Personal debt  and bankruptcy is on the rise in Canada. Here’s a brief overview of the personal bankruptcy process.

Between 1990 and 2006 business bankruptcies declined by 42 per cent – but consumer, or personal, bankruptcies increased by 85 per cent, according to Industry Canada statistics. And with Canadian household debt loads continuing to rise, it’s likely that individuals will continue to have to file for personal bankruptcy. Here’s an overview of the process and some things to consider.

Insolvency

When someone is unable to meet his or her payments on debts (known as debt obligations), that person is considered to be insolvent. The insolvency process is a legal proceeding that is dealt with under the provisions of the Bankruptcy and Insolvency Act.

You are considered to be insolvent when:
• you do not currently have an un-discharged bankruptcy
• you owe at least a $1000.00; and you are unable to meet your regular payments as they become due, or you would not be able to pay all of your debts if all of your assets were sold

At that point there are really two options:

• Bankruptcy: under the guidance of a trustee, most of the assets of that individual will be liquidated to sold the debt
• Proposal: where the individual makes an offer to debtors to settle the debt. (Companies have a third option, receivership, but this is rare for individuals.) To make a proposal the individual’s unsecured debts must total under $75,000.

A licensed professional can advise you on whether a proposal or a bankruptcy best fits your situation. Once you have determined that a bankruptcy is appropriate you will need to find a licensed trustee.

Bankruptcy Trustees

Trustees are chosen by the person filing for bankruptcy and paid by the bankrupt and the assets from the estate. These fees will depend on the individual’s debt situation, but are set under the Bankruptcy and Insolvency Act. However, it’s important to understand that a trustee’s first responsibility is to represent the creditors.

The trustee’s duties are to:
• Review your situation and inform you as to the alternatives available;
• Administer the proposal – that is, to sell any assets you have that are not exempt and to distribute the cash to creditors
• Administer the estate and file the paperwork from the beginning to the end according to the Bankruptcy and Insolvency Act.

A trustee is also an officer of the court, and is generally an accountant. Once chosen, a trustee cannot be discharged (or ‘fired’) without approval from the Court.

If your case is particularly complex or you have concerns, you may want to consult an insolvency lawyer as well. The Office of the Superintendent of Bankruptcy Canada regulates licensed trustees, and provides an online database of trustees.

Once you have a trustee, you have certain obligations that you must fulfill.

Your obligations

Once you enter into the process of bankruptcy you must disclose all your financial information to the trustee: income, expenses, debts, and assets, along with information about any property you have sold in the last year. You will have to turn your credit cards over to the trustee. You must stay in touch with the trustee during the process and advise them of any address or telephone number changes.

You may have to attend an examination before the Official Receiver. This examination takes place under oath and is designed to discover the cause or causes of your bankruptcy, look at any property recently sold, and the status of current assets. Your conduct is also examined.

You may also have to attend a meeting of your creditors, if one is requested. This is to confirm the appointment of the trustee, give creditors information about the bankruptcy, and to appoint inspectors to oversee the process.

And you will have to attend at least two counseling sessions that discuss issues around personal finance and bankruptcy.

Which debts are covered by bankruptcy? What do I keep?
Debts that are not secured, such as credit card debt, and in many cases debts to the Canada Revenue Agency (taxes) are dealt with through bankruptcy. Debts to family must be included in the bankruptcy process – you cannot continue to repay family members the full amount of a loan while settling with other creditors for less.

Secured loans, such as mortgages and car loans are not covered by bankruptcy. However your trustee may be able to help you in surrendering those assets and receiving a receipt.

Other debt not covered by bankruptcy includes:
• student loans, if it is less than 10 years since your schooling finished
• fine or penalty imposed by the Court
• alimony
• liability for dividend to an undisclosed creditor
• debt obtained by fraud
• liability for support or maintenance of spouse or child under an agreement or Court Order

Which assets remain yours (or are exempt from the bankruptcy) depends on your province.

Once you file for bankruptcy most wage assignments and garnishments will stop. The trustee will review your income and expenses and compare these to guidelines set out by the Superintendent of Bankruptcy. If you are considered to have extra income it may be assigned to your creditors.

