Category: Get Out of Debt

How is a Consumer Proposal Different from a Bankruptcy?
Consumer proposal vs. bankruptcy — what’s the difference?

At first glance, they can appear similar. Both clear your debt, stop collection action, and can harm your credit. But when we get into the nitty-gritty, there are several big things that set them apart.
1. Assets
Bankruptcy: When you file for personal bankruptcy, your assets are on the line. There may be allowable exceptions, like a car beneath a certain value, but anything over that can be taken. Each province in Canada has specific exceptions.

Consumer Proposal: When you file for a consumer proposalyour assets aren’t touched. Instead, an agreement is made with your creditors to pay an amount of money in lieu of the full payment, and if they accept your debt is cleared, collection action stops, and your assets cannot be seized. But you have to prove that it is more lucrative for your creditors to accept your consumer proposal than it would be for them if you declared bankruptcy.
1. Cost and Payment Schedule
Consumer Proposal: A consumer proposal payment schedule is designed for you. You make a proposal to your creditors, usually a percentage of your total unsecured debt, and then you create a schedule to pay back that percentage. These are usually fixed, monthly payments that are made over a term of 48 to 60 months (four to five years). You also must pay the Licensed Insolvency Trustee (LIT) who files your consumer proposal a portion for his fee.

Bankruptcy: Bankruptcy payments vary as they are based on your income. The more money you make, the more you’ll have to pay. A first-time bankruptcy can be completed in as little as nine months. If you have surplus income (if your household income is over the allowed amount) it may be extended up to 21 months. You are also required to pay the LIT a portion for his fee.
1. Credit Rating Impact
Bankruptcy: If you claim bankruptcy in Canada, you will receive an R9 credit rating. This is the worst rating you can have. It will stay on your credit report for six to seven years after you are discharged, depending on your province. If you are discharged after nine months, then the credit rating might stay on your record for seven to eight years total.

Consumer Proposal: With a consumer proposal, you will receive an R7 credit rating. It will remain for three years after you complete your payments. So, if you complete your payments in five years, the R7 credit rating will remain for eight years total (five years, plus three years after it’s completed).
1. Monthly Duties
Consumer Proposal: There are no monthly requirements with a consumer proposal, besides making your payments on time. You do not need to report any changes in your income. You have to attend two credit counselling sessions.

Bankruptcy: You are required to complete a monthly budget for income and expenses and supply copies of your pay stubs to your Licensed Insolvency Trustee (LIT). You also have to attend two credit counselling sessions.
1. Tax Refund
Bankruptcy: You will lose all tax refunds or tax credits you are owed.

Consumer Proposal: You keep all tax refunds or credits you are owed.
1. Eligibility
Consumer Proposal: Your total debt cannot exceed $250,000 (excluding a mortgage) and you must be able to afford to repay a portion of your debts. You are not guaranteed to be granted a proposal just by filing one. It must be accepted by the majority of your creditors. You need to prove that they would be better off with this arrangement than if you filed for bankruptcy.

Bankruptcy: Any Canadian resident who owes more than $1,000 in debt and is insolvent is eligible to file for personal bankruptcy.

When you’re choosing between filing for a consumer proposal or filing for bankruptcy, there is no clear winner. They both have far reaching consequences and will take years to recover from.

You also need to consider the bigger financial picture and all your forms of debt. Both a bankruptcy and a consumer proposal can cover unsecured credit and debt, such as credit cards, unsecured bank loans, lines of credit, payday loans, and unpaid bills.

But they won’t deal with secured debt, like your mortgage, secured car loan, or lease. They also won’t include debts like spousal or child support, court-imposed fines, and student loans that are less than seven years old. You will still have to pay those debts.

If you’re in a position where you’re considering filing for either one, make sure you have explored all of your other options. There could be another debt management solution that works better for you, without the same repercussions. And if you do decide to file, make sure that you seek independent representation besides your LIT.

Remember, LITs make money off of your consumer proposal or bankruptcy. You need someone who represents you — and only you — when you’re going through the process.

At DebtCare, we provide just that. We can represent you when filing for a consumer proposal or bankruptcy, and we can also make sure you have eliminated all other debt consolidation strategies.

