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Tag: consumer proposal

  • Bankruptcy in Canada – Does Your Trustee Represent You?

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

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

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

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

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

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

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

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

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

     

  • Consumer Proposal or Debt Consolidation – Which Makes More Sense?

    rsz_consumer_proposal_debt_consolidationIn our experience, for those looking to get rid of their debt, there is often a lot of confusion surrounding the various options available. With so many different types of debt solutions available, it can be difficult to determine which option is the best. Today, in the hopes of providing some clarification, we discuss two such options: the consumer proposal and debt consolidation.

    A consumer proposal is a negotiated settlement with your creditors. This means that you offer to repay a portion of your debts and your creditors agree in order to receive at least a portion of what is owed. There are several benefits to this option. In a consumer proposal, all debt is consolidated into a single, monthly payment, there is no interest and often the debt is reduced.  The downside here is that your credit will be impacted. That being said, if you are in a position to seek a consumer proposal, your credit has probably already been affected.

    With a debt consolidation, you borrow money to pay off all of your debt. You then repay whomever loaned you the money, with interest, with a single, monthly payment. For example, many people choose to leverage their homes by refinancing their first mortgage or taking out a second mortgage to consolidate debt. With a debt consolidation, the monthly payment will usually be larger than it would be in a consumer proposal (since you are paying back all of what is owed as well as interest), but your credit is less negatively impacted.

    Which option is best? We can’t accurately answer that question here. Every person’s situation is unique and your personal circumstances will dictate which option is best for you.

    Buyer beware – when you’re struggling with financial decisions such as these, it is best to speak with a financial consultant for guidance to eliminate potential issues.  Remember, if you go to a bankruptcy trustee, they will usually offer up a consumer proposal as the best answer because that is what they sell. If you go to a bank, they will offer a traditional consolidation because that is what they sell. A financial consultant can advise you on the best option and negotiate the process for you. There is nothing being sold, so the bias just is not there.

    At DebtCare, our goal is to help you get out of debt – that could mean a debt consolidation, a consumer proposal or any number of other options. Our priority is your financial security.

    Get in touch today by calling 1-888-890-0888.

     

  • Consumer Proposal Vs. Second Mortgage – Which Makes More Sense

    debtcare2Clients often come to us seeking viable debt solutions, but are unsure what those debt solutions are. Most people are aware of some of the options available, but not all, and are sometimes surprised to learnthat accessing the equity in their homes through a second mortgage is a great way to get out of debt. Once they’ve learned this, their next question is which option makes the most sense – a consumer proposal or second mortgage financing?

    Let’s compare the two.

    Consumer proposal

    • Pros: Consolidates debt into one monthly payment
    • Sometimes reduces debt
    • Stops interest
    • Stops collection action
    • Cons: Credit is bruised for a short period

    Second Mortgage

    • Pros: Consolidates debt into one monthly payment
    • Stops collection action
    • Preserves credit
    • Cons: Interest bearing, debt will not be reduced unless settlements are made

    If there is significant equity in your home, an experienced financial professional will tell you that a consumer proposal is probably not the best way to go. In theory, if you have enough equity to obtain a second mortgage, that should be explored before filing a consumer proposal.

    Consumer proposals are negotiated and accepted based on your income, assets and ability to pay. If you have equity in assets that will be considered in your proposal.

    Wait, there is a third option which combines the two. If you have some home equity, you can leverage it to make an cash consumer proposal – this is where a proposal is negotiated for the amount to be paid in one lump sum. Here is an example: Sally owes $45,000 in debt and has the ability to get a $30,000 second mortgage. Sally could make cash proposal for $30,000 to settle the debt once and for all if all of her financial information makes sense within consumer proposal guidelines. This would clear the debt and allow her to rebuild her credit faster.

    Why? A mortgage preserves credit because the creditors are paid in full, whereas a consumer proposal reports to the credit report for 3 years from the date that it is paid in full. In the case of a cash consumer proposal, it would be paid in full when filed and so the proposal would cease to exist on the credit report 3 years from when filed – whereas bad credit can linger for 7 years or longer.

    If we’ve managed to make things a bit more complex than you’d originally envisioned, that is ok – it just means that you are now more aware of the options that exist and better prepared to make the best decision for your own situation.

