debtcare.ca

Category: Consumer Proposal

  • 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.

  • Now is the Time to File a Consumer Proposal – How Our Client Reduced $100,000+ Debt to $12,000

    In today’s uncertain environment, creditors are more flexible than ever.

    If you’re facing financial distress, now is the time to consider filing a consumer proposal and making an offer to your creditors to settle your debts for less than what you owe.

    In most cases, you can even keep your home and ensure that your assets remain untouched!

    Client Success Story – Reducing $100,000+ Debt to $12,000

    If you’re wondering if this works, we are sharing a client success story to show you what is possible.

    One of our clients, from Vancouver, is a self-employed professional who owed money to CRA after being reassessed.

    His total debt was over $100,000. After an evaluation, it was ascertained that he owed $65,000 to the CRA in personal income tax and GST and had credit card debt exceeding $44,000.

    With COVID-19 disrupting his earnings, he was relying on the CERB payments being made to him.

    As there was no home equity to pay off debts, he was wondering if he should just opt for a $1,800 bankruptcy to start over.

    We worked with him to help him evaluate all his options and developed a proposal.

    Taking advantage of the current climate, we helped him reduce his debt to $12,000. He is now able to pay this debt back within 5 years at 0% interest!

    Will a Consumer Proposal Pay Off Debt?

    So yes, a consumer proposal can help you pay off your debt. It can also stop any collection action and protect your assets.

    Though it does impact your credit rating temporarily, two years after your proposal is paid in full, your credit score can bounce back if you’re taking steps to ensure that you’re making timely payments.

    It is important to note that 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 may have to consider another type of proposal or file for bankruptcy. You can learn more about the differences between consumer proposals and bankruptcies here.

    Deciding what works for you, depends on your circumstances. The answer is based on some of these questions:

    • How much total debt do you have?
    • How much unsecured debt are you carrying?
    • What’s the worth of your assets?
    • Are you able to repay a portion of your debt?

    At DebtCare, we will help you answer these questions and help you develop an action plan to reduce and ultimately eliminate your debt.

    Contact us today for a free consultation and an independent review of your financial situation. Call us 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.

  • Bankruptcy and Consumer Proposals Rise as Consumer Debt Reaches Record Limits

    Are you struggling with consumer debt? If so, you’re not alone.

    According to BNN Bloomberg, the average Canadian household owes $1.76 for $1 of annual disposable income. The same household devotes $0.15 of every disposable dollar to making principal and interest payments on debt, which is a record high.

    BNN Bloomberg also noted that when you add together consumer credit, mortgage, and non-mortgage debt, Canadians are carrying $2.28 trillion in credit market debt.

    What’s more, beyond just carrying debt, they’re paying the price. The number of insolvencies – bankruptcies and consumer proposals – filed by consumers in 2019 increased from the year before.

    While the numbers for the final quarter of 2019 have not been released yet, as of Q3 2019, Canadian insolvency filings were up to 34,708 — up more than 4,000 over Q3 2018. Of that, the number of bankruptcies rose slightly (from 13,549 to 13,757) and the number of consumer proposal filings rose substantially, going from 16,764 to 20,951.

    Why are more Canadians going into debt?

    According to a survey from Manulife, two in five Canadians believe they will never be debt-free.

    There are many reasons Canadians might currently be struggling with debt. Housing prices are continuing to rise, especially in larger cities like Toronto and Vancouver.

    While interest rates have stayed the same for the past year, the added spikes in 2017 and 2018 still didn’t help for those carrying debt. Some have also speculated that it’s too easy for Canadians to gain access to credit – and spend more than they can afford to pay back.

    For others, job insecurity can be part of it – not enough income to make ends meet. They might be facing job loss, working in a precarious employment situation (like the gig economy) with inconsistent income, or simply not earning enough to afford high housing prices.

    Poor credit habits can hurt your finances, too. While paying only the minimum balance on your credit cards can seem like a good idea, it can actually mean more debt in the long-term.

    Sometimes the moments leading up to major debt troubles are insidious. What can start as a seemingly harmless action can snowball into a much bigger problem.

    What exactly does struggling with debt look like? It could include:

    • Being unable to pay all your bills in full and on time each month.
    • Making only the minimum payments each month.
    • Being unable to make even the minimum payments.
    • Having more debt than income.
    • Always taking out another loan to pay off your old debts, getting into an unsustainable cycle.
    • Relying on credit to pay all your bills because you don’t have enough funds in your bank account.
    • Consistently being unable to afford the items you need to achieve a daily quality of life – pay for groceries, afford your rent, and so on.
    • Living paycheque to paycheque without knowing how you would afford an emergency.
    • And more…

    This might vary depending on your exact circumstances, but any of these could be a precursor to bigger problems down the road.