Contact us today for a free consultation. Call 1-888-890-0888.
August 22, 2018
Two Ways to Get Out of Debt in 5 Years or Less
What is the best way to get out of debt fast?

Unfortunately, when it comes to debt there is rarely an easy way out. You likely didn’t get into debt overnight, so it’s going to take some time to regain your financial freedom. But there are options that can significantly speed up the process.

We’re looking at two of these options: filing for a consumer proposal and securing second mortgage financing. Read on to determine if one would work for you.
1. Consumer Proposal
In a consumer proposal, an offer is made to your creditors to repay a portion of what you owe in lieu of the whole payment.

A consumer proposal is generally termed over five years. It is suitable for someone who is loaded in debt, making minimum payments, has defaulted on debt, or is having problems managing payments. It stops collection action and interest.

You might be eligible for a consumer proposal if you:
- Have under $250,000 in debt (excluding your mortgage).
- Are a higher-income earner who has gotten into a bad financial position.
- Are a homeowner with some equity available.
However, filing for a consumer proposal has its downsides, too. For one thing, it can critically affect your credit score, making it extremely difficult to qualify for credit for years after the fact. It 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. And there is no guarantee that the majority of your creditors will accept your proposal; you have to prove that this option would be more lucrative for them than if you filed for bankruptcy instead.

If you’re considering filing for a consumer proposal, it’s best to seek the advice of a qualified debt consultant who represents you and isn’t making income off of your consumer proposal.
1. Second Mortgage Financing
If you’re a homeowner, securing a second mortgage might be available to you.

A second mortgage doesn’t affect the first mortgage and it can be amortized over five years to see you out of debt, without stretching out over 25 years like your first mortgage.

It’s best suited to those with home equity (at least 20% to 30%) and good credit. If your credit score is low, but you have equity, there may still be a lender who can help but it likely won’t be a prime lender.

A second mortgage can be a good way to consolidate debt, so long as you can make the payments on time. It can allow you to pay off your other outstanding debts and only have one monthly payment. Second mortgages typically carry a higher interest rate than first mortgages, but the rate is still often lower than the interest you might have from credit cards, car lease payments, or unsecured lines of credit.

If your debt is so large that it couldn’t be paid off with a second mortgage, or you’re not eligible for one, then filing for a consumer proposal might still be your best option.

You don’t have to assess your financial situation alone. Handle everything in one place and get your financial advice from someone who represents you and can deploy all financial solutions.

At DebtCare Canada we have financial programs that offer help to people with all types of credit and income. We can help you secure a second mortgage, represent you while filing for a consumer proposal, or explore other debt consolidation options.

Contact us today for a free consultation. Call 1-888-890-0888.
June 20, 2018
Get Out of Debt: Structure Your Second Mortgage as a Loan

When you’re struggling to meet your monthly payments and constantly stressing over those credit card bills, it may be difficult to move outside of that bubble and remember that, if you’re a homeowner with equity, you have a very valuable resource just sitting there. Many homeowners don’t realize that their homes are one of the least expensive ways out of debt. That is, depending on how you structure your loan.

First mortgage refinancing to get out of debt: many people make the mistake of refinancing a first mortgage just to pay a small amount of debt. Since refinancing can mean fees and penalties, or an amortization period that takes you 20-25 years into the future, this isn’t exactly the most financially sound option.

Using a home with significant equity can be a really smart way to get out of debt – and it doesn’t need to take you out of your financial comfort zone or take 20 years to pay off.

You can actually structure a second mortgage as a loan and it can stand alone from your first mortgage – second mortgages have slightly higher rates but in the end you can end up paying less depending on how you structure your loan.

For example, if you borrow $20,000 at 12% interest, your monthly payment based on a 5 year-amortization is less than $450 per month and the debt is completely paid off within 5 years! This means that you roll all of those smaller debts (with sky high interest rates) into one monthly payment, getting rid of all of the additional interest – and stress!

However, where you can end up paying through the nose is when you structure that second mortgage and amortize your payments over 20-25 years. Here you are paying that same rate of interest for a much longer period of time – so although monthly payments are smaller, the end result is a much larger balance due to accumulated interest.

When it comes to solutions to help you get out of debt, your home is a valuable asset – why not take advantage of it? Get rid of the credit card debt with a second mortgage – one monthly payment and far less interest. It just makes sense.