    Our only advice is this: never go directly to a trustee, whatever your end decision. A trustee represents the creditor, not you and they actually earn more when you file a larger proposal. An independent financial consultant hired by you can structure your CP, save you big and protect you from the trustee and your creditors.

    DebtCare is an experienced financial consultant – one with your best interests in mind.

    Call us today to learn more about your options: 1 (888) 890-0888.

     

     

  • Spotlight: Does a Consumer Proposal Ruin Your Credit?

    debt1Last week we went over some of the basics of a consumer proposal, and thought we’d follow up this week by clearing up a few other questions people have regarding consumer proposals. The spotlight this week: does a consumer proposal ruin your credit?

    Does a consumer proposal ruin your credit? This is one area where people get confused about consumer proposals. One common myth is that, if you file a consumer proposal, your credit will be ruined for 7 years. This is a loaded assumption and one we mean to break down and dispel right now.

    Let’s start with a few facts about your credit:

    • Any late payments to credit and R9s (defaulted debts) report to your credit for 6 years following the date it is paid (back up to date).
    • A bankruptcy stays on your credit report for 6 years from the date that you are discharged.
    • A consumer proposal stays on your credit for 3 years from the date that it is paid in full.

    So, right away you will likely notice that of the 3, the consumer proposal is the one that actually remains on your credit for the shortest period of time.

    The great thing about a consumer proposal is that, once filed, it can be paid off at any time. This means that you can make more than your monthly payments whenever you wish to ensure that it is paid off quickly. This is one of the most important aspects of rebuilding after a consumer proposal. For example, if your proposal is paid off in 2 years, it would be completely off your credit report in 5 years, less time than if you had just left a defaulted item there.

    Additionally, even while the consumer proposal is on your credit report you can rebuild. Many lenders will extend mortgage financing to people who have a paid off consumer proposal with 1-2 years of strong, re-established credit. Using products such as a secured credit card to rebuild while in your CP are a good idea, because once the CP is paid, you won’t have any credit on your report (and lenders will want to see some credit history).

    So, does a consumer proposal ruin your credit? Chances are, if you are loaded in debt, have maxed out credit cards, made late payments to credit, or had accounts go to collections, your credit is already bruised. If this is the case, a consumer proposal leaves you in no worse a position, but will get you out of debt.

    Want to find out more about finally getting out of the vicious debt cycle that keeps you up at night?

    Call DebtCare today at 1 (888) 890-0888.

     

  • Can I File a Consumer Proposal and Keep My House?

    debt2You’ve likely heard the radio ads or seen the commercials on television citing the benefits of consumer proposals. If you’re an individual and your total debts do not exceed $250,000 (not including debts such as a mortgage secured by your principal residence), a consumer proposal might just be the best solution.

    Consumer proposals have been around for a long time, but it has been over the last decade or so that they’ve become popular as a viable solution for dealing with debt. Filing a consumer proposal is a legally binding process which involves a financial settlement to your creditors based on an accepted amount, your income and ability to repay. This often involves reducing your debt.

    Some assume, incorrectly, that a consumer proposal and bankruptcy are one and the same. While both are ultimately administered by a trustee, and both are valuable tools when you’re in over your head financially, they are actually quite different. In bankruptcy, you make monthly payments to a trustee. While undischarged, you must participate in credit counselling, report income, etc., to the trustee. You are insolvent and all of your relevant assets and income are vested in the trustee until you are discharged. The trustee in bankruptcy remains in your life until you are discharged.

    In a consumer proposal, an amount of money is proposed to your creditors with a 4-5 year repayment schedule. Once your creditors accept your proposal it is binding and can be paid in full at any time thereafter. Unlike bankruptcy, you are not “undischarged” and you do not have any obligations to the trustee other than making your monthly payments.

    One of the most common questions we receive when individuals come to us looking for debt help is if they can keep their house if they file a consumer proposal. The answer is yes. As long as you are able to continue making your monthly mortgage payments, your mortgage lender cannot foreclose or change the terms of your mortgage just because you’ve filed a consumer proposal.

    As mentioned, a consumer proposal is a legally binding agreement administered by a trustee. However, in order to reach the best settlement possible – one that benefits your creditors and one which you can realistically meet – you are best served by going to a debt specialist rather than going directly to a trustee. A trustee is required to find the best deal for both parties – which means they represent both you and your creditors. The trustee is the one with the power to determine what you can afford to pay, so entering the ring with a debt specialist who can represent your interests before any others will ensure you are protected.

