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Category: Bankruptcy

  • Bankruptcy in Canada – Does Your Trustee Represent You?

    rsz_bankruptcy_in_canadaIf you are drowning in debt and considering a bankruptcy in Canada or a consumer proposal as a solution for debt relief, you may be thinking that the best approach is to go directly to a trustee. Many trustees advertise that they have a solution to your debt problem, and that is true, but are they acting as your representative? Therein lies the problem.

    Both a bankruptcy in Canada and a consumer proposal must be administered by a trustee – you can’t conduct or negotiate a bankruptcy on your own. Therefore, it is a common misconception that you should just go right to the trustee to get things started. We urge you to reconsider this path.

    Why? A trustee is a court appointed officer whose job is to act in your interest AND the interest of your creditors. That means that, although they do represent you, they also represent your creditors. You are not their priority – they are required to find an equitable solution that best suits all involved.

    Additionally, because you look at the trustee as your representative, you may share or present things to the trustee that will later be used against you or you may omit important information that will impact you later.

    For example, in a bankruptcy your monthly payment and the length of time you pay depend on an income calculation. If you err when providing information to the trustee, and the trustee later becomes aware of additional information, even after you have filed, the trustee can claim that you owe your creditors ‘surplus income’ and you will have to pay this money to the trustee before you can be discharged. This may also extend the amount of time you have to remain in the bankruptcy.

    This can get even more complicated when it comes to a consumer proposal. This is because, in a consumer proposal, the trustee is paid a percentage of the amount of the proposal. The more money your trustee can get for your creditors, the more money they receive. This scenario clearly does not place your best interests at the forefront.

    When you have a financial challenge, a bankruptcy or consumer proposal may be the solution – however, you are best served by speaking with a financial consultant who represents you before visiting a trustee. When you meet with a financial consultant who specializes in bankruptcy, that individual can help you structure your information to disclose what is relevant and can even propose the terms of your filing to the trustee. This is the best way to protect yourself.

    At DebtCare, we can help you get all of your information sorted before you speak with a trustee, protecting your interests the entire time.

    Give us a call today at 1-888-890-0888.

     

  • In the News: Who is Filing for Bankruptcy? A lot of Seniors it Seems

    used for DC seniors filing bankruptcyWith Canadian consumer debt on the rise, it is no surprise that filing for bankruptcy has become a popular form of debt relief. The ability to combine all debts and make one monthly payment, as well as the ability to halt collection calls and collection action, has proven to be quite appealing for a vast number of people.

    Accordingly, a vast array of individuals from diverse demographics are choosing this option -but which group is most likely to go this route? According to a recent CBC News article, it seems a lot of seniors are filing for bankruptcy as a way to get relief from debts that have piled up.

    The article states, “According to a review of 6,000 insolvency filings handled…in 2013 and 2014, the share of debtors aged 50 and over increased to 30 per cent compared with 27 per cent in the previous two-year period,” with credit cards and payday loans representing the debts of highest concern.

    The report also found that seniors and those in pre-retirement have accumulated the highest unsecured debt load among all age groups: “On average, debtors 50 and older filing for insolvency had $68,677 in unsecured debt, while those over 60 had total unsecured debt of $69,031.”

    You can read more about this here: http://www.cbc.ca/news/business/seniors-in-ontario-make-up-30-of-bankruptcies-report-1.3060463.

    Furthermore, according the Globe and Mail, several factors have contributed to this, including the higher number of personal loans being granted to adult children. For seniors with children, a loan to a child has become quite common, and although intentions may be good, often these loans go unpaid, leaving parents in a position of financial strain.

    Additionally, seniors are the ones with the highest unpaid tax bills owed to the Canada Revenue Agency. Read more on this here:  http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/growing-number-of-seniors-account-for-ontarios-insolvency-filings-study/article24236617/.

    This rising senior debt, coupled with the fact that income is generally less in the post-retirement years, has led many seniors to turn to trustees for assistance. And this isn’t a bad idea in theory. Why start retirement owing more that you can afford to pay? The only problem is that, without understanding the process in detail, many turn directly to those trustees, rather than to a representative.

    Why is this an issue? Bankruptcy trustees are looking out for the interests of creditors, not just the person filing. However, a personal representative, one with the debtor’s interests in mind, can ensure protection throughout the process, lessening the risk.

    If you are worried about debt in your retirement years, a fresh start thanks to filing for bankruptcy may just be the answer. Just make sure that you are protected. Call DebtCare today. We represent you – not your creditors, and can work towards a fair and objective result. 1-888-890-0888.