If you don’t own your home, or don’t have much equity, obviously this isn’t really an option. That doesn’t mean solutions don’t exist. If you want to know what they are, we can help with that too.

For more about how to use your home to get out of debt, or for other debt solutions, call DebtCare today. We can help: 1-888-890-0888.

July 12, 2016
Take Action to Get Out of Debt: Tips and Tricks
Debt free: a highly attractive yet increasingly unattainable lifestyle for the average Canadian. No matter how you slice it, consumer debt has become a major problem for many individuals, and whether as a result of job loss, divorce, student debt, or just overzealous spending, many now find themselves trying to dig themselves out of a fair-sized financial hole that often seems more like a bottomless pit.

Ok, wait. We are not just going to saddle you with negatives and not offer some useful advice. We are, after all, here to help. So, with that in mind, here is a realistic list of tips to help you get back on the road to financial freedom.
1. Make a monthly budget. We absolutely cannot stress this enough. It is the best, really the only, place to start when it comes to ways to get out of debt. Once you realize how much you take in each month, and compare it to how much you spend, you will actually have a better idea where your money is going, and how you can decrease certain amounts. And be realistic – don’t attempt to cut out all spending – no one can do that.
2. Stick to that budget. Become a savvy shopper and curb needless spending whenever and wherever possible. Look for sales whenever possible and take advantage of money saving incentives.
3. Stop paying just the minimum payments. Take any money saved thanks to your new budget and put it all on those debts. Since most minimum payments on credit cards are interest, making the minimum payment really is making the minimum payment. Give as much as you can to those creditors.
4. Work on those high interest credit cards. When you are overwhelmed with credit card debt and trying to decide which debts to eliminate first, always take a look at interest. If one card is 15% interest and another is 25%, think about how much money you are contributing to the principal and how much is just empty interest.
5. Seek out some debt help. Once you have tried to implement the above changes, but feel as though you are still left in a precarious financial position, it might be time to seek some professional assistance. An organization that can offer you various options to get out of debt might be your best solution.
Stop struggling and start swimming above water. It can often seem impossible to get out of debt if you are drowning, so start with these 5 tips and see just how far diligence can take you.

For more tips or for help getting out of debt please contact DebtCare today by calling 1-888-890-0888.
July 22, 2014
Get Out of Debt: Five Easy Steps to Get You Started

We’ve all heard that myth that dreaming about your teeth falling out means you’re worried about money – but what if Mr. Sandman leaves you checking your teeth every single morning? If money is all you can think about, it might be time to make some changes. Want to get out of debt but just not sure where to start? We can help. Here are 5 tips to help get you started!

1.     Create a budget and track spending. If you don’t know what you owe, or where your money is going, you can’t realistically make a plan to get out of debt. Inventory your debt totals, create a realistic budget and track your monthly spending in order to motivate and eliminate.

2. Pay more than the minimums. When your credit card bill comes and your minimum payment required is $50, that doesn’t mean that $50 will be taken from your total owing. The majority of this total goes right to interest, so stop paying only the minimum on your credit cards and pump up those payments as much as you can!

3.     Stop spending. Sure, this may seem like common sense, but unless you actually do it you are not fixing anything. Look back at that tracker and identify areas that could benefit from a slash. Or, if you can’t seem to resist temptation, get rid of that credit card, take it out of your wallet, or find another effective way to stop using it!

4.     Get debt help. Worried that you can’t tackle your debt on your own? You don’t have to. Dealing with debt can be tough, so why not research and get in touch with a reputable, professional debt management firm. There you can get advice on debt relief or find out more about solutions to actually get rid of the money owed.

5.     Stay focused. Don’t just say you are going to get out of debt – do it. Stay focused on the end goal, not on how tough it is to get there –most good things don’t come easy! Use your monthly tracker (and those decreasing numbers) as motivation!

Get your debt under control and eliminate your financial stress with these tips. Take it one step at a time and that mountain will soon become a molehill!