Assets that you acquire during the bankruptcy period – for example, if you were to inherit property – become a part of the bankruptcy.

Discharge of bankruptcy
For first-time personal bankruptcies the bankruptcy is automatically discharged after nine months. There are however, several kinds of discharge:

Absolute discharge: You are no longer responsible for unsecured debts incurred prior to bankruptcy except for those which were not included (such as child support payments).

Conditional discharge: You may have to make payments to your creditors through the trustee for a specified period. You will not receive an absolute discharge until that period is over (and all payments have been made).

Discharge refused: The Court may refuse a discharge in unusual circumstances, such as:

• your assets are less than 50 per cent of the amount owed
• you continued to obtain credit while unable to pay your existing creditors
• you contributed to bankruptcy by extravagant living or gambling
• you failed to perform any duty imposed by the Bankruptcy and Insolvency Act

Once your bankruptcy is discharged it will take six years for it to be removed from your credit report.

For more information:
http://strategis.ic.gc.ca/epic/site/bsf-osb.nsf/en/h_br01545e.html

At first glance, this may seem a pointless topic for an article. Who would want, after all, to declare bankruptcy? Most Americans are well aware of the far-reaching financial consequences of bankruptcy protection. Bankruptcy can immediately and significantly lower FICO scores, darken credit reports for up to a decade and, depending upon the situation, forever prevent you from some sorts of financing or employment. In the more popular games bankruptcy means, simply, that you lose the game. Even as a form of speech – being morally or spiritually ‘bankrupt’ – the notion’s hardly complimentary.

Nevertheless, as spiraling bills force more and more borrowers to sadly ponder what would’ve been once unthinkable, many consumers are forced to consider bankruptcy as a final alternative to seemingly insurmountable debt-loads. And, because bankruptcy’s so well-known as a final resort, a good number don’t bother to investigate the actual truths of bankruptcy (particularly after the restriction-tightening recent legislation) before succumbing to the inevitable.

More than ever before, this is a shame. Bankruptcies are no longer a guarantee of debt liquidation, the negative impacts can well beyond credit score repercussions, and, especially now, other bankruptcy alternatives may serve the average consumer better as they seek debt relief. Even on a Chapter 7 bankruptcy – and even though Chapter 7 notation would appear on your credit report for seven to ten years following – it’s possible that not all debt would be eliminated. In other words, the unlucky filer could yet adopt all the corrosive drawbacks of bankruptcy without the expected benefits. Considering this, it’s more important than ever for all borrowers even beginning to think about bankruptcy to closely analyze all aspects of the new legislation.

First of all, it’s no longer wholly the consumer’s decision on which sort of bankruptcy to file. As most past debtors attempted the Chapter 7 (which did, whatever the negative effects upon credit, liquidate most outstanding bills), this should be the most striking difference for average borrowers. Under current legislation, the courts must subject your income from six-to-nine-months ago to what’s become known as ‘the means test’. This test compares past income (no grace given if, say, the borrower has since changed jobs) with the average income from the state and then subtracts arbitrarily decided living expenses. Even avoiding the obvious regional and career differences (with housing prices in Fresno rather less expensive than those in Southern California, say, or the vehicle needs of a contractor more expansive than secretary), this allows a court trustee or their assistant to, upon their whim, change every bit of your life. Families have been forced to move or pull children out of private schools with little warning. Allowing the government free rein to budget and plan your family’s future carries obvious risks.

In previous years, of course, whomever went bankrupt would have to face the threat of their property and possessions being taken by the court and sold off to pay the creditors – every once in a while the news would cover an auction of celebrity memorabilia essentially being run by the IRS, for example – but ordinary debtors rarely had to worry about the loss of household items since their collected value, after depreciation, simply wasn’t worth enough for the government to bother with. Now, however, the tax laws insist all possessions (hobby equipment, children’s toys, family heirlooms) be listed according to their replacement cost: sentimental value, as you’d expect, not to be considered.

