Debt consolidation is one of the options you may choose to investigate if your debt payments have become overwhelming. Though there are numerous ways to consolidate your debt, the practice generally involves lumping most or all your balances together into a single affordable payment.
Consolidation options are varied and come with their own benefits and potential risks. Let’s consider pros and cons for some of the options available to consolidate debt.
Your bank or credit card provider may offer the opportunity to transfer the balance of one or more debts to a credit card or line of credit at a reduced rate over a set timeframe — usually between six months and a year.
Qualifying for a balance transfer typically requires a decent credit score and good borrowing history with the lender. It will also typically involve paying an up-front fee, usually in the neighborhood of three percent of the total balance you’re transferring over.
Generally obtained through a bank or private lender, a consolidation loan enables you to combine most or all of your outstanding debts into one affordable monthly payment. It will ideally have a much lower interest rate than you’re currently paying on average between your credit cards, lines of credit and other loans — reducing both the number and total cost of your monthly debt payments.
Debt Management Programs
Depending where you live, credit counsellors and other service providers may offer a handful of options which allow you to pay back debt at a reduced amount over a certain timeframe. Usually this involves entering either a Debt Management Plan or otherwise negotiating an informal debt settlement with your creditors.
Consumer Proposal or Bankruptcy
Bankruptcies and Consumer Proposals are the only two federally legislated options to ‘consolidate’ your debt. They are also the only two options which, provided you meet your responsibilities, offer both legal protection and a clear path to debt freedom. Most debts may be included in a Bankruptcy or Consumer Proposal and these options tend to be the most cost effective for debtors.
The Right Solution
When you’re trapped in the cycle of debt and faced with a range of options, it can be difficult to know which choice is the right one for you and your financial future. Thankfully, you don’t have to make that decision alone. Licensed Insolvency Trustees will always offer a no obligation Free Confidential Consultation to review your financial history, discuss your goals and help you find the best path forward.
Licensed Insolvency Trustees are the only debt professionals in Canada who can administer Life-Changing Debt Solutions such as Consumer Proposals and Bankruptcies. However, they also have a legal and ethical duty to explain all your debt reduction option and provide an unbiased opinion about which options you’d benefit from most. From the moment you walk in their door and through every decision you make, you can feel comfortable knowing you’re getting the best, most informed and most trustworthy advice possible.
You’re only one call away from defeating your debt for good. Call MNP today to begin your financial fresh start today.
This article was originally written for MNP Ltd. View the original post here.
By Selina Jacobson, Registered Insolvency Counsellor
Scheduling and attending a Free Confidential Consultation with an MNP Licensed Insolvency Trustee is the first step to changing your financial future. You may initially feel hesitant because you don't know what they're going to ask you, or you're unsure of what to bring with you. Perhaps everything you've heard about filing a bankruptcy or a Consumer Proposal is negative. If these are your fears, you're not alone. But the only way to get the right information is to speak with a qualified professional, specifically trained to get you out of debt.
To set your mind at ease, attending a Free Confidential Consultation does not automatically mean you will be filing a bankruptcy. Your consultation is an information gathering opportunity where we will use our education and experience in solving debt issues to advise you of your best options. You can ask as many questions as you need to. Our role as consultants is to do the same; ask specific questions to gather all the information relevant to your situation.
Think of it like a puzzle. First, we put the edge pieces together to frame the picture and gain perspective as to which pieces will go where. Next, we group pieces according to their color or pattern, fit those pieces together and join them to the frame. Then we move on to another set of pieces and so on. Soon all the pieces fit and the entire picture connects. This systematic approach helps save time compared to randomly grabbing pieces and attempting to put them together with no clear plan or strategy.
Throughout the consultation, questions will be grouped together according to topic. Initially, some may not seem relevant. But each reflects a piece or section of the financial puzzle we are fitting together. Once we have a clear picture of your financial situation, we'll present you with options and help you make an informed decision regarding your next steps.
What makes up the frame of your financial puzzle? A good starting point is to briefly explain the causes of your financial difficulties. When we understand where you are coming from, we can tailor the remainder of our questions to your unique situation. For instance, if you operate a business, we would ask what type of business it is. Depending on the answer, we'd proceed with specific follow up questions that contextualize how your business might inform your options for getting out of debt.
Questions regarding your personal life are also part of the framework. Are you single or married? Do you have dependants or pay support to an ex-spouse? Do you own or rent? What is your total household income?
Why does this matter? Well, if you're married with 10 children, we would carefully analyse your monthly income and expenses to evaluate what type of debt solution would be affordable for you and avoid further financial hardship to your household. On the other hand, if you're single with no dependants, you may have more freedom to pursue other debt solutions.
Once we have the frame complete we can start grouping questions to gather specific sections of the puzzle. These sections include: your assets, debts, monthly income and expenses and a brief history of your financial transactions.
Many people avoid investigating debt solutions from fear of losing their home, car, household goods, etc. However, each province provides exemption amounts for certain assets to help ensure rehabilitating debtors are not left homeless, carless or couch-less.
