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Tag: dealing with 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.

  • Breaking Down Second Mortgage Options and Costs

    A second mortgage is an excellent tool for dealing with debt. In recent years, many Canadians have come to recognize the value of using their home to consolidate debt. Today we discuss second mortgage options and costs and the benefits of using your home to deal with debt.

    Firstly, a second mortgage is great because it has nothing to do with your first mortgage, so you can structure it like a traditional debt consolidation while taking advantage of lower interest rates.

    For example, you don’t HAVE to amortize a second mortgage over 25 years as you would with a first mortgage. You can choose to amortize it over 5 or 10 years to see the debt paid off faster.

    Secondly, using a second mortgage to consolidate debt will often result in a much lower interest rate compared to the credit products you are currently concerned about.

    There are lots of different second mortgage options depending on your equity positioning and credit standing.

    If you have good credit, a line of credit or conventional second mortgage through a bank at a great low rate are two attractive options. With a line of credit, amortization is not required and your monthly payment will be based on the balance. That being said, selecting a line of credit will mean you need to be more disciplined because minimum payments are often 1-2% of the balance and thus very little will get paid to principal if you only make minimum payments. When choosing between a conventional second mortgage and line of credit, be sure to look at how long you want to be paying the debt and reverse calculate what your payments will look like – a good mortgage broker can help you do this.

    If you have bad credit, this will likely reduce your options and can mean higher rates, albeit usually still far less than a high interest loan from a finance company. If your credit is only slightly bruised, a finance company or trust company may extend second mortgage financing to you. However, if it is really bad you will need lots of equity and your broker will likely get your mortgage financed through a private lender. Most private lenders charge on an interest- only basis, however some may allow you, as with a line of credit, to pay more than the interest if your budget will permit. In this case, you’ll also want to check if the lender offering the mortgage will allow you to make extra payments without penalty.

    Keep in mind that second mortgage financing is a mortgage so you will have some fees. Potential fees could include (and this largely depends on how good or bad your credit is – good credit means fewer fees) a broker fee (lender may pay all or part if credit is good), legal fees (often less with lines of credit), application or administration fees from lender, and an appraisal (if your mortgage is not CMHC insured).

    Going directly to a lender is never a good idea. It is better to deal with a broker because they work with ALL lenders and can explore all options to get you the best deal. This is also important if your credit is bad as only brokers can obtain private mortgage financing.

    If you’re interested in finding out more about using second mortgage financing to consolidate debt, DebtCare can help.

    Call us 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.

     

  • Would You Go on Trial for Murder Without a Lawyer? Dealing with Debt

    Dealing with debtWould you go on trial for murder without a lawyer? We think it is safe to assume that the answer is no! Why? Because the stakes are high and the Crown attorney is a professional appointed by the Attorney General/Minister of Justice to enforce the law. Little old you can’t go up against a trained, seasoned trial lawyer!

    If you wouldn’t go on trial without a legal representative, why in the world would you ever go to a Trustee in Bankruptcy to seek help with your debt without financial representation?

    Like a Crown attorney, a Trustee in Bankruptcy is an officer appointed by a government official. Their duty is to administer bankruptcies and proposals under the Bankruptcy and Insolvency Act. Part of that duty is to ensure that your creditors get the fairest possible financial outcome.

    The law itself protects people when filing a bankruptcy or proposal, not the Trustee in Bankruptcy – they are simply administering legislation. While many advertise the benefits of contacting them about a bankruptcy or proposal, the law itself sets the stage for the benefits while the Trustee simply administers the process you are legally entitled to.

    Part of this process means evaluating your assets, investments, income and liabilities and determining how much money your creditors receive. In instances of consumer proposals, the Trustee receives payment based on a percentage of the proposal. Some have questioned whether this model poses a conflict of interest because a larger proposal = a larger fee.

    Also important is the fact that different Trustees administer files differently. While some deploy due diligence to verify the information in your application at the sign up stage, some have administration departments that do so after the fact. It is not uncommon, after a bankruptcy, for the bankrupt to receive communication from the Trustee that some information was incorrectly disclosed, meaning that you owe surplus income in your bankruptcy or that something that you thought would be protected won’t be!

    Where your financial future is concerned, the stakes are too high and that is why you should never go to a Trustee unrepresented. Do you need a lawyer? No, but you definitely need an experienced financial professional to guide you through the bankruptcy or consumer proposal process.

    Why is this different? Because you pay this professional directly! They are hired to represent and counsel you. Part of this counsel means working with you to structure your financial information and even bring it forward to a Trustee on your behalf. They will help you make sure that there are no holes in your application or unnecessary information that could cause you problems.

    If you are thinking about a bankruptcy or consumer proposal, do your due diligence. Both are effective solutions for dealing with debt, you just want to ensure that you end up with the fairest possible terms.

    For more about effective representation in the bankruptcy or consumer proposal process please contact DebtCare Canada today by calling 1-888-890-0888.

  • Who Is Spending? Canadian Household Debt

    Canadian consumer debt has continued to rise over the last few months, and although the delinquency rate has dropped, the spending has not. But since the delinquency rate has dropped, that means that individuals are more conscious of the need to keep up with paying off Canadian household debt – which is always a good thing.

    So who is spending, who is responsible for dealing with household debt, and how do Canadians feel about their retirement financials? Check out this great infographic “He Debt, She Debt.”

    Who Is Spending? Canadian Household Debt

    According to the survey, both men and women say debt repayment should be a top priority, but there were a few interesting findings:

    • Who is responsible for household debt?
    1. It is equal: 39% men vs. 54% women
    2. Me or mostly me: 56% men vs. 36% women
    3. My partner or mostly my partner: 4% men vs. 10% women
    • Are you confident you’ll be debt-free at retirement?
      • 55% of men and 49% of women said yes
    • Do you find the idea of retiring with debt stressful?
      • 60% of women and 42% of men said yes

    Where do you stand as far as these survey results? Are you the big spender in your household? Do you feel as though retiring without debt is a feasible achievement?

    If Canadian household debt seems to be a stressor, no matter who is responsible, or if you feel like retiring without debt might be an impossible goal, please call DebtCare Canada today. We can help you deal with your debt problem and get you back on a firm financial footing: 1-888-890-0888.

  • Tips for Dealing with Debt Over the Holiday Season

    Dealing with DebtThe holidays should be time to relax, enjoy time with family and friends, and eat far too much delicious food – but for far too many of us, this time of year is also accompanied by a biting anxiety when you think about the amount of money being spent. For those individuals with debt, holiday spending can be a major stress inducer – so we’ve developed a list of easy to implement tips to help with dealing with debt over the holidays.

    Tips for dealing with debt over the holidays:

    First off, set a holiday budget and keep track of what you spend. Establishing a budget is the best way to ensure that you don’t overspend. Have several people to buy for? Divide that budget into envelopes and take those with you when you shop – once an envelope is empty you are finished with that person.

    Start a Secret Santa tradition. Instead of buying for all of the adults in your family, draw names and set a budget and each person buys only for one person – this can seriously cut costs.

    Shop with a list. This can help curb over-spending if you stick to the list rather than buying everything that you see and think others will love.

    Shop early. You still have a few weeks before you have to give those gifts, so get started right now. This also helps to give you time to price match, ensuring everything you want is in stock. And when shopping early, take the time to look for sales and discounts.

    Get creative. If you have the time and the imagination you can save a ton of money by making gifts rather than buying them. Take advantage of Pinterest for great gift ideas that you can make yourself – you might even find some great ideas and suggestions on saving money in other ways.

    Remember: many of us start out with good intentions –buying everything with credits cards with the intention of paying these cards off as soon as the holidays are over – but this isn’t usually what happens and many individuals find themselves paying for their holiday spending months into the New Year. Don’t let the holidays = huge credit card debt.

    Dealing with debt during the holidays can be a challenge, especially if you are already struggling financially, but these tips may just help you keep things in perspective and stop you from going overboard.

    For more about dealing with debt, whether during the holidays or at any time during the year, please contact DebtCare Canada for tips that you can use any time: 1-888-890-0888.

  • The Challenges of Dealing with Debt Through a Divorce

    In Canada, divorce is one of the biggest causes of debt, and debt is one of the biggest causes of divorce. No matter how you look at it, financial strain wreaks havoc on your life in a number of different ways. When you separate, and go from a 2 income household to a 1 income household, it can become incredibly difficult to navigate this change in your financial situation. Maintaining a hold on your current debtload, meeting minimum payments, even establishing and sticking to a realistic budget can be really tough. Check out this video of DebtCare’s own Pam Shimmerman, our financial restructuring specialist. With a legal background, Pam has helped countless individuals deal with the debt that comes from divorce.

    One of the best things that you can do once a divorce is initiated is to take a detailed look at your household income and expenses, as well as your current debt load and future financial goals. Working through these items with a financial specialist can help ensure stability and can help you to achieve your financial goals. If you are in the midst of a divorce and would like some help dealing with the financial repercussions, please contact Pam for a free consultation. You don’t have to do it alone. Please call 1-888-890-0888 or email Pam directly at pshimmerman@debtcare.ca.

  • Filing a Consumer Proposal in Ontario – What you SHOULD know

    If you are thinking about filing a consumer proposal in Ontario there is a lot that you should know. Filing a consumer proposal can be a sound option for dealing with debt depending on your personal circumstances. When making a consumer proposal you are essentially making an offer to your creditors under the laws and regulations set out in the Bankruptcy and Insolvency Act (BIA). The BIA is federal legislation so the process to file a consumer proposal is the same whether you are filing a consumer proposal in Ontario or BC.

    Here is how the process works:

    1.       The amount of the consumer proposal is determined using a formula based on your income and ability to repay the proposal on a monthly basis, and then that payment is multiplied by a term of 4-5 years. The sum is the amount of the proposal. This can result in the debt being reduced.

    2.       Once the consumer proposal offer has been formulated, the official offer is made through a trustee in bankruptcy.

    3.       Your creditors then have 30 days to accept or reject the proposal. As long as creditors that represent 51% of the debt in your proposal vote yes, the proposal is accepted. Creditors who do not respond or vote lose their vote and go on record as not opposing the consumer proposal.

    4.       If your consumer proposal is accepted (and many are) you will then make a single monthly payment to the bankruptcy trustee for the term of the consumer proposal.

    Consumer proposals offer many benefits:

    • They can be paid off early so if your financial situation improves you can pay off the proposal at any time.
    • While the consumer proposal will have a short term negative impact on your credit report, the consumer proposal is removed from your credit report 3 years from the date it is paid in full, so the sooner you pay it off, the sooner you can rebuild your credit – the ball is literally in your court.
    • They stop collection action. All collection action with respect to unsecured creditors included in the consumer proposal will stop. This includes wage garnishments.
    • They offer a single monthly payment which is very convenient.

    Now that we have covered how a consumer proposal works and the benefits, let’s look a little bit closer at the process of actually filing a consumer proposal in Ontario. 

    Consumer proposals are administered by a trustee in bankruptcy. The trustee in bankruptcy has an obligation to act both in the best interest of yourself and your creditors. Going to a trustee in bankruptcy directly to discuss a consumer proposal is dangerous because they will probe you and use your financial information to pay your creditors the maximum monthly payment. This leaves many without much financial breathing room which is why many consumer proposals fail. Trustees are also compensated based on a percentage of your proposal. A larger proposal means more compensation for the trustee. It is for these reasons that you should seek out your own independent financial representation if you plan to file a consumer proposal.

    Hiring your own representative is a small expense that can save you thousands of dollars. A good financial consultant who is versed in the BIA can look at your financial picture and help you to craft proposal terms to push with the trustee. They can also arrange the proposal with the trustee and represent you throughout the process. This is money well spent!

    If you would like more information about filing a consumer proposal in Ontario please call DebtCare at 1-888-890-0888 or visit www.debtcare.ca.

  • Dealing with Debt Part 3 – Divorce Debt in Canada

    Canada has the 8th highest divorce rate in the world. Human Resources Development Canada has reported that the proportion of marriages expected to end in divorce has fluctuated between 35% and 42% in recent years. In 2008, 40.7% of marriages were expected to end in divorce before the 30th wedding anniversary. In 2008, there were 70,226 divorces in Canada or 2.11 divorces per 1,000 people.

    Divorce debt in Canada is also very common. Human Resources Development Canada also reported that in 2008, 115,789 Canadians were unable to repay their debts. Serious financial difficulties brought them to file either a consumer proposal or a bankruptcy. Individuals who were divorced or separated were more likely to file a proposal or bankruptcy.

    Why is divorce debt one of the leading causes on bankruptcy in Canada? The answer is fairly simple. First, two income households will often accumulate debt based on their “household ability to pay the debt”. The challenge with this is that debt is accumulated based on two people sharing living expenses and when people separate, living expenses will double because now each party has to pay for rent or a mortgage, and living expenses separately. When household debt is present this can make it challenging to pay it.

    Second, some marriages will involve one person working and one person raising the family. When divorce occurs, the party who hasn’t worked will likely have little to no income but be faced with the immediate expense of having to hire a lawyer and also live. In many cases this forces the party who has been home raising the family back into the workforce. Individuals who have been out of the workforce for a long time often have to re-enter the workforce in junior or entry level positions.

    Third, sometimes one party in a marriage may carry all of the debt in his or her name. Much of the debt may have been used by the other spouse. There is nothing worse than getting a divorce and then finding yourself having to pay your spouse’s debt.

    Legal protections may result in the party who has the weaker financial positioning receiving support payments, being awarded the house, having the other party take responsibility for the debt, but this can take years. Also, the legal fees that compound over the course of a divorce may end up being more than the debt you owed to begin with.

    So how can someone in Canada who has divorce debt keep his or her head above water without filing for bankruptcy? Fortunately, if you are in this situation there is a solution and believe me you are not alone. There are financial programs for people dealing with debt and specifically dealing with divorce debt in Canada. These programs will often enable you to make a satisfactory arrangement with your creditors and will enable you to consolidate your debt payments into a single reduced monthly payment. These programs can be found through debt consultants who specialize in divorce debt in Canada.

    It is important if you are dealing with divorce debt to make responsible decisions that protect yourself and your family and also consider both your short term circumstances and long term goals.

    For more information about dealing with debt or to get help with divorce debt in Canada please visit www.debtcare.ca or call 416-907-2582.