    How to deal with debt before major damage is done

    The sooner you realize you have a debt issue, the more likely you are to resolve it before major damage is done to your quality of living.

    When you file for insolvency, your credit score takes a big hit. While this is sometimes the best option, and it is possible to recover over time, if you tackle your finances early you minimize the need for this type of action.

    Some steps you can take to resolve problem debt include:

    • Creating a realistic budget and looking for ways to reduce your current expenses, then putting the savings towards paying off your debt.
    • Honestly assessing where your money is currently going and eliminating wasteful spending.
    • Practicing good financial habits, like always paying your bills on time and in full.
    • Not relying on credit. While some use of credit is good for your credit score, you don’t want to be using it because you don’t have the money elsewhere.
    • If you have an income problem, looking for ways to earn more – either through asking for a raise, finding a new job, or getting a part-time job.
    • Seeking out debt consolidation methods, such as mortgage refinancing.

    While filing for insolvency is one option, it’s not the only option – especially if you tackle the problem early.

    In 2020, make your resolution to figure out your finances for good. Debt freedom is possible with a little planning. There’s no point feeling bad about the circumstances that got you into debt. Instead, realize you’re not alone and focus on finding the way out.

    That’s where we come in. At DebtCare Canada, we will assess your situation and make recommendations to deal with debt. We’ll go over your options and create a realistic plan for success.

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

  • How to Save Your Home During a Financial Crisis

    In a financial crisis, all of your assets may be in jeopardy – especially your home.

    A financial crisis can take many forms: an unexpected bill, change in interest rates, job loss, buildup of long-term debt, and more. But one of the hardest to deal with — and most critical – is a CRA tax debt.

    When you owe the Canada Revenue Agency (CRA) money, they can act swiftly and aggressively. The CRA has many debt collection tools in their arsenal, including putting a lien on your house.

    Particularly in cases of tax debt, many folks freeze and don’t know what to do.

    This is mistake! When it comes to a financial crisis — especially a tax debt – time is not your friend. A lien on your house is game over.

    When there is a financial crisis, saving your home means acting fast.

    The first step is to determine your home equity position. A good financial advisor will be able to access an automated valuation model (AVM) to calculate the actual quick sale market value of your home against what you owe.

    The next step is knowing ALL of your financial options and considering the pros and cons of each.

    Option 1: Refinancing Your Home

    Pros: Can deal with your financial crisis without affecting your credit score.

    Cons: The viability depends on the equity available in your home. It isn’t always a long-term solution.

    When evaluating refinancing your mortgage, ask:

    • Do you have enough equity in your home to refinance?
    • If you do refinance, is it just a band-aid solution or does it fully resolve the issue?

    Sometimes people will refinance their homes to quickly deal with the issue at hand, but it doesn’t resolve the long-term one. So, a financial crisis is still looming, but they will not have equity to deal with it the next time it becomes urgent.

    If refinancing is not a long-term solution, there are other options available.

    Option 2: Filing for a Consumer Proposal

    Pros: Stops collection action and deals with debt quickly. Payments are geared to income. Your assets are generally not affected.

    Cons: Only available for unsecured debt up to $250,000 (excluding mortgage). Leaves you with an R7 credit rating, meaning you will need to repair credit afterwards.

    In a consumer proposal, you make an offer to your creditors to settle your debts for less than what you owe. The offer must be accepted by the majority of your creditors.

    In most cases, you can keep your home when you file for a consumer proposal, as your assets remain untouched. But this depends on your mortgage payments being kept up to date and whether you have enough income to continue paying your mortgage after the proposal.

    Option 3: Filing for Bankruptcy

    Pros: No limit to the amount of debt you can file for bankruptcy. Like with a consumer proposal, payments are geared to income and collection action is stopped.

    Cons: Leaves you with an R9 credit score. May put your assets at risk, depending on your financial situation.

    In a bankruptcy, assets are often sold to pay off debts – including in some cases your house. However, this doesn’t always happen; you may be able to keep your home depending on the amount of equity you have available.

    If you are considering filing for bankruptcy, talk to a financial advisor about options for keeping your home.

    Filing for a consumer proposal or for bankruptcy can often seem scary. But in a financial crisis, it could be your best option. If there is no lien on your house, both filing for a consumer proposal and bankruptcy could protect your home, depending on your financial situation.