More worrisome, any significant investments (aside from custodial trusts or tax-deferred retirement plans like Individual Retirement Accounts) could be liquidated. Second homes and second vehicles are also fair game. Depending upon your specific state’s exemptions, even your residence or primary vehicle could also be forced towards auction. Essentially, the exemptions protect some degree of equity for the home, but, if the borrower had paid down too much of the mortgage balance, the courts could insist the home be sold with all excess equity given over to creditors. It’s imperative that every homeowner even considering bankruptcy search out his or her state’s specific protections and talk to a bankruptcy attorney about the potential fall-out.

There’s another even more significant reason to ensure you’ve a well-trained attorney with whom you feel comfortable. It’s considerably easier under the 2005 act for both creditors to sue for fraudulent bankruptcy filings and for the government to initiate criminal proceedings. Obviously, there should be safeguards in place to prevent the genuinely mercenary from taking advantage of bankruptcy protection, but gray areas within the law can also unnecessarily vilify even those honest borrowers that underestimated a motorcycle’s worth or forgot about accounts they hadn’t touched for a decade.

Again, obviously, for many consumers – those without investments or significant equity in their homes or vehicles; those willing to forego all accumulated possessions; those that wouldn’t mind the government planning their family’s budget for half a decade; those that can’t imagine needing credit reports or FICO scores again – personal bankruptcies can still be of some use. Even for those desperate souls, though, we still urge the consultation, whatever the cost, with top bankruptcy attorneys. For all others, it almost always makes sense these days to do whatever possible to avoid bankruptcy altogether – especially as other alternatives, such as debt settlement, have become increasingly popular. It was always meant as the final option, but, after the recent legislation, that can be all too true.

North Americans are a collection of spenders who must learn the hard way to practice what our grandparents have always known: A penny saved is a penny earned.

Consider that about 43% of North Americans spend more than they earn, according to estimates from the federal government, and the average household carries some $8,000 to $10,000 in credit-card debt.

To make matters worse, the average North American no longer saves money. That’s tumbled from a 10.8% average savings rate in 1984 into negative territory today. It’s no wonder that many of us have been living way above our means for some time.

But that is getting harder and harder to do. Available credit for people to finance their lifestyles has shrunk if not dried up altogether and many North Americans are standing by in shock watching their mortgage payments surge while the value of their 401(k)s / RRSP’s drop.

It’s clear we need to start spending less and saving more. That may sound easier said than it’s done. The key is to be aware of your where your money is going and take steps to stop the leaks.

Here are five simple tips that could save you hundreds of dollars a month:

1. Cash back at the pump

In the past five months gasoline prices have dropped 56%, from an average price of $4.11 to $1.80 a gallon or 72 cents a litre. Somehow, households found the money to pay the higher price and survive so now people should take that excess money they are saving and bank it.

Jean Chatzky, author and personal finance expert suggests using the money you were spending on gasoline to build up that rainy day fund or to pay some your holiday expenses instead of racking up more debt.

2. Dinner Savings

Another great way North Americans can cut costs each month is to eat at home, says Jonathan and David Murray, twin brothers who are financial advisers.

According to a recent Zagat survey, North Americans will spend an average of $34 this year every time they go out to eat dinner, that’s for one dinner, drink and gratuity; $76.00 if they live in one of the 20 most expensive cities. If a couple does that four times in a month the expense is close to $300 in low-cost areas and $600 in higher-cost regions, and if you have more than one drink or are treating family or friends, costs can add up quickly.

Plan a dinner or party at home and ask guests to bring a dish. If you’re big on getting together with friends, family and work associates, this could save you hundreds of dollars a month.

3. Renegotiate Household Bills

You may not be able to negotiate with the gas company or the electric company, but you can with credit cards, cable and phone services, among others. Do the homework and find out what competing cable companies, for example, are offering and ask your provider to renegotiate your bill. You may have to get through to a manager but Chatzky said she recently did this and got her monthly bill reduced by $50.

4. Smart shopping

Retailers are poised to have one of the worst holiday shopping seasons in decades and are offering deep discounts to move merchandise. But smart shoppers can save even more money by hunting down coupons. Before ordering online or going to a store, go to sites like Couponcabin.com and Ultimatecoupons.com or Google the name of a store and often you’ll get a coupon code to enter at checkout. You can save 10% to 20% or more on the total order or maybe get free shipping.

