debtcare.ca

Category: Getting Out Of Debt

  • Debt and Divorce: How to Handle Your Finances During a Divorce

    Debt and divorce. How to handle your finances during a divorce isn’t an easy task. Since approximately 38% of marriages end in divorce in Canada, it is no wonder that people want to know how to deal with their own debt and marital debt during divorce. This article will explain your options and comes from the office of a noted debt defense and bankruptcy lawyer in Philadelphia, PA.

    You Are Not Responsible for Your Spouse’s Debt

    Debt and divorceIf your spouse incurred individual debt before or during your marriage, you are not responsible for paying it. In other words, no creditor of your spouse can come after you for their debt.

     

    However, the court may reassign individual debt in the course of the divorce proceedings. For example, if one spouse incurred debt while supporting the other through education or training, the supported spouse may have to pay some of that debt.

     

    A problem arises if someone fails to pay debt per the court order. Then, a creditor will pursue the spouse whose name is on the lending contract. If this is you, it may be prudent to make the monthly minimum payments in order to maintain your good credit, while your lawyer assists you in getting compensation and forcing your ex to pay.

    You and Your Spouse are Jointly and Severally Liable for Marital Debt

    If you incurred debt jointly, you are each responsible for paying the whole amount. While this might not seem fair, creditors may pursue one or the other of you, or both of you, until the debt is paid.

     

    Here is where it can get sticky. The court may order one or the other to pay the joint debt, but if that person fails to pay, the creditor can pursue the other for payment. Look into refinancing joint debt in the name of the person who has accepted responsibility for paying the debt or the person who was ordered by the court to pay. This avoids problems for the other spouse in the future.

     

    For example, the marital home is commonly mortgaged jointly. If one or the other intends to remain in the home, it may be prudent to refinance the home in that person’s name.

    If Possible, Agree on How to Manage Joint Debt Before Divorce

    You both should pull your credit reports from Equifax and TransUnion and, if possible, discuss what debt appears on each. If the divorce is not amicable and you are unable to reach a preliminary agreement about your debt, know that eventually it will be settled but by the court, but in the meantime, things will get messy.

     

    You can take steps to protect yourself financially, such as removing your spouse’s name as an authorized user on any credit accounts, freezing joint accounts, and opening an individual account to deposit your income and pay your expenses.

    What if My Ex Files Bankruptcy?

    Unfortunately, it is common for one or both divorcing spouses to file bankruptcy due to the financial burden of establishing and maintaining two households on the same amount of income used to maintain their single marital household.

     

    If your former spouse files bankruptcy, they will be discharged of most unsecured debt, including any joint credit cards or personal loans, and maybe discharged of secured debt such as a mortgage or a car loan if they surrender the collateral in their bankruptcy case.

     

    What does this mean for you? If your spouse is discharged of any joint debt, the creditor will pursue you for payment even if the court ordered your ex to pay it in your divorce proceedings. Your only recourse at that point is to seek an order from the court for reimbursement for having to ultimately pay that debt.

     

    If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. Contact us, for a free consultation, by calling us on 1-888-890-0888 or visiting www.debtcare.ca.

     

    About the Author

    Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy foreclosure and bankruptcy lawyer in Philadelphia, PA, U.S.A.

  • Debts Deferred or Suspended? Read This…

    With the COVID-19 pandemic ongoing, many debts have been deferred or suspended.

    For instance, Canada’s big banks have been offering mortgage deferrals on a case-by-case basis. The Government of Canada has temporarily suspended federal student loan payments. Some credit card providers have offered deferrals on payments. Some car loan lenders and utility providers have also offered deferrals.

    But here’s the thing — deferral doesn’t necessarily mean erased. The payments will come due at some point. And what happens if you can’t afford to pay?

    The Truth About Deferred Debts

    The Toronto Star reported early on that some mortgage deferrals could cost you thousands of dollars more in the long-term. While some lenders are deferring the principal sum of the debt, they are continuing to charge interest.

    “Customers should understand that this is not mortgage forgiveness,” the Toronto Star reported a Canadian Bankers’ Association spokesperson saying.

    “Mortgage deferral means that payments are skipped for a defined period of time, during which interest which would otherwise be part of the deferred payments is added to the outstanding balance of the mortgage.”

    The same could be true of any loan deferrals or suspensions. It’s important to look at the fine print of your deferral and understand what is truly being put off — and when it will come due.