    Plus, both have payments that are geared to your income, so you will be able to afford the monthly fees without getting into another financial crisis.

    One downside to both is the hit to your credit score and the time it can take to rebuild credit. But that can still be a better option than losing your home. A good financial advisor will structure your consumer proposal or bankruptcy based on equity.

    Whether you choose to refinance or are considering filing for a consumer proposal or bankruptcy, it is important to weigh your options carefully but also quickly (as we said, time is of the essence during a financial crisis).

    That means talking with a financial advisor who can look at your whole financial situation and help determine the best course for you.

    At DebtCare Canada we are experienced in evaluating the pros and cons of all options – and doing everything we can to save your home.

    If you’re facing a financial crisis, don’t delay. 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.

  • 2 Ways to be Out of Debt Within 5 Years

    When you’re in financial trouble, you want to get out of debt quickly. But finding out how to pay off debt fast can depend on many factors:

    • The amount of debt. If you are carrying a lot of debt, the time to pay it off in full may be longer.
    • How much debt and interest you accumulate along the way. The problem with paying off high-interest debt is that the interest continues to add up. If the debt is high enough, you may only be able to afford the interest payments each month, leaving you still in debt.
    • Your income level. Unless your income level drastically changes, it might be hard to find room in your current budget to truly get out of debt fast without your quality of life suffering.

    Some credit cards can take up to 96 months to pay off in full — the equivalent of eight years! That’s eight years of scrimping and saving and constantly having to think about debt payments. There is a better way.

    In order to get out of debt fast you need a solution that:

    • Is realistic and sustainable. You want this to last for the long-term.
    • Is easy to access. If your credit score is hurt, options may be limited.
    • Avoids high-interest payments or fluctuating interest payments.

    Luckily, there are two solutions that meet all of these requirements and more! Pay off debt quickly — within five years (or sooner!) — with one of these methods:

    1. Second mortgage amortized over five years.

    If you own your home, you may be eligible for a second mortgage. You can amortize this mortgage over five years and then use the equity to pay off your debt in one lump sum. Then, over the next five years, you can pay the second mortgage back in fixed, scheduled payments.

    You will always know what you are paying and when you are paying it. This will allow you to budget wisely and with flexibility.

    1. Filing for a consumer proposal.

    If you don’t own a home, or a second mortgage isn’t an option, filing for a consumer proposal may be the way to go. In a consumer proposal, you make an offer to your creditors to pay your debts for less than you owe. The creditors must feel confident that they are getting more back than they would if you filed for bankruptcy instead.

    Once you are in a consumer proposal, you have five years to pay it off. You can do so sooner if you have the money available. This will allow you to clear your high-interest debts quickly and pay back one monthly payment over a planned, fixed schedule.

    Within five years, you can be debt free and with a lot less stress along the way!

    Interested in exploring your options? DebtCare Canada can help. We provide access to second mortgages, first mortgages, home equity lines of credit, and more to people with all types of financial situations.

    Or, if you’re thinking about filing for a consumer proposal, our financial advisors will make sure you are protected and getting the best deal possible.

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

  • Protecting Your Home Through Financial Restructuring

    Having financial troubles can be stressful no matter where you are in life – but it’s doubly so if you own a house.

    There’s a common fear that financial restructuring will mean losing your home. Fortunately, there are ways to protect against this.

    The first thing to do is to make sure that you stay up-to-date with your mortgage payments. If you haven’t defaulted on your mortgage, your chances of keeping your home through a financial crisis increase greatly.

    Let’s look at some of the financial restructuring options you might have when you own your home…

    1. Debt Consolidation

    As long as your mortgage payments are up to date, a debt consolidation loan can be a good way to deal with outstanding unsecured debt.

    Unsecured debt might be credit card bills, lines of credit, your cell phone bill, etc. It is anything not tied to collateral – so your mortgage and car loan would not fall under this umbrella.

    Unsecured debt usually has a high interest rate, making your monthly payments even more expensive. This is where a consolidation loan can help. You can use the money to pay off your unsecured debts, and then pay back the consolidation loan at a fixed interest rate over a manageable schedule.

    You won’t be paying as much in interest, so you can use the extra money to keep your mortgage payments up to date.

    1. Home Equity

    Sometimes your home can actually be a source of income for financial restructuring. If you have equity available, you might be able to use it to pay off your outstanding debts – essentially, this is a form of a consolidation loan.

    Again, this is dependent on your mortgage payments being current and made on time every month.

    1. Filing for a Consumer Proposal

    If you don’t have enough equity available or aren’t eligible for a consolidation loan, filing for a consumer proposal is another option.

