The most recent Statistics Canada Report covering the period 1999-2012 inclusive show that
family debt increased by 4% but the seniors debt (over 55 years old) increased by 16%. People generally are taking on more debt. We now owe $1.60 for every $1.00 we make. In 2013, 69,000 people filed for bankruptcy. Seniors currently make up one-third (and growing) of our population. So why are such a large amount of bankruptcies being filed by seniors? The answer is that their income (pensions from work, RRSP, Canada Pension, Old Age Security, etc.) do not keep up with inflation. The cost of housing, food, automobiles, demands from children and the ever increasing health costs are all rising faster than the available income to pay these expenses. The seniors turn to their homes for a home equity line of credit or a reverse mortgage or they use their credit cards to finance their day-to-day standard of living. They get the credit because their income is stable and seniors have lived their life being taught to “pay your debts.” What they must do before they exhaust all of their options is to sit down with a financial advisor, prepare a realistic budget and make whatever adjustments to their standard of living that are needed to have a long and financial stable life.
What is debt exclusion from bankruptcy? A bankruptcy or proposal will get rid of most of your debts, but not necessary all of them. This is because certain debts are secured to your assets. The most common being a mortgage on your home or a loan on your car. If you want to keep the house or car, you must continue to pay the debt secured to the asset. In addition, other debts listed in Section 178 of the Bankruptcy and Insolvency Act specifically exclude certain debts from being included in bankruptcy as a matter of public policy.
These debts include spousal support, child support, debts originating in fraud, debts incurred while acting in a fiduciary capacity. These also include debts resulting from an assault, fines and penalties awarded by a court (income tax, traffic and criminal). Finally, student loans are not included in your bankruptcy unless you have not been a student for seven years. However, in cases of severe hardship, a court can reduce the seven year limit to five years.
You have decided to buy a house (mortgage), buy a car (car loan) or go into business (operating line of credit to finance inventory, accounts receivable, etc.). You go to your bank and they look at your credit score. The credit score is a number (from 300 to 850) that is based on a number of factors such as your payment history (35% of total), how much of your available credit have you already used (30% of the total), what type of credit you have and how long have you had the credit, as well as how many creditors that you have in total.
Before you start the loan application for that big purchase, consider ordering a copy of your credit report yourself. They are available free by regular mail from both Equifax Canada and Trans Union of Canada. Read the report carefully so that you know what the bank will be looking at. If you spot a mistake, notify the credit bureau immediately to correct their report. The notification is by filling out the Consumer Update Form that the credit bureau will send you with your credit report. It is always advisable to attach any proof or documents that you might have to prove what you are saying is correct. Unless the error is self-evident, please allow time for the credit bureau to investigate your report of the error and correct their records. Always ask the credit bureau to confirm to you that they have updated your credit report.
God put us on the earth for a limited amount of time. Why then does he make us sleep for about 8 hours each day? We could be producing something of value for 24 hours each day. The answer of the sages is profound. We have all heard the phrase “I am having a bad day” which really means “leave me alone.” God decided to give us a fresh start every 24 hours. A new day begins with a fresh attitude and renewed energy.
This same fresh start is a basic principle of The Bankruptcy and Insolvency Act. If you are an honest but unfortunate individual who is overwhelmed by your debts, the legislation is there to help you get rid of your debts, teach you how to budget properly and train you on moving forward without the mental stress and burden of debt. This applies whether you file an Assignment in Bankruptcy or a Consumer Proposal.
What went wrong yesterday is in the past, today we start anew.