Debt Crisis: Are you Overwhelmed?

Debt Crisis: Are you Overwhelmed?debt-sept

The average Canadian owes more than $1.60 for every $1.00 of after-tax take home income. No wonder, we are all feeling stressed. A major cause of this is the high cost of living in major cities like Toronto or Vancouver in relation to other parts of Canada. If you are only making the minimum monthly payments on your debts or even taking cash advances from one creditor to make those payments to another creditor, consider meeting an experienced professional who has the experience to assess your situation and offer a plan of action that will result in getting out of debt. The options that should be considered are:

Credit Counselling

This is mainly a self-help approach although there are several for-profit and not-for-profit agencies that will assist you. You or the counsellor will contact each individual creditor to try to get them to waive some of their late fees, reduce their interest rate and set up a long-term payment plan. This is a long-term program that must be negotiated with each creditor individually. There is no court assistance or other court approval for this option. There is no requirement for any creditor to negotiate with you or the counsellor, although, creditors will often negotiate some settlement out of goodwill.

Debt Settlement

You or a debt settlement company hired by you at your expense approach each of your creditors to negotiate a reduction in the debt that you owe. No creditor is required to negotiate anything with you but they usually will negotiate a reduction in the total of your debt if you will tell them that the reduced amount will be paid in full over a specified short period of time. The cost of hiring a debt settlement company must be factored into your eventual saving of the debt owing. They normally charge a fee based on a percentage of what they save you but this is also subject to negotiation.

Consumer Proposal

A consumer proposal is administered by a Licensed Insolvency Trustee who will negotiate a reduction in the overall debt as well as the payment of the reduced amount over a period of time with no interest (usually 60 months or less).

The advantages of a Consumer Proposal are:

  • You keep your house, car, RRSP, RESP, etc.
  • You lose no assets unless you decide to sell the assets and pay the money into the proposal as a lump sum
  • Once 51% of creditors agree to your proposal, the other 49% are bound to abide by the terms of the proposal
  • All interest charges by creditors stop on the day your trustee files the proposal with the court
  • All legal actions, wage garnishees, etc. stop on the day the trustee files the Consumer Proposal with the court
  • The proposal once approved by the creditors and the court is a legal process that can be enforced against all creditors

Bankruptcy

When all else fails, bankruptcy is the final solution. As long as you are unable to meet your financial obligations as they come due and your debts exceed $1,000, you can legally file an Assignment in Bankruptcy using the services of a Licensed Insolvency Trustee. You will be placed under the protection of the court to prevent any creditor from suing you, garnisheeing your wages or bank account or taking any actions against you to collect their debt. If your situation is not complicated, you may be able to obtain your discharge from the bankruptcy process in as little as 9 months. Your trustee will still take much time after your discharge to complete the administration of your file. Your trustee will still continue to assist you in rebuilding your credit score even after your discharge.

The above are the four (4) main solutions to a person with debt problems. Please consider meeting with a Licensed Insolvency Trustee for a free initial consultation to determine which of the above or any other options are best for you.

Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation formTo learn more please visit our YouTube  Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.

 

Will I lose my RESP if I file a Consumer Proposal?

Will I lose my RESP if I file a Consumer Proposal?should-i-file-bankruptcy

No, you will not lose an RESP in a Consumer Proposal. In a Consumer Proposal, you are making an offer to your creditors to settle your debt to them based on the terms of your offer. The terms of your offer is usually that you are prepared to pay a percentage of your debts over a period of time–usually 60 months with no interest. It is rare that the creditors will ask that you collapse the RESP to pay the money into the proposal. Even if they ask, you have the right to refuse.

Please see related article – Will I lose my RESP in a Bankruptcy?

 

Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation formTo learn more please visit our YouTube  Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.

Will I Lose my RESP in Bankruptcy?

Will I Lose my RESP in Bankruptcy?

An RESP is set up usually by a parent or other family member by way of a contract with an Bankruptcyinstitution (the scholarship fund) for the benefit of their child. The standard wording in the contract results in the RESP being considered an asset of the parent or other person that is divisible among their creditors in the bankruptcy. If you are in this situation, speak to your Licensed Insolvency Trustee about buying the RESP back from the bankruptcy so that it can continue to be of benefit to your child when he or she starts their post-secondary level of education. The purchase price and terms of payment can be negotiated but generally start at the dollar amount that the trustee would get if the RESP plan was collapsed. The usual payment terms are that you must pay the settlement amount for the RESP before you are discharged.

Please see related article – Will I Lose my RESP in a Consumer Proposal?

 

Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation formTo learn more please visit our YouTube  Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.

 

Consumer Proposal & Administrator’s Report

Consumer Proposal & Administrator’s Reportshopping_cart

I filed a Consumer Proposal and my trustee tells me that he has to file an Administrator’s Report. What is this?

Your trustee is acting in this situation as the Administrator of your proposal. As such, there is a requirement under the legislation that he submits a report to your creditors:

  • The proposal was filed with the Officer Receiver who represents the Office of the Superintendent of Bankruptcy
  • Your financial situation and assets listed on your documents are reasonable
  • Your list of creditors (with balances higher than $250) is reasonably accurate
  • Explains what is the cause of your financial problems
  • A brief summary of your net income per month, type of employment, the fact that you do not wish to file a bankruptcy and the amount that the creditors will receive in the proposal. If you and your partner are filing individual proposals at the same time, the joint creditors will be notified of the concurrent proposal so that they realize that they receive payments from both proposals. If the administrator has determined that the payment in the proposal is lower than the creditors would receive in a bankruptcy, there is an obligation to disclose that fact but add any mitigating factors for the creditors to consider before deciding whether or not to vote for or against your offer.

In many cases, the creditors start reviewing your proposal by reading the Report of the Administrator. It is a very important document.

Contact Rumanek & Company Ltd. for more information on bankruptcy and debt solutions. Or please fill out the free bankruptcy evaluation form. To learn more please visit our YouTube Channel. Rumanek & Company have been helping individuals and families overcome debt for more than 25 years.