There are also coupons to print out and take to the store for deeper discounts. And don’t be afraid to pit one retailer against another by asking for a price match on sale items.

5. Keep the receipt

It is important to hang on to all your store receipts and keep track of sales. Savvy shoppers can possibly save even more on purchases by checking back to see if the retailers lower prices even further. If that happens within two weeks of your purchase, most stores will credit you the difference.

We hope that you can layer into your shopping habits the following tips as a means to start saving money fast and easy.

Toronto Bankruptcy Trustees

I came across this fantastic news today in the Toronto Sun newspaper that will give investors some peace of mind:

If you find yourself in financial trouble and have to declare bankruptcy, your registered retirement savings are now safe from your creditors.

Recent amendments to Canada’s Bankruptcy and Insolvency Act now rule that for bankruptcies occurring after July 7, 2008 creditors can no longer go after your Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) or Deferred Profit Sharing Plans (DPSPs) to pay off owing debts.

In the past, only some of your investments such as certain segregated funds and pension funds were protected from creditors. Now, you don’t have to worry that all your retirement savings will be forfeited if you go bankrupt. However, to prevent intentional protection of funds, any money put into registered plans in the 12 months before a bankruptcy (or longer) may not be subject to this new rule.

Several provinces (Manitoba, Saskatchewan, P.E.I., and Newfoundland) already provide creditor protection. Those laws will remain in place and the new federal law applies everywhere else. Quebec law protects some registered retirement plans but this new law appears to cover all RRSPs in Quebec.

All Canadians will benefit from this new rule change in the following ways:

– Retirement protection for small business owners:

In 2003, the Canadian Federation of Independent Business conducted a survey of members that found 91% of small business owners used RRSPs as a retirement savings vehicle. CFIB has been calling on the government to protect these retirement savings for years. Many small business owners and professionals put their personal assets at risk. The CFIB survey says only 28% of small business owners have already-protected formal pension plans. This rule will help small business owners protect one of their main retirement savings strategies while still investing other money in their business.

– Greater diversification:

As we all know, you should spread your investments around to reduce your risk. Before this amendment, if protection from bankruptcy was a concern for your retirement savings your investment choices may have been limited. Now you and your advisor can look at the universe of investments to choose what works best for your retirement portfolio.

- Potential fee savings: Bankruptcy-protected segregated funds have higher fees due to the creditor protection and other unique features. Investors can now work with their financial advisers to see if there are appropriate alternative strategies that can save them some money.

Most GTA – Greater Toronto Area -  financial advisers can help you determine if this rule change affects your personal financial planning strategies. Consult a Toronto bankruptcy expert to find out more details about how these changes could affect your situation. If you find yourself in financial difficulty consult your local non-profit credit counselling agency. Their counsellors can help you decide if bankruptcy is the right course of action for you.

Bankruptcy Toronto

I came across this very sad Toronto Sun story about an abusive collection agency that took harassment to a new level, phoning a debtors 81-year-old dad and a neighbour, telling them he owed money and he better pay up.

When the man’s 14-year-old daughter got a harassing call and was so overcome with fear she decided to offer $400 in babysitting money to help her cash-strapped dad get out of financial hot water, he cried. And called the Toronto Sun.

“I know I owe money and I’m not running away from it. But they’re harassing me, making me feel worthless. I’m not a deadbeat. I’m a hard-working family man who may lose my job,” says a sobbing 47-year-old Robert, who has worked on the line at General Motors for the past 27 years.

Robert is among a growing number of Canadians struggling to keep up with the bills, while a layoff looms.

Last week GM announced it would shut its truck assembly operation in Oshawa, putting 2,600 out of work. Robert is one of them.

With total household debt in Canada at a record $1.1 trillion and consumers owing 124% of real disposable income, many aren’t keeping their heads above water. Personal bankruptcies hit their highest level in more than four years in April.

In total, 8,035 consumers declared bankruptcy, as did 592 businesses. Some of the biggest increases were in Ontario, where the economy has been hit hard by a U.S. economic meltdown.

Up until a year ago, staying ahead of the bills wasn’t a problem for Robert, who earns a decent wage of $33 an hour. His 45-year-old wife earns $17 an hour working as a nurse in Whitby.