     

  • Faceoff – Canadian Bankruptcy Trustees vs. Canadian Debt Counsellors

    debtcareWhen you are struggling to make even the minimum monthly payments to bills, or worse, having to choose which bills to pay each month, it is probably time to consider professional financial help to get things back on track. But how can you best determine which route is the right one, and who you should elect to stand in your corner? We can help. Today’s topic: the financial faceoff – Canadian bankruptcy trustees vs. Canadian debt counsellors. Both can help you get out of debt – but not necessarily in the same way.

    Trustees

    A Canadian bankruptcy trustee is a court appointed officer, appointed by the Superintendent of Bankruptcy. Their role is to administer bankruptcies and consumer proposals – but to do so on behalf of the interests of all parties. They don’t represent you as the client, they represent both you and your creditors. This means that, since they are not your representative, they can use the confidential financial information you provide to them to get the best deal for your creditors. They are paid out of the estate in the case of bankruptcy, and out of your pocket in the case of a consumer proposal, so their paycheque is then determined by how much is paid by you to your creditors.

    Debt Counsellors

    Often bankruptcy trustees like to say that you don’t need to pay a debt counsellor, and can just go right to them. This is because if you do this they can control the filing – which is especially enticing in the case of consumer proposals, where, as mentioned above, the more you pay, the more they earn.

    Instead, debt counsellors are paid by YOU, they represent YOU and only YOU. They know insolvency inside and out and you can trust that any information you provide to them is not going to be used against you – you can tell them everything without fear of unanticipated consequences. The role of a debt counsellor is to structure your financial information, assist you in finding a good trustee, and to help you manage negotiations with a trustee.

    Both bankruptcy and consumer proposals represent important and viable solutions when debt becomes unmanageable. That being said, going right to a trustee and hoping for the most favourable outcome will often leave you disappointed.  Consider speaking with a debt counsellor first and having them negotiate a consumer proposal or bankruptcy on your behalf – NEVER go to a bankruptcy trustee unrepresented.

    For more about the difference between a Canadian bankruptcy trustee and a Canadian debt counsellor, please contact DebtCare Canada today at 1-888-890-0888.

     

  • Ontario Bankruptcy Trustees – Who They Are and How They Advertise!

    debt careDebt consolidation, get out of debt, debt relief: it is hard to turn on the radio or television these days and not hear one or all of these phrases. Why? Because so many Canadians are facing financial challenges thanks to the ease with which credit is granted coupled with high (credit card) interest. The temptation to pay on credit can quickly lead to getting in over your head, and then struggling to find a solution.

    When it comes down to it, the question is, who advertises these solutions and what do they do?
    Ontario bankruptcy trustees, more aggressively now than ever before, are advertising to the public that they offer the best solution for people facing financial woes. We disagree with much of the advertising we hear from many Ontario Bankruptcy Trustees. Why? Because we exist because of them!

    Ontario bankruptcy trustees promote financial solutions. However, if you choose the solutions offered, the Ontario bankruptcy trustee does not represent you. A bankruptcy trustee in Canada is a court appointed officer who administers estates when a bankruptcy or consumer proposal is filed. They do not represent you, they do not represent your creditors. They apply rules set out in the Bankruptcy and Insolvency Act. The trustee is required to represent the best interests of all parties (and this includes their own financial interests).

    What does this mean? Well, trustees are paid a tariff out of the proceeds of your bankruptcy or consumer proposal. In the case of bankruptcy the fee is fixed, whereas with a consumer proposal the fee grows with the amount of the proposal.

    Some things to know:
    • Trustees advertise to you, despite the fact that they don’t represent you – this is because without you, they have no business.
    • In the case of bankruptcy, finding surplus income means that they can extend your bankruptcy and collect larger tariffs because the bankruptcy is being administered for a longer period of time.
    • In the case of consumer proposals, convincing you to propose a higher amount to your creditors will result in the collection of more fees – and thus is a major priority for them.

    Now, of course a few bad apples shouldn’t spoil the whole bunch, and we don’t mean to say that all trustees are shady. Many trustees in bankruptcy are reputable and do business above board – but the few that don’t can do a lot of damage. There are just too many conflicts of interest and the law needs to go further in terms of requiring trustees to state in their advertising that while they are promoting a service they don’t represent you.

    A consumer proposal or bankruptcy is often a really good financial solution for someone backed into a corner. These allow for one monthly payment, can reduce debt, stop interest, and stop collections. Just keep in mind, just as you wouldn’t go to a meeting at the CRA without your accountant, you shouldn’t go to a trustee without your own independent financial representation.

    Financial counsellors who specialize in bankruptcy and proposals can structure the numbers, review your information, make recommendations, and bring a proposal forward to a trustee on your behalf- protecting you throughout the entire process.