    For instance, when the deferral period ends, will you be required to pay a lump sum? Will the balance be added to the rest of your loan (creating larger monthly payments)? Will your loan period be suspended?

    You need to know the answer.

    You also need to know about any associated interest or fees applied to the deferral or suspension. This is not a time for surprises.

    While deferrals may be necessary for some right now, go into it with your eyes open and make a plan.

    You need to make a plan now to deal with debt when the payments come due.

    Step 1: Assess Your Debts – Even Deferred Ones

    The first step is to assess all of your debts — including those that have been deferred or suspended.

    You need to know exactly how much you owe and exactly when you will owe it. This is how you can start to assess your true ability to repay.

    Make a list and ensure you have answers about any deferral fine print, then tally up your monthly payments. Now you will have an idea of how much you will owe each month (even if it is on hold for now).

    Step 2: Track Where Your Money is Going

    When you know how much you will owe each month, you will have an idea of how much income is needed to pay it off. You can assess whether your pre-COVID-19 income would cover this amount, and if your current assistance will do the same.

    If you don’t have enough income, don’t panic. This is just for information purposes right now.

    To make a payment plan, you need to understand where your current funds are going. If your income has been reduced, this may be easier to assess as necessities like rent and groceries may be making up the bulk of your expenses.

    But it can also help to look at a month of pre-COVID-19 spending to see where your income normally goes — and how much you were saving each month before the crisis hit.

    From here, you will understand how much income you are putting towards debt payments already and how much you can realistically afford to contribute when your income is returned.

    Step 3: Make a Savings Plan

    In the previous step, you will have hopefully seen if you have any leeway in your budget to set aside savings for when payments come due.

    Even if you can only set aside a small amount, every little bit can help. However, if you do not have enough income to realistically pay off your debts — now or if your income is returned — it’s time to look at other measures.

    Step 4: Deal with Debt

    If debt payments have been taking up a large chunk of your budget even before COVID-19, you need to look at dealing with them for good.

    The solution can depend on the type of debt you are carrying. For instance, mortgage debt could be dealt with through a refinancing, if enough equity is available.

    Unsecured debts might be eligible for settlement, and if your income is reduced you could get a better settlement right now.

    Outstanding utility bills and the like could be handled through a debt consolidation loan or filing for insolvency — bankruptcy or consumer proposal.

    The key is to consult with a debt counsellor who can walk you through your options and make a plan that works for you.

    At DebtCare Canada, we provide just that — we offer free consultations to help Canadians get out of debt for good.

    Don’t wait until the COVID-19 crisis is over to make a plan for your debt. Deal with it now so you can ensure you come out the other side stronger.

    DebtCare Canada is available 100% remotely. We have helped thousands of Canadians deal with problem debt. Call 1-888-890-0888 or visit www.debtcare.ca to contact our debt counsellors.

  • Get Debt Help Without Leaving the House – Here’s How

    In the past, before the novel coronavirus (COVID-19) people might have gone to see a financial consultant in person for debt help or otherwise, but with social distancing in effect, that is not advised right now unless absolutely essential.

    However, debt help is more necessary than ever right now. The impact of COVID-19 has left many Canadians out of work and struggling to pay bills.

    A report from the Canadian Centre for Policy Alternatives warns the unemployment rate could rise to 13.5%, the highest level since the Second World War.

    In one week, more than 500,000 Canadians applied for employment insurance (EI). The government is also expecting more than 4 million applicants for the recently announced Canada Emergency Response Benefit (CERB).

    While some government help is available — such as emergency caregiver assistance and a wage subsidy for eligible employers — these programs are still rolling out and there may be a waiting period to receive funds. And for many, the assistance provided may not be enough to get by.

    Dealing with Debt to Free Up Finances

    Debt payments take up a large chunk of Canadian budgets. According to Equifax Canada, the average Canadian carries $72,950 in debt. $23,800 of that is non-mortgage debt (which includes credit cards, loans and lines of credit).

    Even carrying a little bit of debt can stretch your budget, especially when your income is reduced. Do you want to be putting your limited income towards credit card payments?

    When every penny counts, it’s better to make that money work for you — instead of using it to repay past expenses.

    The time to deal with debt is now, particularly if you have been laid off or your income has been affected by COVID-19 or otherwise.