    If you are considering a consumer proposal to help get rid of your debt, call DebtCare first. We represent you and only you. 1 (888) 890-0888.

     

  • When Your Trustee in Bankruptcy is Pushing a Consumer Proposal…

    debt2So you’ve finally decided to get a handle on your debt. You’ve done some research, spoken to friends and family, and have decided to get in touch with a trustee. On the first consultation, that trustee in bankruptcy suggests a consumer proposal. Then continues to suggest it, making it seem as though it is your only option.

    If your trustee in bankruptcy is pushing a consumer proposal, beware!

    Don’t get us wrong. A consumer proposal is a great way to get out of debt, and thousands of

    When Your Trustee in Bankruptcy is Pushing a Consumer Proposal…

    Canadians are taking this appealing option for the number of benefits it presents. However, it is not the only way to get out of debt – and if your trustee is presenting it as such, they might have ulterior motives.

    Why should you proceed with caution? It is simple: a trustee administers proposals and bankruptcies – that being said, these individuals are not there to represent and act for you alone. Their role is to administer your estate for the benefit of you AND your creditors. Ok, that seems fair…

    The problem here is that in consumer proposals the trustee is compensated based on the amount of the proposal. That alone presents a conflict. Add to this the fact that they don’t represent you, and it, essentially, is the same as going to court with a lawyer who says that they also act for the prosecutor – not sounding like such a smart idea anymore, is it?

    If you are in debt and looking for a way out, the first thing you need to do is get an impartial opinion on the state of your credit and finances. This includes looking at ALL the ways that the debt could be addressed, including exploring consolidation options, not just a consumer proposal.

    If a proposal is the best answer, that is great – it could save you money on interest, bring down your total debt balance, and consolidate all of those debts into one tidy monthly payment. Just be sure to have your representative negotiate the proposal with the trustee – don’t go to the trustee on your own – then you get the best deal and the representation of a professional who is representing only your interests and goals!

    At DebtCare, we deal with debt every day, and we represent you and only you. If you are considering a consumer proposal or any other debt relief option, call us first. We will make sure that you are protected! 1-888-890-0888.

     

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

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

    Full stop. This is not the case at all.

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

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

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

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

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

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

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

  • Myth vs Fact: Consumer Proposal vs Bankruptcy

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

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

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

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

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

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

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

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

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

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

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

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

  • Step into Spring with a Smile: Realistic Ways to Get Rid of Credit Card Debt

    credit card debtIs your credit card debt making it hard to get to sleep at night? Are you finding it hard to focus on daily tasks because of the stress? Are collection agencies calling you or your family members in an attempt to obtain what you owe? Are you avoiding opening bills that you know you can’t pay?

    If you answered yes to any of these questions, don’t worry, you are not alone. Thousands of Canadians struggle with this financial problem on a regular basis. The ease with which credit companies extend credit and the high interest rates have made credit card debt a national problem, one that continues to plague the average Canadian no matter their income or financial status.

    Does this mean that you have to continue to struggle to make those monthly payments or combat the stress? No – there are ways to get rid of credit card debt and stop the calls and finally get a good night’s sleep.

    • Firstly, stop using those cards. Right now! Remove the cards from your wallet to help resist the temptation.
    • Secondly, assess your debt. Make a list of the credit cards, the amounts you owe, and the monthly payments. Follow this up with a monthly budget, including everything you spend money on and all income. Once you’ve done this, establish what expenditures can be cut – and cut them.
    • Attack your debt. Once you’ve cut your spending, start applying that extra income to your current debt load. Make sure that you are making at least the monthly minimum payment on each card, and apply any additional savings to the balances owed.

    If this doesn’t seem like a realistic approach for the amount of debt you are currently carrying, or if making minimum payments has become almost impossible, some more serious methods may need to be considered. If this is your current situation, our best advice is to speak with an experienced debt specialist right away. Getting rid of your credit card debt might mean a debt consolidation, consumer proposal or bankruptcy – all of which are complex and come with a number of great benefits.

    Stop ignoring those phone calls and throwing away those bills. Deal with your credit card debt and eliminate that stress.

    For more about getting rid of credit card debt that seems to be holding you back please call DebtCare Canada today at 1-888-890-0888.