcy if you owe at least $1,000 and are not able to pay your debts. Bankruptcy only deals with secured debts, such as personal loans, credit cards, and tax debt. It doesn’t erase most secured loans, such as a car loan or mortgage, although those assets may be repossessed if you cannot meet those payments.

    To be discharged from a bankruptcy, you must meet a schedule of payments, set out by a Licensed Insolvency Trustee.

    Consumer Proposal vs. Bankruptcy – Main Differences

    Filing for a consumer proposal and for bankruptcy are two different things. The main differences are:

    • In a consumer proposal, you can only file if you owe less than $250,000 in non-mortgage debt. In a personal bankruptcy, there is no limit.
    • A consumer proposal must be accepted by the majority of your creditors. A bankruptcy does not need approval.
    • Filing for a consumer proposal leaves you with an R9 rating on your credit report while you are in the proposal; it is upgraded to an R7 once it is paid off. The R7 stays on your credit report for three years after completion.
    • Filing for bankruptcy leaves you with an R9 credit rating while in the bankruptcy and for seven years after it is discharged (it is never upgraded to a better rating throughout that time).
    • A consumer proposal generally does not affect your secured assets, like your mortgage or car – although this depends on your personal situation.
    • A consumer proposal allows you to rebuild credit faster, particularly if you pay it off quickly.

    Bankruptcy or Consumer Proposal – Which One is Best for You?

    Whether you choose to file for bankruptcy or for a consumer proposal can depend on your circumstances.

    Questions to consider include:

    • How much total debt are you carrying?
    • How much unsecured debt are you carrying?
    • How much are your secured assets worth?
    • Can you demonstrate the ability to repay a portion of your debt?

    It can difficult to answer these questions on your own. The best way to go about deciding which insolvency option is for you – or if there is an alternative debt consolidation method that may work – is by contacting a debt counsellor, such as DebtCare Canada, for a free consultation.

    Having an Advocate on Your Side

    Both a consumer proposal and bankruptcy must be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a Trustee in Bankruptcy). However, if you’re filing for insolvency, it’s also important that you have an advocate on your side.

    While Licensed Insolvency Trustees administer the consumer proposal or bankruptcy, they are not equipped to be this advocate for you. A) They represent both you and the creditor, so they are not entirely on your side. And B) they earn their money based on the size of your filing.

    It’s best to have a debt counsellor – like our experts at DebtCare Canada – on your side during an insolvency filing to ensure you are represented at the table during the filing process. We can make sure you are protected and getting the best deal possible.

    At DebtCare, we will help you decide whether filing for bankruptcy or for a consumer proposal is right for you and be your advocate throughout the entire process. We perform an independent review of your financial situation and make practical recommendations that will work for you.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • If I File for a Consumer Proposal Does It Mean I’m Bankrupt?

    If you file for a consumer proposal does it mean you’re bankrupt?

    It’s a common question we receive, but the short answer is NO.

    While both programs are administered under the Insolvency Act, filing for a consumer proposal and filing for bankruptcy are two different things. Filing for a consumer proposal doesn’t mean you’re bankrupt, just as filing for bankruptcy doesn’t mean you’re in a consumer proposal.

    And both have different implications for your credit score.

    When you file for a consumer proposal, you are given an R9 credit rating while in the proposal (this is the worst credit rating you can receive). However, once your proposal is paid off, you are upgraded to an R7.

    The R7 stays on your credit report for three years from completion. So, in three years, your credit will be clean. You can pay off your consumer proposal in anywhere from one month to five years. This could mean your credit score is clean as soon as three years and one month after filing!

    Bankruptcy is a little different. When you file for bankruptcy, you are given an R9 rating that stays on your credit report for seven years after completion. First time bankruptcies can be paid off in nine-to-21 months, so the R9 rating would stay for seven years after that.

    A consumer proposal allows you to rebuild credit faster, particularly if you can pay it off quickly.