    Consumer proposals deal with unsecured debt up to $250,000 (excluding your mortgage). In a consumer proposal, you make an offer to your creditors to settle your debts for less than what you owe. This offer must be accepted by the majority of your creditors and you must be able to prove they’ll get more money than they otherwise would if you filed for bankruptcy.

    In most cases, you can keep your home when you file for a consumer proposal, as your assets remain untouched. Again, this depends on your mortgage payments being kept up to date and is based on you having enough income to continue paying your mortgage after the proposal.

    A good financial advisor will structure your consumer proposal based on equity.

    If you have more than $250,000 in unsecured debt, you might file for another kind of proposal or bankruptcy instead.

    1. Filing for Bankruptcy

    Filing for bankruptcy is where most people fear they will lose their home. This is because in a bankruptcy, assets are often sold to pay off debts – including in some cases your house.

    However, this doesn’t always happen – and you may able to keep your home depending on the amount of equity you have available.

    If:

    • You don’t have much equity (this varies depending on province), and
    • Your mortgage payments are up to date

    your ability to keep your home increases substantially.

    If you do have a lot of equity, you may still be able to keep your home by repaying your equity through borrowing money, or through a second mortgage.

    A good financial advisor, like those at DebtCare Canada, will also help you structure your bankruptcy based on equity.

    1. If You Can’t Afford Your Mortgage…

    As we’ve discussed, keeping your home through financial restructuring largely depends on being able to continue making your mortgage payments.

    If your mortgage is up-to-date, you’re less likely to lose your house. But what if even after consolidating debt and making a budget you don’t have enough income to make your mortgage payments?

    This can be a whole other issue – but it’s important to remember that you still have options. You might need to:

    • Make more income through asking for a raise or getting a second job.
    • Or sell your home and downsize to a smaller mortgage.

    While selling your home may not necessarily be the same thing as keeping it, it can be preferable to losing your home through having it seized. In this option, you would still retain the profits from the sale, and you could use the money to move into another, less expensive property.

    A good financial advisor, like the ones at DebtCare Canada, can help you sort through your financial restructuring options, so your home is protected.

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

  • A Consumer Proposal is One Way to Stop a Wage Garnishment Dead in its Tracks!

    How do you stop a wage garnishment?

    If your paycheque is being targeted by creditors, it’s a critical question to ask – and we have the answer.

    Stopping a wage garnishment immediately is vital to your financial health:

    • A wage garnishment removes a percentage of your paycheque automatically.
    • It can be embarrassing – your employer (or clients if you’re self-employed) will find out that you are being garnished.
    • And it can put you in even more debt if you can’t afford your other expenses because of the garnishment.

    Luckily there are ways to stop a wage garnishment in its tracks. One of these methods is by filing for a consumer proposal.

    In a consumer proposal you make an offer to your creditors to settle your debt for a lower amount than you owe. The majority of your creditors must accept your proposal and they must think that it is more beneficial to them than if you were to file for bankruptcy instead.

    To qualify for a consumer proposal, you must:

    • Have less than $250,000 in unsecured, non-mortgage debt.
    • Be able to demonstrate your ability to repay at least a portion of your debt.

    Benefits of filing a consumer proposal:

    • It stops collection actions by creditors – including wage garnishments.
    • As long as the majority of your creditors accept the proposal it is binding on all creditors whether they voted against the proposal or not.
    • In most cases you can keep your home, car, and investments.
    • It allows for one low, interest-free monthly payment.
    • It can be paid in full at any time, at no additional cost.

    A consumer proposal stays on your credit rating for three years from the date it is paid in full as opposed to a bankruptcy that will remain on your credit for six years from the date that it is discharged.

    How to file for a consumer proposal:

    A consumer proposal is filed by a Licensed Insolvency Trustee (LIT) – formerly known as a Bankruptcy Trustee. But it’s important to note that LITs represent both you and your creditors and they are paid on a percentage of the consumer proposal they negotiate. The larger the settlement, the more money they make.

    We recommend working with an independent financial advisor who is strictly on your side to advocate for you throughout the consumer proposal process. At DebtCare Canada, we do just that. We perform an independent review of your financial situation and make practical recommendations that will work for you.

    If a consumer proposal is your best choice, we will work with you and structure the terms of your proposal before you meet with an LIT. With our assistance we will schedule a meeting with a Trustee and negotiate on your behalf as well as supervise the entire process.

    Stop a wage garnishment today. Contact us to get started. Call 1-888-890-0888 or visit www.debtcare.ca.