    While everyone is frightened and worried (and rightfully so), the current situation and loss of income will allow people to get much lower deals on their debts as their income has been reduced. Most creditors will be accepting any reasonable offer.

    If you wait until your income has returned, the opportunity to have your debt reduced to the same extent will be gone.

    How to Get Debt Help Online

    The key to getting debt help online — without leaving your house — is knowing what you are looking for.

    You want to find:

    • A debt consultant that has an established reputation (meaning you can trust their services — this is especially important when you cannot visit their offices due to social distancing).
    • A debt consultant that works in your part of the country or nationally.
    • A debt consultant set up for remote access — with social distancing, you shouldn’t have to go into an office.
    • A debt consultant that will review all your options.

    We can only speak to our services at DebtCare Canada, but we provide exactly that. We’ve helped thousands of Canadians deal with their debt and get their finances back on track.

    We act solely in your interest to ensure that you get the best possible results by utilizing federal government programs and other financial solutions to help you deal with your debt with dignity.

    Our reputation is trusted and secure. We operate nationally and remain fully functional during the COVID-19 pandemic through remote operations.

    How to Contact DebtCare Canada Remotely:

    We know this is a stressful time and we want to assure you that DebtCare is here for you. If you are struggling, please reach out. 

    You can also follow us for regular information related to dealing with your finances during COVID-19 and beyond. DebtCare is on Twitter, Facebook, and LinkedIn.

    Learn more about our services at https://debtcare.ca/.

  • COVID-19 Income and Debt Help for Canadians

    The past two weeks have been a non-stop train of breaking news as Canada copes with the novel coronavirus, COVID-19.

    This public health pandemic is affecting many across the country — both medically and financially.

    In order to “flatten the curve” and reduce the risk of infection, many businesses and public services have been suspended, including in some provinces:

    • Public and private school closures.
    • Daycare closures.
    • Eat-in restaurant closures (take-out and delivery are still available).
    • Temporary closure of non-essential businesses, such as clothing retailers.
    • Temporary closure of public event spaces, such as movie theatres.
    • The list goes on…

    While all of these measures are meant to reduce COVID-19 risk and pressure on our healthcare systems, it has created another challenge: financial difficulties.

    Many Canadians are now out of work, or unable to work due to the need for childcare or caring for those who are ill. While some are working from home, not everyone has that opportunity.

    Businesses are also feeling the loss of income, and some have had to lay off employees temporarily.

    While public safety is essential, there is no denying the challenge this has had on the Canadian economy — and that’s where emergency relief comes in.

    Emergency Response Package

    On March 18, 2020, Prime Minister Justin Trudeau announced an economic aid package of $82 billion. This includes:

    • A temporary boost to Canada Child Benefit payments.
    • A new Emergency Care Benefit of up to $900 biweekly, up to 15 weeks, to provide income support to workers who have to stay home and don’t qualify for paid sick leave or employment insurance (EI). This includes those who are self-employed.
    • A new Emergency Support Benefit to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment.
    • A six-month, interest-free reprieve on student loan payments.
    • The income tax deadline has been extended to June 1, 2020 and taxpayers can defer tax payments until August 31.
    • And more.

    Mortgage Payments Deferrals

    The Big 6 Banks announced on March 17 and 18 that they are taking measures to support customers on a case-by-case basis to provide solutions, including up to a six-month payment deferral for mortgages and the opportunity for relief on other credit products.

    This is meant to help those who are facing challenges due to COVID-19, such as pay disruption, childcare disruption, or illness.

    Customers are encouraged to reach out to their lenders to ask what assistance there is for them.

    Bank of Canada Interest Rate

    On March 13, 2020, the Bank of Canada announced an emergency interest rate cut to 0.75% — the lowest that it has been since 2017.

    “It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the Bank said.

    The next Canadian interest rate announcement is scheduled for April 15, 2020. Economists are predicting the interest rate will be cut again.

    The lower interest rate means that credit is easier to secure — and is especially helpful for variable-rate debts, such as variable-rate mortgages, credit cards, or unsecured lines of credit.

    Putting It All Together — and Dealing with Debt

    Let’s talk for a moment about the impact of all of this. While these are good measures temporarily, we must acknowledge that they are not necessarily long-term solutions.

    For people relying on a certain amount of income to meet their bills, $900 biweekly is likely not enough to cover their expenses.