    That’s where working with financial counsellors, like DebtCare Canada, comes in. We can help you decide which is best for you — filing for a consumer proposal or filing for bankruptcy — and make sure you are protected along the way.

    We are on your side and will work to secure you the best deal possible in your consumer proposal or bankruptcy.

    If you’re thinking of filing for either, contact us first for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca.

  • How is a Trustee in Bankruptcy Different from a Debt Counsellor?

    If you’ve been considering debt consolidation, you may have heard the terms “trustee in bankruptcy” and “debt counsellor.” But do you know the difference?

    They’re far from the same thing. Here’s what you need to know.

    Trustee in Bankruptcy

    Also known as a Bankruptcy Trustee or Licensed Insolvency Trustee (LIT).

    • Doesn’t represent you.
    • Has to act for the creditors.
    • If you reveal information to them, like an unclaimed asset in a bankruptcy, they are obligated to tell your creditors.
    • A trustee can only offer you a consumer proposal or bankruptcy, not other debt consolidation options, like a loan or home equity products.
    • They are paid based on the amount you declare in your bankruptcy or consumer proposal.

    Debt Counsellor

    • Is paid by you to present debt management options.
    • They will look at the whole picture and present all financial options —including loans, home equity products, consumer proposals, bankruptcy, and beyond.
    • They protect your information and answer your questions confidentially.
    • If you do need to file for a consumer proposal or bankruptcy, a debt counsellor will prepare, structure, and propose the best solution for you to your trustee on your behalf.

    If you decide to file for a consumer proposal or for bankruptcy, you will need to work with a trustee as they are the only professionals in Canada who can file for either one.

    However, even if you do decide to go for one of those options, it is still to your benefit to consult a debt counsellor first, and during, the process.

    A trustee is more like a referee — someone who is the middleman between you and your creditors. They are not necessarily on your creditors’ side, but they’re not on your side, either. They are obligated to follow the rules and report anything out of bounds that they discover.

    As we mentioned above, a trustee is also paid based on the amount that you file in your bankruptcy or consumer proposal so often it is in their interest to try to make that amount higher so they are paid more.

    A debt counsellor, on the other hand, is 100% in your corner. They will represent you and only you. You can count on them for confidential advice and to be your advocate when working with a trustee.

    At DebtCare Canada, our debt counsellors offer free consultations to help decide the best debt management plan for you. We will examine every option available and if it comes to filing for a consumer proposal or for bankruptcy, we are on your side.

    Contact us today. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Your 2018 Debt Consolidation Options

    As Canada’s household debt continues to rise, many Canadians are looking at debt consolidation options. Rising interest rates and new mortgage rules are leaving less room for debt and those who once had a comfortable cushion may now find themselves struggling.

    If you’re finding yourself in a position where your debt is becoming unmanageable, or you want to be proactive and pay it down before it becomes so, here are your 2018 debt consolidation options you may want to consider:

    1. Home Equity Loans

    If you have equity available in your home, you may be eligible for a home equity loan. This can be a viable option, so long as the interest is low. You can use the loan to pay off your higher-interest debts and then repay your home equity loan in single, monthly payments. However, home equity loans often depend on your credit score and the interest can be high.

    1. Lines of Credit

    A line of credit is similar to a home equity loan, only you don’t need to own a home. A line of credit can also help with your debt consolidation, but it can come at price. Many will cost you 8% interest or higher, meaning you’ll be able to pay down debt, but repaying your line of credit will cost you. You also need to have good credit. If you have bad credit or owe a lot of debt, this may not be the answer for you.

    1. Mortgage Refinancing for First Mortgage or Second Mortgage

    Both mortgage refinancing or a second mortgage are great options if you have a lot of debt and sufficient equity. However, your credit often needs to be good and if you’re carrying too much debt, you may not be eligible.

