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  • School for Debt Relief #2: Bankruptcy vs. Consumer Proposal

    Debt ReliefThis week we are back in the classroom with the second blog in our school for debt relief series, this time to talk about the difference between a bankruptcy and a consumer proposal. These are two very popular forms of debt relief, but before you jump in it is best to fully understand each option. If you feel as though you are drowning in debt and don’t foresee a solution in the future, one of these options may be just what you need.

    In Canada, hundreds of people each year choose to deal with their debt through a bankruptcy or consumer proposal. That being said, the two are very different, so we’ve broken things down to help you better understand how these forms of debt relief can help.

    Bankruptcy:

    Bankruptcy is the legal process that discharges you from most of your debts. This may involve the distribution or selling of some of your assets to pay creditors, but this depends on your own individual situation. The first time you file for bankruptcy, if you do not have any surplus income, you can qualify to be discharged (meaning you have fulfilled your obligations) within 9 months. If there is surplus income, you can be discharged in 21 months. When you file you are required to report to your trustee on a monthly basis, make monthly payments and complete two credit counselling sessions. If, over the course of your bankruptcy, your financial situation changes to the point that surplus income exists, you will be required to pay additional monthly payments until your trustee is satisfied. Once you become discharged, your debts are gone and your obligations are over.

    Things you need to know: once you file you can only be discharged by your trustee – it is up to their discretion to decide when obligations have been met. Additionally, attempting to obtain credit after you have filed (and after being discharged) can be significantly impacted. This is because you are now deemed high risk by creditors.

    Consumer Proposal:

    A consumer proposal is also a legal process which discharges you from your debts, but in a different way. In a consumer proposal, your creditors agree upon a repayment amount, usually significantly less than what you owe, and then you make monthly payments for a set number of months. This pays off only unsecured credit (credit cards, lines of credit, personal loans), but not secured debt (mortgage, car loans).  Once you have fulfilled your obligations (monthly payments), you are debt free and out of the consumer proposal. That being said, like a bankruptcy, a consumer proposal can impact your ability to secure credit in the future.

    Both of these options are valuable if you find yourself struggling with debt. Each option has its pros and cons, and so speaking with a professional debt consultant is the best place to start.

    For more information about debt relief and bankruptcy versus a consumer proposal please contact DebtCare Canada at 1-888-890-0888 or visit www.debtcare.ca.

  • School for Debt Relief #1: Harassing Collection Calls? Know Your Rights

    Debt ReliefWith September behind us, and the school year in full swing, it is the perfect opportunity to take some time for yourself. So, what better time to give yourself a new start than right now? If you are in debt, this school for debt relief blog is for you. This first blog in the series will look at collection calls and help you better understand how to stop them.

    When you are receiving harassing phone calls from a collection agency it can be very stressful. Each time you pick up the phone can bring with it the anxiety that comes from knowing that you still have not managed to make that payment. But what can you do? If the money is not readily available, not answering or avoiding the calls is probably the best course of action, right? Wrong! This will likely only make the problem worse.

    Here are some things you need to know about your rights when it comes to collection calls. Firstly, when an organization calls you concerning a debt, they are likely calling from a collection agency – an organization hired by your creditors to collect a debt. These calls can sometimes get quite aggressive, so it is crucial to know your rights and better understand what is fair and what is not.

    In Ontario there are laws which outline the appropriate behaviour that collection agencies must adhere to when making collection calls. First off, you must receive a notice in writing regarding the debt.

    When can they contact you? Here are some of the restrictions put in place by law:

    A collection agency cannot:

    –        Contact you more than 3 times in the course of 7 days without your consent

    –        Contact you on Sunday, except between 1 and 5pm

    –        Contact you on any day between 9pm and 7am

    –        Contact you on a statutory holiday

    –        Use threatening, profane, intimidating or coercive language

    –        Use excessive, undue or unreasonable pressure

    –        Contact a spouse, family member, friend, etc. regarding the debt unless that person has guaranteed the debt or you have given permission for that person to be contacted.

    If you feel as though your rights have been violated you do have some recourse for action. Sending a letter to the agency stating why you feel they have acted inappropriately, or, if the behaviour persists, filing a complaint with the Ministry of Consumer Services are two options to consider.

    In the end, the only real way to stop collection calls is to pay your debt. If this is something that you feel you may not be able to achieve on your own it might be time to seek out some professional help. A debt solutions company can present you with the various options and help you get debt relief and stop those calls.

    For more information about debt relief or to put a stop to the collection calls please contact DebtCare today by calling 1-888-890-0888.