    And then there is the matter of deferrals — whether that be deferring mortgage payments, student loans, income tax payment, or otherwise.

    These payments will still need to be made eventually. Some of the details have yet to be confirmed, but consumers need to be aware that these payments are not just disappearing. These methods are meant to give you time to get the money together, when hopefully the economy is recovered, along with public health.

    But (and there is a big but) the money will still be owed. You will still need to find the funds.

    If you are currently earning less than you usually make due to COVID-19, or have a hard time meeting your bills regardless, other measures may need to be taken to get your finances on track.

    These might include:

    • Creating a budget and tracking expenses.
    • Avoiding taking on more unnecessary debt, such as charging expenses to your credit card.
    • Consolidating debt payments and paying off high-interest debt.
    • Filing for insolvencies, such as bankruptcy or consumer proposal.

    Take the time now to make a plan for your finances during the COVID-19 pandemic. If you are on the brink, contact a debt counsellor today.

    Debt can weigh down your lifestyle, particularly when money is tight. If you have $10,000 in credit card debt, those payments can take away from your ability to pay the mortgage or rent, buy groceries, or pay utility bills. When every dollar counts, you don’t want any more than necessary going towards your debt payment.

    At DebtCare Canada, we remain available by phone, text, or online across the country. We will talk through your financial options with you and help you find the best path forward for your unique situation during the COVID-19 pandemic or otherwise.

    Contact us for a free consultation. Call or text “Help” to 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.

  • Affordable Housing in Toronto is Still a Major Problem

    Affordable housing in Toronto has been difficult to find for a while now — but despite hopes that it would get better, it is still a major problem for many.

    A recent report from Zoocasa determined that in the Greater Toronto Area, it would take 32 years for a household earning a median income to save a down payment for a typically-priced home.

    And for those renting instead of buying, affordable housing isn’t much better.

    The Canadian Rental Housing Index recently determined that in 20 Canadian ridings — including some in the Greater Toronto Area such as Willowdale, Thornhill, Richmond Hill, Markham-Unionville, University-Rosedale, and more — at least 25% of renters are spending 50% or more of their income on rent alone.

    At least 48% of renters are spending 30% or more of their income on rent.

    “Housing is typically considered affordable if a household spends less than 30% of its before-tax income on rent plus utilities,” the Index stated.

    See more of the Index results here: http://rentalhousingindex.ca/en/#intro

    With increases to home prices and rental rates, it’s no wonder that it’s getting harder and harder to make ends meet. It’s too expensive to live in the Greater Toronto Area and other major cities, and lenders know it.

    If you are in this situation, what can you do?

    While this is a tough situation to be in, the first thing to do is try to free up room in your budget. If you are using credit to balance the shortfall, you may find that doing away with the debt frees up the cashflow you need to pay rent or save more for a down payment.

    Debt can harm your budget in two ways:

    First, it can get in the way of your cashflow. If you are always making debt payments (like paying off your credit card balance plus interest) you’re spending money you could use elsewhere.

    Second, many lenders use your total debt service ratio (TDS) to determine how much you can afford to borrow — particularly when it comes to a mortgage. In addition, carrying too much debt can hurt your credit score, which makes it harder to be approved for low-interest loans. If you are hoping to get a mortgage in the near future, or renew an existing one, lowering your total debt-to-income ratio will only help.

    While getting out of debt won’t make Toronto’s home and rent prices drop, it can make it easier for you to balance your budget and save money at the same time.

    DebtCare Canada helps Canadians deal with outstanding debt. We’ve helped thousands of people reduce or restructure their debt, repair and rebuild credit, access financial help, and more.

    Contact us today for a free assessment to see how we can help you manage your budget while dealing with the lack of affordable housing in Toronto and the GTA.

    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 Stress-Free Holiday May Start with Consolidating Your Debt

    The holidays can be a time of family, love, and joy, but they are also often a source of major stress — financial stress to be exact.

    Have you considered consolidating your debt to manage that stress?

    More than half of Canadians say that they go over their budget during the holiday season. A CIBC poll found that the average Canadian spends $643 on holiday gifts and $300 on décor and entertaining. And those figures only keep going up.

    Moneris found that after the 2017 holiday season, Canadians spent an average of 4.26% more during the last three months of 2017 than they did during the same period in 2016.