    1. Consumer Proposal

    If your debt is excessive, you may be able to manage it through filing a consumer proposal. An offer is made to your creditors to repay a portion of what you owe in lieu of the whole payment. However, filing a consumer proposal can majorly affect your credit score making it extremely difficult to qualify for any type of credit years after the fact. A consumer proposal must also be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who takes a portion of what you pay.

    1. Bankruptcy

    Filing for bankruptcy leaves you with only one monthly payment, stops interest and collection action, and reduces debt. However, like with a consumer proposal, it also majorly affects your credit. It must also be filed through a LIT.

    A seasoned financial professional experienced in all of the above is your best bet to get professional financial guidance. Not only can DebtCare Canada work through the debt consolidation options, but they can also liaise and arrange the solution.

    At DebtCare, we deal with debt. A debt consolidation may just be the answer you’re looking for when it comes to getting rid of debt.

    Call us today at 1-888-890-0888.

  • Who Does a Bankruptcy Trustee Represent?

    While bankruptcies and consumer proposals are two common practices for Canadians looking to deal with problematic debts, they can also be somewhat confusing or misunderstood. One of the most common misconceptions comes with regard to who a bankruptcy trustee represents. This blog aims to clear the confusion.

    In the simplest terms, a personal bankruptcy in Canada is a legal process whereby a bankruptcy trustee is appointed to administer your estate and distribute any assets to your creditors. With a consumer proposal, a financial calculation is done based on your income and assets and a proposal is put forth to your creditors based on a sum that you would pay back. In this case, a trustee administers the proposal with your creditors.

    While it may sound, in both circumstances, as though they represent you, the reality is more complex.

    A trustee is a legally appointed official, regulated by the government. They are required to represent all parties involved, namely the debtor and the various creditors. This means that, while the trustee does represent you, they are also required, by law, to represent your creditors as well. Their job is to administer your estate to ensure all parties are satisfied.

    Another issue arises with regard to payment, specifically in the case of a consumer proposal. With a consumer proposal, since a bankruptcy trustee is paid based on the size of the proposal (the total sum to be repaid), there is some motivation to obtain a higher payout from you.

    Since a bankruptcy trustee is the only person who can legally administer a bankruptcy or consumer proposal in Ontario, you can’t remove them from the equation. However, you can obtain your own representation to help you work through the process, a person who will help protect you and your assets. A financial consultant can examine your current financial circumstances, determine, in consultation with you, your financial abilities as far as repayment, and help structure the negotiation with the trustee to ensure the best possible deal. Furthermore, working with a financial consultant will give you access to the trustees they’ve worked with in the past, ones they know to be trustworthy.

    Our aim here is not to disparage bankruptcy trustees. There are many reputable, trustworthy trustees out there willing to do their best to achieve a satisfactory solution for all involved. However, it is always smart to have your own representation. Just as you would never head to trial without a lawyer, the same should be said for this financial situation.

    If you’re considering bankruptcy as a debt solution, DebtCare is the best place to start.

    Call us today for a free consultation to discuss your options: 1 (888) 890-0888.

     

     

  • Demographic Shift? Worsening Income Inequality in Ontario Leading to Higher Rates of Insolvency

    Bankruptcy has, for decades, proven to be an incredibly important resource for those Canadians struggling to meet their monthly obligations, and for good reason. It provides a fresh start when things have become too difficult to handle, providing significant relief from overwhelming debts and reducing the overall amount a person is required to repay.

    That being said, worsening income inequality is making bankruptcy far more common a solution for certain segments of the population. Insolvency rates in Ontario are rising. The economy is making it more and more difficult for those in certain situations to meet rising costs. Who is filing most often? Seniors, millennials and single parents.

    According to a study reviewed by the Globe and Mail, seniors over the age of 60 account for 12% of insolvency filings, whereas those under 30 account for 14%. Single parents were also disproportionately represented in the findings. While single-parent families account for about a fifth of Canadian families, they represent 43% of households with dependents who file.