Full disclosure of your assets, including investments like RRSPs or TFSAs, insurance policies, recreational vehicles and potential future windfalls like an inheritance or settlement helps your Licensed Insolvency Trustee assemble a comprehensive list of what your assets are worth, along with what is exempt and not available to creditors. It's also the first big chunk of the puzzle to help determine whether you are insolvent and what MNP can do for you.
Knowing the total amount of your debts is the next large chunk of the puzzle required to determine whether you are insolvent and what solutions are available. Your Licensed Insolvency Trustee will benefit from any recent loan or credit card statements you have, collections notices and a simple list of any other personal debts you may owe to friends or family.
It's important that you disclose all debts you owe – whether it's to a credit card company, an automotive lender, the Canada Revenue Agency or a family member. With few exceptions, all creditors rate the same under insolvency legislation. For your protection and to ensure all creditors are treated fairly throughout the process, this means you cannot decide to disclose one creditor and not the other. Whether it's a $100,000 tax debt or a $10 library fine, you want to include absolutely everything.
Your Monthly Income and Expenses
Your Licensed Insolvency Trustee will then look at the actual income coming into your household every month– including employment income, tax credits, pensions, social assistance, etc.
They can also assist you with creating a comprehensive list of your expenses and will prompt you for the kinds of expenses you may not have thought of - like bank fees, pet food, and the weekly (or daily) coffee splurge. Bringing a recent bank statement with you will help with detailing specific payments like insurance and utility bills that may be automatically debited from your account.
Being insolvent doesn't mean you have to forego living a normal life – you need to get haircuts, buy shoes, spend money on gifts, buy a bottle of wine. However, you need to be realistic and honest with us about your spending each month, so we can make sure your bases are covered.
Now with this third chunk of the puzzle added, we are getting very close to seeing the whole picture.
Recent Financial Transactions
Questions about recent financial transactions help your Licensed Insolvency Trustee understand whether any personal property such as a home, vehicles, personal goods or investments have been sold, transferred or cashed out in the previous year, and what was done with the proceeds from those transactions.
Among other things they will ask:
It is your Licensed Insolvency Trustee's duty to ensure you are informed of all debt relief options available to you. They will explain each of them to you in detail. These range from proceeding as you are with your current debt reduction strategy to consolidating debt with a personal loan through a financial institution, filing a consumer proposal or bankruptcy.
When the picture of how to fix your financial troubles becomes clear, it's much easier to decide which solution seems best for you.
Don't wait too long to schedule your Free Confidential Consultation with a Licensed Insolvency Trustee. The sooner you can assemble your financial puzzle, the quicker you will find relief from financial stress and the sooner you can start working toward a financial fresh start for yourself and your family.
This article was originally published by MNP. To view the original article, click here.
By Leah Drewcock, Licensed Insolvency Trustee
You're a good, honest person. You know you should pay your debts. You want to pay your debts. But you can't. It's unbelievable how quickly things spiraled out of control. First it was one unexpected expense, then another. Now you're in over your head – missing payments, dodging collections calls and creditors are threatening to take you to court.
Even if a judgement goes against you, you know it won't make any difference. You have no assets of value and hardly any income to speak of. So, what can a creditor do when you can't pay, have nothing to give up and no wages to garnish? More importantly, how do you solve this problem for good?
What it means to be 'Judgment proof'
Creditors have the option to pursue legal action against debtors who fail to pay their bills or respond to collections action. Once the creditor successfully obtains a court order granting a judgement against you, it is up to them to enforce that judgement through various channels – including asset seizure or wage garnishment.
To ensure you maintain a reasonable standard of living, there are certain government mandated exemptions to these judgements. If all your assets and wages fall under that exemption, your creditor will not be able to enforce the judgement, thereby making you 'judgement proof'.
Examples of Exempt and Protected Property
B.C. Income Assistance – Under the Employment and Assistance Act, it states that any provincial income assistance is exempt from garnishment.
Federal Income Benefits – Canada Pension Plan (CPP), Old Age Security (OAS) and Guaranteed Income Support (GIS) and Employment Insurance (EI) payments distributed either by cheque or direct deposit are exempt from garnishment by non-government creditors. However, other government bodies such as the Canada Revenue Agency (CRA) or the B.C. Family Maintenance Enforcement Plan (FMEP) can still garnish these payments for outstanding government debts, such as income tax or child support.
Personal Property – Each province has its own legislation determining what types of personal property are and are not exempt. In B.C. this falls under the Court Enforcement Act. Protected assets include:
Jointly Owned Assets – Assets that are co-owned between you and another person are exempt from seizure unless you are both subject to the judgement.
Beware Bank Deposits
Regardless of where your income comes from – including the exemptions mentioned above – once income enters your bank account, it is no longer judgement proof. As a worst-case scenario, if your primary banking institution is the same one you owe money to, they could potentially freeze your accounts and use your account balances toward your outstanding debts.
To protect yourself, you may want to consider having a bank account with a financial institution whom you do not have any credit dealings and transferring your automatic deposits to this account.
Duration of Judgement Proof Status
You will remain judgement proof for as long as your financial status remains unchanged.