    A 2017 Angus Reid poll of 1,512 Canadians found that three-quarters of respondents wish they could save more money during the holidays and about 52% end up spending more than they liked.

    In order to avoid any long-term damage to your credit score, it’s important that you pay your bills on time each month and (preferably) in full. Making the minimum payment every month is not enough to ensure good credit.

    Plus, most credit cards come with high interest rates, so that $1,000 of debt can quickly add up to even more. If it took you five months (the average timeframe) to pay $1,000 at an interest rate of 18% you would have to make a payment of $209.09 per month and by the end of the five months would have paid $1,045.45, including interest.

    That might be okay if it is your only debt and you are not accumulating any more, but for most people that is not the case.

    While a certain amount of spending is likely expected during the holiday season, it can be particularly stressful if you are already carrying debt.

    For instance, say that you have:

    • $10,000 of debt on one credit card at 19% interest.
    • $5,000 of debt on another at 21% interest.
    • And now $1,000 on a new credit card at 18% interest.

    And you are hoping to pay it off by the next holiday season — in 12 months.

    You would then have to make monthly payments of $1,477.03. By the end of the year, you would have spent an additional $1,724 in interest. And that’s assuming you don’t accumulate any more debt or miss any payments. This also assumes you have the ability and tools to calculate the combined monthly payments of all these debts, which most people struggle with.

    It can be stressful trying to pay off holiday debt, but it helps to have a plan. That’s where consolidating your debt can come in.

    With debt consolidation, you can put all of your outstanding debts together in one monthly payment. If you choose a consolidation loan with a fixed interest rate you will only have one bill to pay each month and you will always know the amount you have to pay, so you can budget for your payments.

    This can allow you to enjoy your holidays without worrying about how you will pay for them.

    At DebtCare Canada, we can review your options and help arrange the debt consolidation that’s right for you. You’ll be able to enter the holiday season feeling relaxed and stress-free.

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

  • Getting Out of Debt – Halloween Horror Stories to Learn From

    Getting Out of Debt – Halloween Horror Stories to Learn FromNo matter how you slice it, debt is a scary thing, especially when those phone calls start coming in from creditors threatening to take action in order to obtain what they are owed. In the spirit of the season, we thought we’d share some truly terrifying getting out of debt horror stories in the hopes that you can learn from other people’s mistakes and keep yourself protected!!

    Scenario #1: One of the most tragic stories, and yet one we continue to hear on a regular basis, is the one about the “debt consultant” who requires payment in full before paying off your creditors, only to disappear (or the company claims bankruptcy) just as your payments to him are completed! This is such a terrible occurrence that often leaves individuals with little avenue for financial recourse, having paid out hundreds, if not thousands, of dollars in the belief that their debt will eventually be settled.

    Lesson to be learned: Don’t trust an individual who asks for payment in full before paying off your creditors – this is just bad news all around!

    Scenario #2: We’ve all received them in the mail – those offers from credit card companies that give you 6 months no interest and encourage you to pay off existing credit card debt with this new card. Sure, this may sound like a great option – but what happens when that 6 months is up? Not only have you impacted your credit report with the initial inquiry and subsequent credit seeking, you’ve also essentially traded one card limit for another.

    Lesson to be learned: Unless you are certain that you can pay off the initial debt in its entirety before the time limit expires, toss these as you would any other credit card offer.

    Scenario #3: Recently a couple entered our office with a story that is financially terrifying for a number of reasons. After attempting to deal with their debt on their own with little success, our clients called the number of a debt company they found posted on a billboard (bad idea #1). The initial phone meeting sounded promising, and the company sounded quite legitimate, so the couple decided that the guarantees sounded so great that the offer was one they could not pass up – until they were asked for a money transfer of $500 to secure the company’s services. Fortunately, after further inquiries, and more online research, the couple realized that this was a major scam and averted a crisis that likely would have resulted in a serious loss of money! What scares us here is the knowledge that far too often the temptation is too much and the due diligence just isn’t done!

    Lesson to be learned: Do your research, read reviews, know who it is that you are placing your trust (and your money) in.

    True debt relief from a professional, respected, well-known organization is the safest, most effective means of getting out of debt without incurring exorbitant fees and further financial stress. At DebtCare, we are committed to providing you with the knowledge and expertise to help you get out of debt as quickly as possible. Call us today 1-888-890-0888.