    For millennials, student loans are a big part of the problem, as is the tough job market. Tuition costs have risen across the country, making it harder and harder for the average Canadian student to obtain a diploma or degree without some debt following them off campus. According to Statistics Canada, the average full-time undergraduate student is paying nearly $6,400 in tuition for the 2016-2017 school year, compared to about $4,400 a decade ago. That’s a big difference. Where is the money coming from? Most often from student loans.

    For seniors, or those looking ahead to retirement, debt is rising (and thus the number of bankruptcies), often thanks to a desire to help their children enter this incredibly turbulent housing market or pay for those sky-high tuition fees.

    Another problem for both millennials and single parents struggling to make ends meet is the dreaded payday loan. With advertisements claiming loans for as little as $1, many heads are turned in the belief that payday loans are the answer for quick cash. However, these have proven to be quite devastating because they quickly become almost impossible to pay off.

    With income inequality continuing to make it harder for certain demographic groups to live without debt, bankruptcy represents an important debt solution that can narrow the gap. If you’re looking to take advantage, just remember to speak with a financial consultant first to secure your own representation, before heading to a trustee in bankruptcy. Since bankruptcy trustees represent both you and your creditors, it is best to have someone with you who has your back.

    At DebtCare, you are our first and only concern. If you’re looking for more information about bankruptcy, please get in touch with us today: 1 (888) 890-0888.

     

  • What is the Difference Between a Consumer Proposal and Bankruptcy?

    Often we have clients come to us with financial troubles looking for advice regarding the difference between a consumer proposal and bankruptcy. While both are very valuable resources when it comes to dealing with debt that has spiraled out of control, there are significant – and important – distinctions between the two. Today we discuss those differences.

    What is a consumer proposal? A consumer proposal is a process by which you put forth a proposal to your creditors presenting, based primarily on your income, an amount to be repaid on a debt over a period of typically 5 years. This amount is often far less than the current debt owed. All creditors must be included in the proposal and a majority must accept. Once accepted, you begin making a single monthly payment to your trustee which is then distributed to your creditors.

    The benefits of a consumer proposal are numerous. Firstly, as mentioned, the amount to be repaid is often far lower than what you actually owe. Additionally, when a consumer proposal is filed, interest stops accumulating and your creditors are required to stop taking collection action against you. This means that any wage garnishments and frozen bank accounts must be lifted.

    What is a bankruptcy? Unlike a consumer proposal where you propose an amount to your creditors, when you file for bankruptcy, you enter into a legal contract to assign (surrender) everything you own to a trustee in exchange for the elimination of your debts. In bankruptcy, you are not paying against an agreed amount – rather the number of months you have to pay is based on your income. For a first time bankrupt this is typically 9 or 21 months. Once you’ve completed the payment schedule and the terms of your bankruptcy, you are discharged and your bankruptcy is essentially done.

    Completing the terms of your bankruptcy means more than just paying monthly – it is also means participating in credit counselling and disclosing all extra income you receive. If you receive more income during your bankruptcy than what was provided at the time you filed, you may be subject to additional surplus income, meaning you will have to make additional payments in your bankruptcy.

    The benefits of bankruptcy are, as with a consumer proposal, numerous. You’re required to make only a single monthly payment, interest stops accumulating and your creditors must remove all enforcement action currently levied against you.

    Which option is best for you? As with any major financial decision, the answer to this question depends on your current financial situation. A main consideration is how much you earn as well as what assets you have. A financial consultant will be able to review your finances and recommend the solution that is best suited for your personal circumstances.

    One final note. Both a consumer proposal and bankruptcy must be administered by a trustee in bankruptcy, but be forewarned. While this individual does represent you, they also represent your creditors, meaning your interests are not protected. You are best served by speaking first with a financial consultant, someone who can protect you and negotiate on your behalf. At DebtCare, we stand in you corner.

    Protect yourself by calling us first. 1-888-890-0888.