However, it is important to remember that judgement proof does not mean your debt, or the judgement, will go away. Once your financial situation changes and / or you obtain income or property that is not judgement proof (e.g. employment wages), your creditors may then resume enforcing judgement against your property.
Debt Doesn't Expire
B.C.'s Limitation Act provides unsecured creditors (e.g. credit cards, lines of credit, payday loans) two years from the time you made your last payment to initiate legal action against you. However, that only limits their ability to obtain a judgement for wage and asset seizure; it does not expire the debt itself.
Short of taking you to court, your creditors may still proceed with regular collections activity such as requesting payment, sending written collections notices, contacting you by phone or reporting your delinquency to the credit bureaus. And they can continue to do this until you've settled your accounts to their satisfaction.
Notable exceptions to the Limitation Act include:
Collection Activity and Your Rights
As above, judgement proof status and the two-year limitation period can only protect you from creditors exercising or obtaining a court judgement. They do not prevent creditors from engaging in other regular collections activities. Because your judgement proof status can continue for an indefinite period, you may have to endure the stress and frustration of collections activity for months or even years. So, it's important to know your rights and what creditors can and cannot do.
Debt collectors can:
Debt collectors cannot:
If you feel a debt collector is not respecting your rights, you may contact the Provincial Consumer Affairs office to file a complaint.
Defeat Your Debt
The idea of being judgement proof may initially sound reassuring. But it can only provide temporary relief from wage garnishment or asset seizure. It's not a permanent solution. Remember, your status could change at any time. And when it does, your creditors will be ready to commence or enforce any judgement against you.
There is only one way to end the stress of your debt and harassment from your creditors: you need to settle for good.
While this may seem impossible given your current situation, a Licensed Insolvency Trustee can help. During a Free Confidential Consultation, they will work with you to review your financial situation and determine if you qualify for a Life-Changing Debt Solution such as personal bankruptcy or Consumer Proposal and whether that might be your best path forward. They'll explain your options and help you make the choice that's best for you. Though things may seem difficult now, you're just one phone call away from a financial fresh start.
Based out of Prince George, Leah Drewcock is a Licensed Insolvency Trustee and Vice-President at MNP LTD. To learn more about how MNP Debt can help, contact our local office at 250.596.4901 or toll-free at 310.DEBT (310.3328).
This article was originally written for, and published by, MNP. To view the original post, click here.
If you find yourself facing bankruptcy, you’re not alone. With soaring levels of consumer debt, many Canadians are finding themselves contemplating bankruptcy as a means to resolve their financial difficulties.
Bankruptcy is a term that most people are familiar with; however, there are many myths and misconceptions associated with the term. When people receive full and factual information about bankruptcy, they are struck by the simplicity and fairness of the process. Moreover, the simple act of becoming informed provides a sense of great relief.
This 5-part series is meant to provide a general overview of bankruptcy; however, individuals contemplating bankruptcy, or exploring other options, should meet with a Licensed Insolvency Trustee for further information to learn how bankruptcy will impact them based on their unique circumstances.
Step 1 – Meet with a trustee to review your options
Anyone who finds themselves in a bit of a financial pickle (the signs may be different for different people) first needs to meet with a Licensed Insolvency Trustee, who will review the individual’s specific situation and explain all of the options available. A meeting or phone call with a Licensed Insolvency Trustee is free and confidential.
Many people in financial difficulty don’t realize that there are options other than bankruptcy. A Licensed Insolvency Trustee has a responsibility to go through all of these options. If bankruptcy is the best option in the circumstances, the trustee will advise you of the next steps.
Stay tuned for Part 2, where we'll discuss how to file for bankruptcy.
More articles in this series:
Lana Gilbertson is a Licensed Insolvency Trustee with MNP Ltd., based in Vancouver, BC for more about how Lana can help, contact her directly at 604-637-1599 or firstname.lastname@example.org.
Click here for a list of our offices throughout Greater Vancouver, Fraser Valley and Vancouver Island.
Looking for debt help in Vancouver, BC? If you are feeling stressed out about your debt and you just can't seem to get ahead, we can help. Starting with our free consultation, we will walk you through your options to show you how you can become debt free. If you are looking for help to file a consumer proposal or bankruptcy, we are licensed to administer these proceedings.
We have two conveniently located offices in Metro Vancouver to better serve our clients. Our Downtown Vancouver office is located at #1600, 1021 West Hastings Street in MNP Tower, next to the iconic Marine Building on the corner of Hastings and Burrard. Our South Vancouver office is located in Vancouver's Marpole neighbourhood at #1100, 1200 West 73rd Avenue, in Airport Square Tower.
Regular office hours in our Vancouver locations are Monday to Friday, 8:30 am to 5:00 pm. We offer flexible evening and Saturday appointments on request.
Call us at 604-639-0001 to book your free, confidential, no-obligation consultation, or fill out our form below and we will contact you within 30 minutes during regular business hours.
Lana Gilbertson is a Licensed Insolvency Trustee with MNP Ltd. Visit MNP's Vancouver page here.