For more debt reduction tips please contact DebtCare Canada by calling 1 (888) 890-0888 or visit us online at www.debtcare.ca

February 10, 2014
Getting Out of Debt Blog Series #3: Debt Consolidation

When debt is taking over your life it can be difficult to see the light at the end of the tunnel. Mounting monthly payments that include mostly interest can become difficult to meet and missed payments can lead to collection calls or other enforcement action. You are not alone – many Canadians are dealing with heavy debt loads and don’t know where to turn. This 3^rd blog in our ‘getting out of debt blog series’ talks about debt consolidation and provides you with the information necessary to help you determine whether this is the best route to take for getting out of debt.

What is debt consolidation? It is pretty straightforward – a consolidation of your debt into one monthly payment, saving you thousands of dollars in interest and making the monthly payment far more manageable. It is a loan given by a financial institution which allows you to pay off all of your unsecured debts to creditors at once (secured debts such as car loans or mortgages are typically never included).

A debt consolidation can be achieved through a secured or unsecured loan or line of credit. Secured consolidation loans often involve a house, vehicle, investment or guarantor as security.

Obviously if you obtain a debt consolidation, your credit is paid off and the result will be no further collection or enforcement action by your creditors. Debt consolidations will also in some cases lower your interest rates and monthly payment. If you have damaged your credit, or are having enforcement action taken against you by your creditors and have no assets to pledge as security – being approved for a debt consolidation can be challenging.

Debt consolidation is not for everyone. Often in order to qualify your credit needs to be acceptable since the institution lending the money will want some indication that you will be able to make the required monthly payments. If your credit rating is less than stellar it might be more prudent to consider some other alternatives. The more bruised your credit is, if approved, the higher the interest rate on the debt consolidation will be, which may leave you in no better shape than when you started.

A smart way to determine how best to approach your ‘getting out of debt’ solution is to speak with a professional debt consultant, one experienced with helping Canadians find effective forms of debt relief. A consultant will be able to go through all of your financial obligations to help determine what means for getting out of debt are best suited to your unique situation. He or she will also be able to get the ball rolling and get you started on a debt-free road as well as help you to budget realistically for the future.

If you are in debt that you feel is becoming tough to manage it is probably time to consider getting some help. Don’t wait until the debt takes complete control.

For more information about debt consolidation or getting out of debt please contact DebtCare Canada by calling 1-800-890-0888 or visiting us online at www.debtcare.ca.

August 20, 2013
Get Out of Debt Canada

Even though the economy seems to be rebounding, the average Canadian household debt load continues to grow. People across the country are still relying heavily on credit for a great number of their normal purchases, and many are finding it harder and harder to pull themselves out of this dangerous cycle.

The stats on Canadian debt are unprecedented. A recent report from the CBC stated that the average unsecured consumer debt load jumped 4.6 percent in the third quarter of 2012 – the average amount being $26,768. The debt to income ratio has jumped from 140 to 165 percent. For Canadians, the trend seems to be one of continued reliance on credit to the extent that many are opting to up limits and increase borrowing.

This trend is becoming more and more problematic for those Canadians unable to meet minimum monthly payments. If monthly financial responsibilities exceed income, the results can be disastrous. This is why it has become increasingly important to get out of debt and take back control of your finances.

An important thing to remember when you are thinking about how to get out of debt is that you don’t have to do it by yourself. The influx of companies offering debt reduction services is evidence of this. Many Canadians are turning to these companies to get out of debt. It is important though, even with new regulations being put in place, to make sure that the company you choose is one that has your best interests in mind.

A good financial consultant is a great option for a number of reasons. An experienced, well-reputed financial consulting company can offer you solutions to get out of debt the right way. By offering you budgeting advice alongside various methods to get out of debt, a debt reduction company can give you the help that you need to get rid of your debt.

Many Canadians worry that bankruptcy is the only option when drowning in debt – it isn’t. Instead, debt consolidation is a great solution for many Canadians, as is entering into a consumer proposal. Consolidating your various monthly payments into one, easily managed payment not only makes it easier to pay, but this can also reduce the interest. A consumer proposal, if accepted, can reduce your debt substantially, making it far easier to get out of debt much more quickly.

Don’t keep ignoring your financial problems to the point that they take over your life. Instead, talk to a good financial consultant who can present the options available to help you get out of debt – before it is too late.

It is time to get out of debt Canada. For more information about how to deal with your debt, please contact DebtCare Canada today by calling 888-890-0888 or visit www.debtcare.ca.

April 2, 2013