    DebtCare Canada represents your best interests – yours and yours alone. Call us today BEFORE contacting a trustee: 1-888-890-0888.

  • Rebuilding Credit: Bad Credit Rating Doesn’t Always Just Disappear After a Few Years

    rebuilding credit pngIt is a very common misconception that bad credit just “disappears” once debts are paid and your credit behaviour improves. However, past credit activity doesn’t just evaporate into thin air with a few months (even a few years) of good behaviour. Rebuilding credit takes some work.

    For example, if you file for bankruptcy in January of year one, pay on time, every month, and are discharged in January of year 3, that bankruptcy will remain on your report for 6 years following the date of discharge (January of year 9) – not from the time that you declared.

    When it comes to consumer proposals, these stay on for 3 years following payment in full, as does any credit counselling.

    Periods of inactivity can also impact your credit rating. For example, if a lender assigns debt to collections, this results in activity, and negative activity at that. However, if you don’t have any activity, this is not necessarily a good thing either.

    When it comes to activity, a tip is to continually use credit and to repay that credit on time, all the time. A secured credit card is a good way to do this without being tempted to start relying on credit again or getting back in over your head.

    So, if you have bad credit and want to clean it up, here are a few steps you can take to get the process started:

    • Step 1 – Get your credit report and see what it says. These are available online from both Equifax and TransUnion. Some lenders use one, whereas some look at both.
    • Step 2 – Deal with the bad credit debt on your credit report by paying it off. Better yet, settle it for far less than you owe with a consumer proposal to stop interest and reduce overall amounts.
    • Step 3 – Document EVERYTHING. Any time you settle a debt, get a letter re: settlements and arrangements and copies of proof of your action. It can take some time for these payments to register, but keep on top of it.
    • Step 4 – Make sure the credit reporting agency knows these debts have been paid – don’t count on your lender to tell them. Send the above noted documents via registered mail to ensure they reach their intended destination.
    • Step 5 – Begin the process of rebuilding. Consider a secured credit card to show you are committed to maintaining positive history.

    When it comes right down to it, the only way to improve a poor credit rating is to pay your debts and allow time to pass to show that your payment habits have improved.

    For more information about how to rebuild your credit effectively, call DebtCare Canada today at 1-888-890-0888.

     

  • What is a Canadian Bankruptcy Trustee’s Role in a Consumer Proposal?

    Canadian bankruptcy trusteeA Canadian Bankruptcy Trustee’s role in a consumer proposal can be very confusing for consumers largely because of the advertising done by Canadian Bankruptcy Trustees. These Trustees advertise a way out of debt and offer to help you out of your financial problems, almost as though they represent you and your best interests through the process.

    Full stop. This is not the case at all.

    Trustees need you in order to stay in business. No bankruptcies and consumer proposals = no need for the Trustee. In fact, while in a bankruptcy they are bound by pre-defined tariffs, in a consumer proposal they are compensated based on the amount of the consumer proposal. Bigger proposal = more fees for them. While they advertise the benefits of a bankruptcy or proposal and are the only ones who can administer one, they in no way represent you.

    In order to be able to understand their role in the consumer proposal process, let’s look at what the duties of a Canadian Bankruptcy Trustee actually are.

    Consumer proposals and bankruptcies are both very powerful tools you can deploy to put a stop to debt that has become unmanageable. Because the process to file both is legislated under the Bankruptcy and Insolvency Act (BIA), both must be administered by a Trustee appointed by the Superintendent of Bankruptcy. This Trustee is the Bankruptcy Trustee. Their role is to ensure that a consumer proposal or bankruptcy is administered fairly and in accordance with the BIA – to the benefit of you AND your creditors.

    When you meet the Trustee in Bankruptcy you may see no harm in divulging personal information to them because you feel that you are with your representative. However, that information may be considered in whatever proposal scenario they put forward. Once you disclose information to the Bankruptcy Trustee, this information can now be relayed to your creditors.

    Going to a Trustee in Bankruptcy directly would be the same as being charged with a crime and meeting with the prosecutor without a lawyer. Prior to making contact with a Trustee you should sit down with a trusted financial advisor who has experience with insolvency to work through different financial scenarios – one of which may be a proposal. Because this individual is your representative, you are able to openly discuss all of the issues and then they can advise you on which options are relevant to bring forward.

    Earlier in the blog we mentioned that the Bankruptcy Trustee is the only professional who can administer a bankruptcy or consumer proposal, and this is true, but it is never wise to meet with one without your own representation.