But this past winter Robert was laid off for 31/2 months and his wife was forced to take time off work to deal with skin cancer. After that, she had a scare with breast cancer.

Luckily Robert is not one of the cash-strapped Canadians who’ve borrowed against their home equity or opted to play the game of 0%-down mortgages or 40-year amortizations.

His $180,000 mortgage on a three-bedroom Oshawa home valued at $285,000 is in good standing. But with rising property taxes, it’s a struggle to fork out $1,700 a month on home ownership costs.

Then, there’s skyrocketing hydro bills (their home is heated by electricity), plus the rising cost of food, gas and insurance. One car now sits in the driveway of this two-vehicle family.

CREDIT CARD WOES

What got Robert in hot water was his Visa credit card. When he was out of work, he racked up debt of $4,600, and with interest and late payment penalties, the total now sits at $5,620. At first, he was able to make minimum payments, then all he could afford was partial payments. It wasn’t long before a letter arrived warning that he was in collections, and then the phone calls began.

“I tried to explain my predicament, but they were very rude. On the third call, they told me obviously I didn’t want to settle the matter and they would take other action,” he recalled.

Robert did the smart thing and visited a credit counseling agency for help. A consumer proposal was drawn up that sets out a repayment plan he can handle, while waiving interest, fees and late-payment penalties.

What he wanted to know from me was what were his rights when dealing with a harassing collection agency.

Laurie Campbell, executive director of Credit Canada, explains collection agencies have to abide by rules set out in Ontario’s Collection Agencies Act.

With the latest bankruptcy numbers indicating more and more loan defaults are on the way, she advises that consumers understand what an agency can and cannot do.

Campbell also points out it’s high-cost credit card debt that sinks families, a burden made worse by gouging interest rates that average more than 19% on standard cards, and head even higher when a payment is missed.

“It can be very stressful to manage your financial life when collection agencies start calling,” she said.

A review of Ontario’s Act reveals the collection agency dealing with Robert broke a few rules.

For starters, the Act is clear. An agency cannot contact a spouse, family or household member, relative, neighbour or acquaintance unless the person contacted guaranteed the debt. The only time they’re allowed to contact these people is to ask for an address or telephone number.

Robert is adamant. Not only did this collector call his father and a neighbour but spilled the beans that he owed money. “My father called me and said, ‘Bobby, what kind of trouble are you in?’ ” Robert recalls.

Another rule this agency broke was calling Robert at 6 p.m. on a Sunday. On Sundays or holidays, calls can only be made between 1 and 5 p.m.

And collectors can’t use “threatening, profane, intimidating or coercive language,” the act states, “or use undue, excessive or unreasonable pressure.”

According to Robert, not only was this collector intimidating but was urging him to sell his house.

Other rules include:

- A collector is only allowed to contact you six days after sending a written notice stating the name of the creditor, the balance owing, the name of the agency and its authority to demand payment.

- A collector can’t contact you if a registered letter is sent to the agency saying you dispute the debt and suggest the matter be taken to court.

- A collector can’t contact you if you sent a registered letter stating to deal solely with your lawyer.

- A collector may not contact you other than by ordinary mail more than three times in a seven-day period without your consent, once the agency has actually spoken with you.

- A collector can’t continue to contact you if you have told him you’re not the person he’s looking for, unless he takes reasonable precaution to ensure you’re that person.

- They can’t give false or misleading information.

- They can’t recommend to a creditor that a legal action be started against you without first sending you notice.

- They can’t contact your employer except on one occasion to obtain your employment information, if your employer has guaranteed the debt, if the call is in respect to a court order or wage assignment, or if you’ve provided written authorization to contact your employer.

If any of these rules have been broken, you can file a complaint with the consumer protection branch of Ontario’s government and consumer services ministry.

Meanwhile, for Robert money’s so tight, he’s considering signing up to test drugs for a pharmaceutical firm that will pay $3,600. Also, his 20th wedding anniversary is this Tuesday. Robert can’t afford much, so he asked that I print this message for his wife:

“Happy anniversary, honey. You have given me the best 20 years and the meaning of love.”

