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.
It happens to all of us at one time or another. You were on a vacation, did not have enough money or just simply forgot to make a payment (or two). There are three things that you must consider:
1. What is the effect on your credit score?
2. Will there be a penalty for a late payment?
3. Will the bank raise the interest rate on my credit card?
As a general rule, if you have always paid your credit card in full and on time, being late one time will have no effect on your credit score or credit rating. However, if you have a history of late payments, no payments, bounced cheques or paying less than the minimum amount due, you already have a reputation with the credit card company as a delinquent credit card holder. Missing or late payments will just continue to reduce your credit score. The only way to get back your old “good” score is to start making all of your minimum monthly payments on or before the date they are due. If you have any extra money, review your credit card statements and look for interest being charged and make the extra payment to those cards that charge the highest interest rate.
The computers of all credit card companies are programmed to charge a penalty if you are late in a payment. If you regularly pay your bill on time each month, consider calling the credit card company (the number is on the monthly statement) and explain what happened that caused you to be late in your payment and ask them to consider reversing the late fee. The person that you will be speaking to may be sympathetic to you and just might have the authority to reverse the late payment charge. Nothing ventured, nothing gained!
The credit card companies will rarely raise the interest rate on your credit card just because you were late on one payment. Being late on many payments or several payments in a short period of time will almost certainly downgrade your credit standing
Credit card companies set the interest rate on your credit card based on several factors:
There is the standard rate charged to the average cardholder
An introductory rate for new customers
The rate based on your credit score
The rate based on what the card offers you in points, rewards and/or bonuses
What other similar cards will charge you
You must realize that your credit card company wants to make a profit on you, but, they do not want to lose a good customer to a competitor. There is nothing wrong with phoning your credit card company and asking them to reduce your interest rate or allow you to transfer your card balance to a lower interest rate card. You should shop the competitors to see what is available from them and tell your credit card company what you found and see if they will match the competition.
You might find it advantageous to actually switch to the competitor if they offer a 6 or 12 month low introductory interest rage. But be careful of doing this as many people start running up their debt on the old credit card. Now you have solved one problem but created a much larger one by increasing your overall debt. Your purpose should be to lower your interest rate but continue to make the same payments so that you can pay off the total debt on all of your credit cards faster than before.