    Protect yourself and your financial assets – contact DebtCare before you go to a Trustee. Call us today at 1-888-890-0888.

  • Myth vs Fact: Consumer Proposal vs Bankruptcy

    consumer proposal, consumer proposal vs bankruptcyConsumer proposals and bankruptcy are often confused with one another because they both involve a Trustee in Bankruptcy. In Canada, the government introduced legislation to protect people who have reached a breaking point with their debt. Over time that legislation has been amended and re-worked to simplify processes and to make the process fair for both creditors and those who owe money.

    The Superintendent of Bankruptcy is an entity of Industry Canada, and is the individual who administers the Bankruptcy and Insolvency Act through appointed officers. These officers are Trustees in Bankruptcy. The Trustee in Bankruptcy’s role is to administer a consumer proposal or bankruptcy on behalf of the creditors and the people who owe money.

    A bankruptcy and a consumer proposal are both powerful in that, once filed, all collection and enforcement action being made by unsecured creditors stops, interest stops, and in many cases the overall amount of debt is reduced.

    That being said, a consumer proposal bears less strings than bankruptcy and should always be considered as option number 1 – bankruptcy is generally a last resort measure.

    In a consumer proposal, a proposal is made to your creditors – basically you are offering them a sum of money to be repaid through the Trustee over a term of, typically, 5 years.

    • Your creditors have a specified amount of time to accept or reject the proposal.
    • If no one responds, the proposal is accepted.
    • If the majority creditor(s) accepts, the proposal is accepted.
    • If a proposal is accepted you make a single monthly payment to the Trustee for the term proposed. You can pay off the proposal at any time. You have no ongoing income reporting requirements to your Trustee.

    In a bankruptcy your creditors don’t get a choice to accept or reject.

    • You make a monthly payment to the Trustee in Bankruptcy over 9 or 21 months in a first time bankruptcy, depending on your income. There are maximum income thresholds set out and if your income exceeds those thresholds the term of your bankruptcy payment extends from 9 to 21 months.
    • During your bankruptcy you have to report your income and any changes to your financial circumstances to the Trustee.
    • If you come into any significant sums of money you may have to pay surplus income to the Trustee.

    A consumer proposal is removed from your credit report 3 years from the date it is paid in full. A bankruptcy remains for 6 years from the date of discharge.

    Since the Trustee doesn’t represent you, going to one directly is never recommended. Any financial information you divulge can’t be taken back. Prior to meeting a Trustee you are best served to work with a financial representative who specializes in bankruptcy and consumer proposals – one who will represent you – to review and help you structure your financial information to be presented to a Trustee. Some may even help you negotiate the terms of your proposal or bankruptcy with the Trustee.

    Both of these options are viable when it comes to debt relief – just make sure that you are not putting your financial affairs at risk by attending a Trustee before seeking real help.

    For more information or to protect yourself before going to a Trustee, please call DebtCare Canada today at 1-888-890-0888.

  • Getting Out of Debt Blog Series #2: Bankruptcy

    Getting Out of Debt

    There are thousands of Canadians facing a mountain of debt that can seem impossible to overcome. For many individuals, it can often seem as though there is nowhere to turn as far as getting out of debt – but there is hope. It never helps to ignore the problem or let the stress of high debt levels control your life. The second blog in our back-to-basics ‘getting out of debt blog series’ looks at bankruptcy, and can help you better understand if this might be the best solution for your financial woes.

     

    What is bankruptcy?

    Bankruptcy in Canada is a legal process and is governed by federal law under the Bankruptcy and Insolvency Act. Like a consumer proposal, a bankruptcy must be conducted by a licensed trustee in bankruptcy – you cannot negotiate one on your own. The role of a trustee is to ensure that both you and your creditors are protected, so they will negotiate the terms of your bankruptcy and administer it accordingly.

    When you file for bankruptcy all of your assets, which include investments, property and your income, become the property of your trustee while you are “undischarged.” This means that if you have equity in your assets, or your income exceeds what is the allowable minimum, you will be subject to surplus income. Surplus income means that 50% of any income you earn over the prescribed minimum and 50% of any equity in assets will have to be paid to your estate to be distributed to your creditors by your trustee. During the undischarged period you will have reporting obligations to your trustee which includes reporting your income.

    In Canada, and in the case of a first time bankruptcy – if there is no surplus income you will only remain undischarged for 9 months (if you meet any additional terms in your bankruptcy); if you have surplus income you will remain undischarged for at least 21 months. If, at the end of 21 months, you have not re-paid your surplus income into your estate you will remain undischarged until you do.