Debt Collection Toronto

There are no quick fixes for improving your credit score. But you can raise your score over time by demonstrating that you consistently manage your finances responsibly. Any of the following ten tips can help you to improve your credit score:

1. Pay your bills on time.

This is the best way to improve your score, and it’s never too late to start. Even if you’ve had serious delinquencies in the past, those will count less over time if you keep paying your bills on time.

2. Keep credit card balances low.

High outstanding debt can pull down your score. Don’t go maxing out your credit cards all the time.

3. Check your credit report for accuracy.

It’s possible that there may be inaccurate information on your credit report that can be easily cleared up (see How To Fix Credit Report Inaccuracies). In Canada, if this proves to be the case, then you should contact Equifax immediately.

4. Pay off debt rather than moving it around.

Consolidating your credit card debt onto one card or spreading it over multiple cards will not improve your score in the long run. The most effective way to improve your score is by simply paying down the amount you owe.

5. Keep your credit cards – but manage them responsibly.

In general, having credit cards and installment loans that you pay on time will raise your score. Someone who has no credit cards tends to have a lower score than someone who has managed credit cards responsibly.

6. Don’t open multiple accounts too quickly, especially if you have a short credit history.

Opening too many accounts in too short of a time period can look risky because you are taking on a lot of possible debt. New accounts will also lower the average age of your existing accounts, something that your FICO score also considers.

7. Don’t open new credit card accounts you don’t need.

This approach could backfire and actually lower your score.

8. Don’t close an account to remove it from your record.

It’s a myth that closing an account removes it from your credit report. This is untrue-even closed accounts remain on your report, possibly for an indefinite period of time and may still be factored into the score. In fact, closing accounts can sometimes hurt your score unless you also pay down your debt at the same time.

9. Shop for a loan within a short, focused period of time.

FICO scores distinguish between a search for a single loan and a search for many new credit lines, based in part on the length of time over which recent requests for credit occur. If you shop for a number of loans over too long a time period, it can count against you.

10. Contact your creditors or see a legitimate credit counselor if you’re having financial difficulties.

This won’t improve your score immediately, but the sooner you begin managing your credit well and making timely payments, the sooner your score will get better.

Steps to Improve Your Overall Credit

If you have a history of poor credit or think that you might, it’s important that you find out and take the steps to improve it. It will take time, but with discipline, you may expect to see improvement in as little as six months. You see, creditors are interested in a track record. You’ll have to prove that you consistently pay your creditors on time and that you can effectively pay down your debt. Here’s the simple plan to improve your credit:

Know what’s on your credit report and resolve any discrepancies.

Even if you believe you have a good credit score, it is still wise to check with credit reporting agencies to make sure they contain a similar view of your credit history. It’s also wise to make sure there are no errors on your report, such as name misspellings or incorrect addresses.
Plan to pay your bills on time and follow through.

You can start this today, even before you take a look at your credit report. Contact your creditors to review your payment options and catch up with any late payments. Focus on ways to reduce your spending.

Stop using credit cards now.

Paying down your credit card balances will not only improve your credit rating over time, but you’ll be in a better position to negotiate a lower interest rate for your cards.

Don’t live beyond your means.

Make paying your bills and buying only essential items your main priority. Carefully weigh the importance of all new purchases against the greater importance of reestablishing your good credit.

Getting a handle on your spending, paying bills on time, and paying down credit cards takes a long-term commitment and strong self-control. It won’t always be easy, but the effort will pay off once you see your credit improve.

Toronto Bankruptcy Trustee

A Debt Consolidation loan is a personal loan that allows you to consolidate many other debts into one. For example, if you have three credit cards, you may be able to eliminate your credit card debt (see details below) by getting a Debt Consolidation loan to pay off the credit cards, so that you only have one payment each month instead of three.

What are the advantages of debt consolidation and refinance loans?

The advantages of a Debt Consolidation loan are:

* Your Debt Consolidation loan may have a lower interest rate than the rate you are paying on credit cards, so the loan should reduce your interest payments and help you eliminate your credit card debt, eventually.
* With the lower interest rates and/or extended terms a debt consolidation and refinance loan may offer, you may be able to reduce your total monthly payments.

* You replace many payments each month with only one payment, which should make your monthly household budgeting easier.
* Your Debt Consolidation loan may have a lower interest rate than the rate you are paying on credit cards, so the loan should reduce your interest payments and help you eliminate your credit card debt, eventually.
* With the lower interest rates and/or extended terms a debt consolidation and refinance loan may offer, you may be able to reduce your total monthly payments.
* You replace many payments each month with only one payment, which should make your monthly household budgeting easier.

Do I qualify for a Debt Consolidation loan?

To qualify for a Debt Consolidation loan you must meet the following:

* The bank will require a copy of your monthly budget to determine if you can meet your loan payments.
* You must be working, or have some other source of income allowing you to repay the loan. Banks calculate your ability to service a debt based on your income, so bring with you your most recent pay stubs, and last year’s tax return, to the bank or lender when you apply for a debt consolidation loan.
* To satisfy prerequisites set up by the lending institution for debt consolidation and refinance loans, you may need a co-signor or collateral (such as a car or a house).

What is the next step?

First, do some research. For example, there are web sites that offer debt consolidation loans information. It is in your best interest to gather as much information on debt consolidation loans as possible to determine whether or not you qualify for a loan.

To determine if you qualify for a Debt Consolidation loan, contact your banker or finance company, or some other lending institution. The major Canadian banks, debt consolidation lenders, can be reached through their web sites, your local yellow pages or by clicking on onw of the ads, located at the top of this page.

In case you own a house, you could contact a mortgage broker. In addition, there are a number of lenders that specialize in dealing with people in financial trouble and, especially, with bad credit – car loan lenders being an example. In case debt consolidation and refinance loans are beyond your reach, don’t despair – there are other debt management solutions available to you. For professional help, please contact one of our licensed bankruptcy trustees today and arrange for a free initial consultation.

Toronto Debt Consolidation

Consolidation Loan:

A consolidation loan should pay off all of your existing unsecured debts. This would be loans from credit cards, retail store cards, bank overdrafts and personal loans.

Essentially, a consolidation loan combines all of your unsecured loans and uses your home equity to secure them.

But be careful of what looks to be a quick fix, you’re getting symptomatic relief, not a credit cure. Home equity lines or loans appear as a quick and easy way to get out of debt. By leveraging your primary residence value, you get money to pay off other bills and a tax break, too. But borrowing against your house can backfire. The biggest risk: You could lose your home if you default on the loan.

Re-Mortgage:

Many times, the answer to a credit crunch is to re mortgage your existing home. Housing prices have increased in the past few years and the opportunity to take some of that equity out of your home.

When you remortgage you move your mortgage from your existing home loan to another loan, paying off the old debt with the new one. You may not even change lender. There are two basic reasons to remortgage: you remortgage to save money with a better rate of interest or you remortgage to borrow more money against the value of your property.

Please remember that as with any mortgage your home may be repossessed if you do not keep up the repayments.

Secured Loan:

A secured loan is a loan that uses your home as security against the loan. Secured loans are suitable for when you are trying to raise a large amount; are having difficulty getting an unsecured loan; or, have a poor credit history.

Benefits of secured loans include:

• The ability to borrow more money
• Lower monthly repayments than unsecured loans
• Spread repayments over a longer period of time

Be on the look out for the following:

• High interest rates
• Penalty charges for defaults or early repayment
• High set up fees

With any type of loan, credit or refinancing, you should always seek professional advise!

When it comes to repairing your credit, you’re the only person for the job.

What should you do if you have bad credit? Here are 10 tips that are designed to improve your credit history and raise your credit score:

1. Get a copy of your credit history:  Equifax Canada is a great place you can go to get a copy of your credit history. Each credit-reporting bureau is required to give you one copy once a year. You should pull copies from each of the bureaus, since they sometimes collect different data.

2. While you’re there, buy a copy of your credit score from Equifax.com. Equifax offers a FICO score, also known as a Beacon score, which is from Fair Isaac, the company that created the concept of credit scoring. Most creditors will pull a FICO score, so you should see what they’re seeing. Your credit score will give you a snapshot of what your credit information means to your creditors. The FICO score runs from 350 to 850. The higher the number, the better. Your target should be to have a credit score of at least 720.

3. Check your credit history thoroughly. You’re looking for errors, misinformation and negative information that might count against you. File a dispute with the three credit-reporting bureaus if you spot any errors. Some credit reports have serious errors in them, so fixing these will boost your score.

4. Understand what kind of debt you’re facing. Make a list of everything you owe, the interest rate each debt carries, and the minimum payment due each month. Then, prioritize your debt: mortgage, real estate taxes, credit cards and medical bills should be paid in that order.

5. Negotiate with your creditors for a lower interest rate. Paying less in interest means more of your payment each month goes toward paying down your balance. If you have a good credit score (over 720 is a starting point), you should be able to find other credit cards featuring zero percent to 5 percent in interest for the first year, or for the life of a balance transfer (check out sites like CardRatings.com and CardTrak.com to compare credit-card offers.) Just be sure you read the fine print: Some credit cards require you to charge on the new account each month or face a stiff fee.

6. Pay down the debt with the highest interest rate first. Pay your mortgage and home equity loan and lines of credit in full each month. Then, make sure you have enough cash to make all of the minimum payments due on your debt each month. Then, throw any spare cash at the debt that carries the highest interest rate first. Once you’ve paid down that debt, transfer all of the extra cash you’re paying each month to the debt with the next-highest interest rate, and so on.

7. Pay everything on time, even if only the minimum payment. The most crucial component of your credit history and credit score is your ability to pay your bills on time each month. Paying on time shows your creditors that you take your debts and obligations seriously. Even one late payment can seriously damage your credit history and credit score, even though it can take a year’s worth of on-time payments to start to heal your credit history and raise your credit score. It doesn’t seem fair, but that’s how the credit industry works.

8. Don’t charge more than 25 percent of your maximum available credit limit. If you carry a credit-card balance that is a higher percentage of your available credit limit, your credit score will go down. Why? Because creditors believe if you charge the maximum on your credit cards, it means you can’t properly manage your credit. You’re better off spreading out your debt between three or four different cards than having it all piled on one card.

9. Don’t open and close a lot of accounts. Again, a credit score tells current and future creditors how likely it is that you won’t pay back your debts. It assesses how risky a borrower you are today. Every time you apply for a new credit card, that creditor pulls a copy of your credit history from the credit-reporting bureaus. That “inquiry” gets reported on your credit history. Too many inquiries in a short period of time signals that you may be getting low on your available credit and need more cash. Even though you might be interested in getting 10 percent off your first purchase for opening a new account, it looks different to a prospective creditor.

10. Don’t share credit. It’s easy to tell someone that you’ll “co-sign” a credit card, student loan or a mortgage loan application, especially if it’s someone you’ve known for a long time. But it’s also easy to wind up in a situation where that friend or relative stops paying his or her bills (for whatever reason) and your credit will take a big hit. Once you’re a co-signer for a loan, you’re legally obligated to make those payments — whether or not you can afford them. So think carefully before you agree to co-sign a loan, and nip the problem of bad credit before it begins.

The cost of bankruptcy in Toronto, Ontario is largely dependent on your personal situation – although not completely since there are some common expenses that you should certainly take into the account when trying to determine the cost of filing bankruptcy in your case.

Below we provide a summary of some of the costs you can expect in regards to a bankruptcy process in Toronto, but for a thorough explanation of all the costs, we recommend that you interview several Trustees in your area.

Costs in a Bankruptcy Process in Toronto

First of all, when filing personal bankruptcy you will have to make a contribution to your bankruptcy estate to cover administrative costs, court fees, communication and government filing fees.

Next, you must pay a share of your “surplus income” into your estate. If you or your family earn over a certain amount each month, you will lose a fraction of your earnings over that limit.

You should also keep in mind that you will lose some of your assets, as well as any tax refunds and GST credits you would normally acquire during the bankruptcy period. You will also lose any windfalls (lottery winnings, inheritance) you receive throughout the bankruptcy.

For the most part, your total cost of filing bankruptcy will be determined mostly by your monthly income, your family size, and your assets.

Determining the actual final numbers can be difficult, so it’s recommended that you speak directly with a professional. Please note that an initial consultation is normally at no charge.