  • Getting Out of Debt Blog Series #3: Debt Consolidation

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

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

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

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

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

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

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

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

  • Summer Debt Relief: Tips to Reduce Your Debt

    Debt ReliefOver the summer many families find that debt rises with the temperatures; vacations, weekends away, daily outings, etc. can all leave the wallet feeling very light. If you entered the summer drowning in debt, the worst thing that you can do over the summer is add to that. Instead, use this time to make some financial changes and reduce you debt rather than continuing to build it up. Here are our summer debt relief tips to help you regain control of your finances.

    Debt relief tip #1: Go over your finances and set a budget. Look at how much you spend every month on bills and see where you can save. And be realistic. Don’t deny yourself every luxury – you won’t be able to stick to it. For example, if you eat out 5 nights a week, don’t cut this out altogether, you are bound to cave in at some point. Instead try and limit these treats to once a week, or even once every 2 weeks.

    Debt relief tip #2: Avoid making only minimum monthly payments. Most of your monthly payment is just interest, very little of the principle balance being paid off as a result. Check out your monthly statement – most will give you a timeline showing when your balance will be paid off if only monthly payments are made – this might shock you – and hopefully motivate you to reduce your debt!

    Debt relief tip #3: Contact your creditors and see if they can offer a lower interest rate, especially if you have received offers from other companies offering an interest free period and free transfer (just be sure that you can pay off the balance before the interest free period is up). This option though is often only good for those with good credit – if your credit is less than stellar or if you routinely miss payments, there isn’t much motivation for your creditors to reward you with a lower interest rate.

    Debt relief tip #4: Seek the help of a professional. Once you get deep into debt, it can seem impossible to climb back out. But it is possible. If you have tried to reduce your debt but just can’t seem to make any progress, it might be time to call in the professionals, ones with experience helping Canadians get debt relief. Debt consolidation, consumer proposals or bankruptcy are all viable options to reduce your debt, and can all end up significantly reducing the amount of debt you currently carry.

    Don’t let summer spending get away from you. Instead, try to reduce your debt instead of increasing it with these tips and others. For more tips about debt relief and how to reduce your debt over the summer, please contact DebtCare by calling 1-800-890-0888 or visiting www.debtcare.ca.

  • Collection Agency Harassment: How to Stop the Calls

    collection agency harassmentCanadians have become so accustomed to carrying debt, and for some being in debt has become the norm. It is true that the vast majority of Canadians do have debt and when debt accumulates to the point where you are defaulting on monthly payments, the debt you have can be the source of considerable stress. This is especially true if your creditor has sent your debt to a collection company resulting in collection agency harassment!

    Collection agency harassment comes in many forms, but the most common is phone calls demanding payment for uncollected funds. These calls can come during the day, in the evening, on the weekends – when you are at home and at work. If you have been receiving these calls, or are nervous that they may begin in the very near future, it is best not to avoid the issue. The calls are not going to stop just because you don’t answer the phone – if anything they will increase in frequency. The collection agency may also pursue other methods to make contact with you that can be the source of embarrassment.

    In provinces like Ontario collection agencies are regulated by the appropriate ministry. In Ontario that ministry is the Ministry of Consumer Services (MCS). Reading your province’s legislation that deals with the regulation of collection agencies is your first step towards stopping collection agency harassment. If an agent called you at a time he or she wasn’t supposed to or disclosed information about you or your debt to a third party such as a family member or co-worker, you may file a complaint with the government to stop the collection agency harassment.

    Formulate a plan to deal with the debt. It won’t go away by itself and as long as it sits in collections it will accumulate very high interest, can be damaging to your credit and the collection agency will continue to pursue you. Speak with a financial consultant who has experience stopping collection agency harassment for help and also to learn about programs that can help you deal with the root problem – the debt itself.

    There are several very effective forms of debt relief in Canada, most common among them are debt settlements, consumer proposals, debt consolidation, mortgage refinancing and bankruptcy. All of these approaches have different benefits. While a consumer proposal can reduce your debt and freeze interest, it can also impact your credit in the short-run. While mortgage refinancing will enable you to rebuild credit faster, you will have to pay closing costs and interest to use your home equity to consolidate your debt. Only a skilled financial consultant can help you to review your options and help you choose the one that will best help you achieve your personal financial goals.

    If you are facing collection agency harassment it might be time to get the ball rolling and seek out debt relief from a professional organization experienced in dealing with collection agencies and helping individuals get rid of their debt. Get control of your debt – don’t let your debt control you!

    For more information about debt relief to stop collection agency harassment please contact DebtCare Canada today by calling 1-800-890-0888.

  • Credit Card Debt Relief Scams – Buyer Beware

    If you are drowning in credit card debt then there is no doubt you have been thinking about how you can get credit card debt relief. Fortunately for you there are more companies than ever before advertising credit card debt relief services, but it is very important to do your due diligence when choosing one if you want to avoid credit card debt relief scams.

    Here are some things that you should ask yourself in order to find a legitimate company:

    1.       Does the company have a website?

    2.       Is the company listed with Industry Canada?

    3.       Does the company have a bricks and mortar retail location?

    4.       Have past clients of the company made positive reviews about them?

    5.       Do the company and its employees have a presence online on sites like LinkedIn?

    If you want to avoid credit card debt relief scams, ask a lot of questions:

    1.       Does the company charge an upfront fee? If they do, this is a not a good sign. The company should be able to present you with financial options and advise you of the cost to participate in them. Only upon selecting a program should you pay any fee to the company.

    2.       Is the company going to hold the money you pay to them monthly and then disperse the money at a later date? Beware of credit card debt relief companies that collect money from you monthly on the premise that once it has accumulated, they will use it to settle your debt. You don’t know what could happen with the company in the future and this is risky business.

    3.       What will the impact be to your credit? Let’s be realistic – if you are behind making payments or know you will be soon, your credit has likely already taken a hit – or you should expect it to. Any debt solution that involves reducing your debt or freezing the interest will have a negative impact to your credit. A financial program that involves reducing your debt will cause you to pay off your debt much sooner so it really is short term gain for long term pain. Our point here is that the company that offers you debt relief should be open about the implications that different programs will have on your credit and have the ability to guide you through the process of rebuilding your credit.

    4.       Ask the company to be clear about their solution. Many companies will promote debt consolidation but there are different types of debt consolidation. Debt consolidation involves consolidating debts into a single monthly payment. Many credit card debt relief options achieve this but each is different. For example:

    a.       If a bank gives you a debt consolidation loan your creditors will be paid off in full. Pros: You can preserve your credit and your relationships with your creditors. Cons: You will pay interest on the debt and it will take a long time to pay off. Also, you must have good credit for this option.

    b.      You could refinance your mortgage to consolidate your debt. Pros: You can preserve your credit and your relationships with your creditors. Cons: You will pay interest on the debt and you will be stretching the debt out over your mortgage amortization.

    c.       If you go to credit counselling they will allow you to make a single monthly payment to them. Pros: Monthly payments are low. Cons: Damages credit, damages relationships with creditors, takes a really long time to pay off.

    d.      A consumer proposal also involves making a single monthly payment. Pros: Debt can be reduced, single monthly payment, stops collection action, interest is frozen. Cons: Damage to credit.

    e.      A bankruptcy will also result in a consolidated single monthly payment. Pros: Debt can be reduced, single monthly payment, stops collection action, interest is frozen. Cons: Damage to credit, ongoing reporting obligation to trustee, if financial situation improves payments could be increased.

    When looking for a company that offers debt solutions remember that if you do your research and ask a lot of questions you should be able to find a debt solution while avoiding credit card debt relief scams.

    For more information about credit card debt relief or if you need help with a financial problem please call DebtCare at 1-888-890-0888 or visit www.debtcare.ca.

  • Finding Debt Relief from Holiday Credit Card Bills

    Credit cards are scary because they are easy to run up and then difficult to pay down. Did you know that last year it was reported that the average Canadian is carrying over $40,000 in unsecured debt? If you are one of these Canadians then you probably had credit card debt before you even started holiday shopping! Now the holiday shopping credit card bills are rolling in and you are likely thinking that you could really use some debt relief.

    Credit card debt presents the following challenges:

    1. Damage to your credit. Even if you are making your minimum payments credit cards can still damage your credit. Did you know that if you let your credit card balance get close to the limit, or if you go over the limit, it reduces your credit score? Yes, it is true, and not only does it reduce your credit score it also causes a message to appear on the credit report that indicates that the proportion of the credit card balances are too close to the credit limits.
    2. Minimum monthly payments are too small. Credit card companies set your minimum monthly payment at 1-3% of your balance. This is simply too small. If you make only minimum monthly payments on credit cards it can take many years to pay down the balance.
    3. Monthly compound interest. Unlike loans, credit card interest compounds monthly (12 times per year). This means that interest is added to your balance each month. When you combine the fact that your interest compounds monthly with the fact that your minimum monthly payment on your credit card is likely set at 1-3% of your balance, the effective cost to borrow using your credit card is significantly higher than the interest rate on your credit card.

    Credit card debt can quickly become overwhelming because once it accumulates it can become really difficult to pay off. Most people do not have the kind of cash flow needed to really get those credit card bills paid off.

    Getting debt relief from your holiday credit card bills can be achieved three ways:

    1. By paying off the debt by liquidating your savings, getting help from family or winning the lottery. Unfortunately this is an option that most folks don’t enjoy.
    2. By consolidating debt through:
      1. A loan with the bank – you will need good credit for this option.
      2. A mortgage refinance – you will need a home with equity for this option.
      3. By taking advantage of an alternate financial program.

    If you don’t have good credit or assets then an alternate financial program may be the best choice for you.  An alternate financial program will enable you to make a single monthly payment, as in a debt consolidation, and will stop the interest from accruing on your credit cards. Sounds like a great solution right? Well, really the right solution will depend on your personal financial circumstances. Before making any of the above choices your best bet is to speak with a financial consultant who is hired by you, one who can offer you unbiased financial advice so that you can get debt relief from your holiday credit card bills and start off the year on fresh financial footing.

    For more information about finding debt relief contact DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • Debt Relief in Canada Blog Series Part 4 – The Reality of Making a Debt Settlement

    You may have heard about debt relief in Canada being offered by debt reduction companies or some of the government reports warning consumers about the risks associated with debt reduction companies.

    The debt reduction companies that the government has been speaking out against are those who offer debt relief in Canada without a bankruptcy or consumer proposal. These debt reduction companies will offer you a program whereby you pay them on a monthly basis over a period of time with a promise at the end that they will settle your debts.

    The reality of making a debt settlement with your creditors is that generally a creditor will not make a debt settlement unless you have the funds to forward them the full settlement amount at the time the debt settlement is made. In almost all cases, your creditors and their collection agencies will not accept monthly payments when they approve a debt settlement, unless it is part of a consumer proposal. For example, if you owed $1,000 and the creditor agreed to accept $600 as a full and final debt settlement, they would want to be paid $600 at once, not paid in monthly instalments.

    Direct debt settlements are often made with creditors when an individual owes a small amount of debt (less than $8,000 in total).

    So, making a debt settlement with your creditors is a real possibility and is something to be considered, but only if you are in a position to pay the settlements in full if they are accepted. Where debt reduction companies are concerned however, and in almost all cases, money is collected from you monthly and a full and final settlement with your creditors is not made until all of the money has been collected to satisfy any settlements that the debt reduction companies were considering offering.

    In the absence of the ability to make a debt settlement, you can look at a consumer proposal, which is another viable option for achieving debt relief in Canada. The benefits to a consumer proposal are:

    You can usually reduce the amount of debt that you owe

    1. It is a legal process that can, in most cases, stop collection action
    2. It will result in a single monthly payment which is typically less than what you have to pay your creditors now
    3. Your money is administered by a trustee who is an official appointed by the superintendent in bankruptcy and not a private debt reduction company (who may or may not be in business when the time comes to make a debt settlement)
    4. You can re-build credit quickly because the consumer proposal is removed from your credit report 3 years from the date it is paid in full
    5. Because a consumer proposal is negotiated, once accepted the balance can be paid off at any time should your financial situation improve

    The best thing to do if you need options for debt relief in Canada is to work with a Canadian provider of financial or debt consultation services that is not a trustee or a debt reduction company who administers debt reduction plans. A debt consultant will be able to assist you in establishing a plan that will help you achieve your financial goals, will be able to align you with the right professionals to achieve them, and will represent you through the process.

    For more information about debt relief in Canada or if you would like to discuss making a debt settlement please contact DebtCare Canada at 416-907-2582 or visit www.debtcare.ca.

  • Debt Relief in Canada Blog Series Part 3 – Are There Consequences to Filing for Bankruptcy?

    There are many options for debt relief in Canada, and one of the most common is bankruptcy. If you have financial problems, bankruptcy may seem like a scary option because of the consequences that many people associate with filing for bankruptcy. Hopefully this article will help you to understand bankruptcy better and determine if in fact it could be an option for debt relief that you should consider.

    Bankruptcy is generally filed by people who have limited income or significant debt in relation to their income. Most first-time bankruptcies last either 9 or 21 months. When an individual files for bankruptcy, a trustee in bankruptcy will assess the bankrupt’s household income, assets, liabilities and personal circumstances. Personal circumstances include the number of people in the household and the number of dependents that the bankrupt has. Based on bankruptcy guidelines, if your income, once all factors are considered, is below a specified threshold, then the monthly payments in bankruptcy will last for 9 months. If the income is above a specified threshold, then it will be determined that the bankrupt has surplus income. This will result in higher payments in bankruptcy over a specified period of time, in most cases 21 months.