    While bankrupt, additional terms in your bankruptcy will include not only disclosing income but also reporting on living arrangements, family situation, etc. You will also be required to attend credit counselling sessions and report any monies borrowed (over $500).

    To qualify for bankruptcy in Canada you must meet certain conditions, the foremost of which is that you must be insolvent. To be insolvent means that you owe at least $1000 and that you are unable to pay the debts as they are due.

    Will filing for bankruptcy affect your credit? Yes, since your credit report is the document which contains all of your borrowing activity and credit behaviour. When you file for bankruptcy your credit score will change from being a number to being an “R” reject score until you rebuild your credit. The bankruptcy will show on your credit report for 6 years following discharge. That being said, if you are seriously considering filing for bankruptcy your credit has most likely already suffered, and so cleaning it up will take time.

    Also, you can often qualify for credit within 2 years of being discharged from bankruptcy with up to 2 years of solid re-established credit.

    Contrary to popular belief you can file for bankruptcy and keep your home and vehicle. Because the trustee represents you and your creditor it is important to have your own representation through the bankruptcy process. Bankruptcy can be complicated and having an expert in your corner will ensure that you are prepared for all eventual outcomes and don’t go to the trustee without already having your plan in place.

    For more information about getting out of debt or to find out if you qualify to file for bankruptcy in Canada, please contact DebtCare Canada at 1-800-890-0888.

  • Consumer Proposal VS. Bankruptcy – How Are They Different

    If you have been facing financial challenges you may have been exploring financial options to deal with debt. Two of these options include a consumer proposal and bankruptcy. We are often asked the differences between filing a consumer proposal vs. bankruptcy in Canada, which prompted us to write this article.

    Before discussing the differences between filing a consumer proposal vs. bankruptcy it is important to understand that both are legal processes to deal with debt that are administered by a trustee in bankruptcy. The trustee in bankruptcy is an officer of the court appointed by the Superintendent of Bankruptcy who oversees the Bankruptcy and Insolvency Act and regulates the insolvency professionals who administer it.

    The trustee in bankruptcy administers bankruptcies and consumer proposals; they do not represent you in the process. One of the trustee’s responsibilities is to make a fair deal that pays your creditors the most money possible. Trustees also earn more money based on the size of the consumer proposal that you file. The larger the payments you make under the consumer proposal they negotiate, the more money they make administering it.

    A bankruptcy or consumer proposal is a viable method to use to deal with debt. Both will stop most collection action, will leave you with a single monthly payment, and will stop the interest accruing on unsecured debts.

    When comparing the differences between filing a consumer proposal vs. bankruptcy the option you choose will generally depend on your income and assets. Those with minimal income, no assets and a significant amount of unsecured debt may be a better candidate for a bankruptcy. One big drawback with bankruptcy is that, if your income surpasses a certain level, your trustee may assess you as having surplus income. Having surplus income means that, if your income exceeds the threshold, not only will your monthly payment in bankruptcy increase but the trustee may also require that you remain bankrupt longer. The same applies to equity in assets, such as a home. If you have equity in your home the trustee will assess surplus income which will increase the amount that you have to repay in bankruptcy. This is why higher income earners or those with assets often opt for consumer proposals.

    Many individuals don’t realize that in a bankruptcy or consumer proposal you can generally keep your assets, homes or cars included.

    Consumer proposals involve offering your creditors a proposal that includes a sum of money that you will repay as a final settlement on your debts. Consumer proposals are based on your income, cash flow, and the ability to make a monthly payment over 4 to 5 years. Some benefits of a consumer proposal include:

    • It can be paid off early – a bankruptcy can’t.
    • It is a final agreement – bankruptcies will continue until your bankruptcy trustee discharges you. If your income increases, it could increase the amount you have to repay in your bankruptcy and the length of time that you are bankrupt.
    • You can rebuild credit sooner – consumer proposals are removed from the credit report 3 years after they are paid in full, bankruptcies stay for 6 years from the date you are discharged.
    • In the case of a higher income earner or individual who has assets, a consumer proposal will involve a smaller monthly payment than bankruptcy.
    • If the majority of your creditors accept the consumer proposal, your other creditors are automatically included whether they like it or not.

    When investigating the differences between filing a consumer proposal vs. bankruptcy it is best to speak to an independent financial professional who can guide you through your options and represent you throughout the process. Bankruptcy trustees are shrewd negotiators and have experience filing these every day. Having your own representation can help to ensure that you get the best deal. The fact that a bankruptcy or consumer proposal may not be your only financial option is also important, which is why an independent and objective financial opinion will help you to make more informed financial decisions.

    For more information about filing a consumer proposal vs. bankruptcy or if you need help with a financial problem, please contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca