Posted On: June 16, 2014

When facing financial desolation, it’s hard to think straight, you are so gripped by worry. Bankruptcy plays into many people’s doomsday scenarios, imagining that it will be the end of them financially and personally, as family relationships are ripped apart under the strain.

The truth is, bankruptcy and consumer proposals are about getting control back over your life and feeling relief as you take steps towards recovery. As soon as bankruptcy is filed, the calls from creditors begin to stop and an immediate stay of proceedings means that none of your assets can be seized, other than those signed over in security in case of default.

The immediate emotional and financial relief can relieve the enormous burden on a family and actually repair the relationships of frazzled spouses.

Here are five myths that many people hold about the bankruptcy process:

1. Everyone is going to know that I am a deadbeat.
Though bankruptcy is a public proceeding it isn’t publicized. So even though there are sections in the newspaper devoted to bankruptcy notices aimed at alerting creditors, these only involve large or corporate bankruptcies. The only way your neighbours and friends would know that you are going bankrupt is if you tell them or  they decide to go to Office of the Superintendent of Bankruptcy’s website, register as a user and pay an $8 search fee to find you.  The chances of this happening are small to none at all.

2. I will never get credit again
Again, not true. A first-time bankruptcy is usually a nine month process. When the process is finished, you are free of previous debt and financial obligations, there are many companies eager to lend you money again. Some people can even get a loan or secured credit card while they are bankrupt. If you are like most people, you can start rebuilding your credit rating right away by getting, for example, that secured credit card. You may qualify for a mortgage or car loan in a few years. Here are five ways you can rebuild your credit.

3. I will lose everything I own.
Contrary to popular belief, you don’t lose all your assets when you go bankrupt. There may be some things you will have to give up, especially if you have a lot of assets, but you will probably get to keep your furniture and personal effects, your car and your business tools.  You may not even lose your house. While a secured creditor has the right to repossess the security you gave them if you default on your contract, they can’t do this merely because you’ve gone bankrupt, as long as you have managed to keep up your payments. Another thing, if you are worried about being able to renew a mortgage don’t be. These things are usually done almost automatically and even if you are still in the bankruptcy when the renewal time comes people do not usually have a problem, especially with the banks.

4. I’ll take my spouse down with me.
Your spouse and their property should not be affected by your bankruptcy. Each person is responsible for their own debts. So if your spouse hasn’t co-signed a loan or guaranteed your debt, then they won’t be directly affected and their credit rating won’t be damaged. There may be indirect consequences, however. For example, your spouse may not qualify for a loan in future if your bankruptcy prevents you from being able to co-sign for it. But nowadays this is very, very rare. You can read more about the impact of bankruptcy on spouses here.

5. Bankruptcy will eliminate all my debts.
Hold on, cowboy. While bankruptcy will bring you considerable relief, no one can wave a magic wand and make everything go away (Although sometimes that’s what seems to happen.). Certain debts aren’t wiped out by your discharge from the bankruptcy. These include court fines, alimony, debts that were incurred fraudulently and any debts that you continued to pay after the bankruptcy started such as a mortgage, a car loans, etc. Then there are some student loans that you would be responsible for after your discharge.

All of these “myths” are misleading and can make a person shy away from seeing a trustee. Big mistake! Contact us and we will make sure you get correct information so you can determine what’s the right course for you; a bankruptcy, a proposal, or some other option. Only you can decide, so get the facts and then you’ll be able to make a good decision.

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You’ve gone through a bankruptcy and you want to get your life back to normal as fast as possible. While it won’t happen automatically and you will have to be proactive about it, you can actually take steps to start repairing your credit rating right away – as soon as you’re discharged. Here are five ways to do it:

Speak to Your Bank Manager: They are a good source of information to get you started on the road to credit repair. In most cases they are also quite supportive.

1. Start Saving: Creditors like to lend to people who don’t really need the money. So use your savings account or open one if you don’t have it. Every pay period, put in a small amount in the account, perhaps arranging for an automatic withdrawal.  Or if you were used to paying the trustee a certain amount each month during the bankruptcy process, just continue to put the same money in your savings account. By the end of the year you would have a nice balance in the account, sure to impress creditors. (This is called paying yourself.)
2. Get a Secured Credit Card: This type of credit card is secured by a deposit account that you own. So if you can scrape together, say, $500, you can use that as a deposit with the credit card company and get a $500 limit on a new credit card. You would still have to make regular payments on it every month like a regular credit card. If you keep this card in good standing it will all count towards rebuilding your credit rating.
3. Pay Your Bills on Time: Pay all your bills, including utilities and credit cards, promptly. Creditors like to get paid on time. Some people are under the misapprehension that if they carry a balance on their credit card from month to month then that will endear them to the credit card company and boost their rating. Not so. It just costs you money.
4. Get a Copy of Your Credit Report: There are two main Canadian credit bureaus, Equifax Canada and TransUnion Canada. This is where all your credit information is stored. You are entitled to get a copy of your credit report. Get it. You can see if there are any mistakes and correct them. You also have the option of putting in a short note that will be given out to anyone who collects a credit report on you.

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When it comes to marriage, a question may arise: Is a spouse responsible for credit card debt in Canada if the other spouse declares bankruptcy?

Sorry, Dear, I’m Bankrupt.

Nothing can make for a frostier breakfast conversation than revealing your financial woes have led to bankruptcy. Fueling the tension of guilt and anger is the fear one spouse filing for bankruptcy is going to drag down the other.

But if you do file for bankruptcy does this automatically affect your spouse?

The short answer is no. Each person is responsible for their debts. So if your spouse has not co-signed a loan or guaranteed your debt, then they won’t be directly affected and their credit rating won’t be damaged. There may be indirect consequences, however. For example, your spouse may not qualify for a loan in the future if your bankruptcy prevents you from being able to co-sign for it.

Don’t Give Credit Where it’s Due

But the truth is, married life can be complicated, with intertwined finances and joint ownership of assets. Take credit cards, for example. If your spouse has a joint or supplementary credit card – that is, one with their name but has the same account number as yours – then he/she would also be responsible for any debt.

On the other hand, if they have a supplementary credit card and have never used it, chances are they wouldn’t be responsible for the debt. The case could also be made that they are not saddled with the debt if they have only used the card occasionally, for small amounts.

However, if the two of you have used the cards extensively, you are both on the hook for the debt. This doesn’t change if only you go bankrupt. Things can get worse for your spouse because creditors can, and probably will, pursue them for the full amount of the money owed, and not just 50 percent. This scenario would be the same for any loan they’ve co-signed, such as a mortgage. (Though a legal case could be made that they are not responsible if they didn’t get legal counsel before co-signing the loan.)

Nothing Ruins a Good Divorce Like  . . .

The risk of being saddled with joint debt seems to increase during divorce when communication and cooperation often dwindle. Some might be under the impression that debt is divided 50-50, as assets often are. But if one spouse files for bankruptcy, the other could be left responsible for the full debt and not just half, with avid creditors giving them their undivided attention.

Time to Take Out the Saw

Another consideration when one spouse goes bankrupt and the other is spared is jointly owned assets. That Harley and sidecar you both own for summer camping trips might need to be sold to pay what you owe to creditors. Your spouse’s portion of the motorcycle would be spared but you couldn’t exactly saw the vehicle in half.

Generally speaking, jointly owned assets have to be reviewed one by one by the trustee to see how they will be treated.

In summing up, if you not sure the answer the question “Is a spouse responsible for credit card debt in Canada?” or about other assets or liabilities, all the ins and outs of the effects of bankruptcy on a spouse need to be considered and explained by a licensed trustee.

Posted On: June 15, 2014

During the holiday season, the joy many of us feel is tempered by our dread at opening credit card invoices in January. Apparently we pay for our pleasures.

We will make New Year’s resolutions and vow to shed weight at the gym and through dieting. Why not put your budget on a diet, embracing the discipline of Credit Free Friday?

This is a movement espoused by personal finance gurus David Ramsey and Canada’s own Gail Vaz-Oxlade. The belt-tightening up here gained steam last year when the Canadian Federation of Independent Business (CFIB) and Vaz-Oxlade announced the launch of the Credit Free Friday campaign.

“Excessive use of credit cards, especially premium credit cards, contributes to escalating consumer debt and hurts small businesses,” explains its. “Credit Free Friday is a campaign that encourages Canadians to take a break from using their credit cards, one Friday at a time, by paying with cash or Interac Debit.”

The site also provides sobering credit card facts (the average Canadian now owes more than $27,000, and that doesn’t include mortgages), advice on how to get involved with Credit Free Fridays, a few debt stories and tools to help manage debt problems.

Posted On: June 14, 2014

Too often credit cards seem like easy money. Just hand it over to the clerk or type in the card number for your online purchase and, presto!, you have stuff. But you may pay to play. If you don’t take care of  your credit card balance on time, you can get penalized with late fees and bad credit scores.

While most of us know this on some level, it’s worth the reminder.  Canadians continue to fall further and further into debt, with their love of bank loans, car loans, lines of credit and credit cards leading the way. Last month the average Canadian consumer’s total debt rose $225 to $27,355 according to the latest analysis of credit trends by TransUnion.

So here’s five things you should know about the plastic plunderer in your pocket:

1. Don’t Live Without Grace: When buying with a credit card you are basically taking out a loan, which means paying interest. Usually the interest is waived if you pay within a “grace” period. Check to see whether your card’s grace period is 30 days, 20 days or one of the lovely “specialty” cards that has no grace period at all.
2. Minimum Payments Maximum Pain: What’s wrong with just paying the minimum balance cited on your credit card invoice? If you were to figure out how much time and money, in the form of interest payments, you would spend to pay off a balance with minimum payments, you would be staggered.
3. Never Be Late: Not only does missing the deadline for a credit card payment carry a financial penalty, it may bump up your interest rate and damage your credit rating. Ouch!
4. Dangers of Juggling: You might be tempted to transfer your balance to a credit card with a lower interest rate. This could be OK if  you pay off the balance during the period the low rate is offered. If not, check the fine print, because you may wind up paying  a higher rate than before.
5. Doesn’t Advance Your Cause: Doing cash advances with a credit card at an ATM is not a good idea. Not only are you charged a high interest rate there is no grace period. As soon as the money leaves machine, the credit clock is ticking.