    Some of the pros of filing for bankruptcy are:

    • Immediate relief from collection action from unsecured creditors (such as wage garnishments).
    • A monthly payment that is less than what you are likely contractually obliged to pay to your creditors now.
    • The opportunity for a fresh start to get out of debt in a short period of time, enabling you to rebuild your credit and finances.

    Many people don’t know that, in many cases, when you file for bankruptcy you are able to keep your home and vehicle.

    Some of the cons of filing for bankruptcy include:

    • If your financial situation improves during your bankruptcy you could be subject to additional surplus income. If there was no surplus income when you filed for bankruptcy and your bankruptcy repayment is over 9 months, surplus income during bankruptcy could result in your monthly payment in bankruptcy being extended to 21 months.
    • The bankruptcy will remain on your credit report for 6 years from the date it is discharged. With that said, most financial institutions will do business with a bankrupt individual who has 2 years of re-established credit after bankruptcy.
    • Having a number of assets with equity in them will complicate things. In this case, a consumer proposal may be a better option than bankruptcy.

    Bankruptcy is a very viable debt relief option in Canada, and while there are some consequences of filing for bankruptcy, in many cases there are many more benefits. Bankruptcy is an option for debt relief in Canada that can provide you with immediate relief, not only from collection action, but also the stress that accompanies a financial problem. If you have creditors that are currently after you, perhaps even suing you, this is relief that can provide you with a breath of fresh air, enabling you to think clearly again and get your personal and financial situation back on track.

    For more information about options for debt relief in Canada or to see if you are a candidate for bankruptcy please call DebtCare at 416-903-4000 or visit www.debtcare.ca.

  • Debt Relief in Canada Blog Series Part 2 – Do I Qualify to Refinance My Mortgage?

    Debt relief in Canada can involve a debt settlement, a consumer proposal, budget management, credit counselling, bankruptcy, debt consolidation and more. The right option for debt relief will depend on your personal and financial situation and also the resources you have available to you to deal with your debt.

    A homeowner with home equity has more options for debt relief in Canada than one who doesn’t, as that individual can leverage his or her home equity to consolidate debt. A homeowner who uses his or her home to consolidate debt can save greatly on interest because mortgage interest is significantly less then credit card interest. With that said, there have been many changes to Canadian Mortgage and Housing Corporation (CMHC) guidelines in the past couple of years, so it is not as easy as it once was for homeowners who need to consolidate to do so. This has left many homeowners wondering “do I qualify to refinance my mortgage?”

    In the past, CMHC insured lines of credit and debt refinancing up to 95% of the value of an applicant’s property. CMHC no longer insures lines of credit, and will only insure a refinancing of up to 80% of a property’s value. Also, those who want to qualify for a mortgage through the bank that is insured by CMHC must have good credit and meet both the bank and CMHC lending guidelines.

    You may be thinking that you have a lot of debt, that you have missed some payments, or that the bank has already turned you down for a mortgage refinancing to consolidate debt, leaving you to beg the question how can I qualify to refinance my mortgage. If you have equity in your home, you still have options for debt relief in Canada through refinancing your home. There are many private lenders, credit unions, private financial institutions, mortgage investment corporations and finance companies who will offer mortgage financing to people who do not qualify with the bank.

    This is because they will give more merit to the amount of equity in the home as it provides them with more security when considering a higher risk applicant. Generally speaking, to be approved for mortgage refinancing based on the amount of equity you have in your home, your new mortgage (which includes the amount that you borrow on your home in addition to your existing mortgage) should not exceed 75% of the value of your home now.

    The entire process to refinance your home can take up to a month to complete. First, your financial consultant will have to review your finances to see if you qualify to refinance your mortgage. Once it is determined that you qualify, you will make a formal application. Upon approval of the application, if your mortgage is not CMHC insured, the mortgage lender will request an appraisal of your property. This step alone can take a week to complete. Once your appraisal has been completed and your property value has been verified, you will have to provide any documentation that is required in connection with your mortgage approval and sign the mortgage documents. At this point the mortgage will go to a lawyer and the final mortgage closing documents will be prepared. This step can take two weeks or more. Finally, you will sign all of the mortgage documents with the lawyer and your mortgage funds will be advanced.

    If you think you may have too much debt and need debt relief, it is important to act before a financial problem emerges. Because the process to refinance your mortgage takes time, it is important to consider this as well as your other financial options before your debt continues to accumulate, or before you run into problems managing your payments (if you haven’t already).

    For more information about options for debt relief in Canada or to see if you qualify to refinance your mortgage please call DebtCare at 416-903-4000 or visit www.debtcare.ca.