In Nova Scotia, where coastal beauty meets a rich cultural heritage, the picturesque landscape can often mask the silent struggle faced by many grappling with overwhelming debt. The burden of debt infiltrates every facet of life, extending beyond the financial realm and into your relationships and overall well-being.

This article dives into the Nova Scotia debt dilemma and sheds light on the emotional and financial toll unmanageable debt takes. Fortunately, there is hope on the horizon. Today, we concentrate on debt consolidation in Nova Scotia as a means of regaining control of your finances while exploring various other paths to debt relief.

Find the strategy best suited for your needs as we uncover the options, benefits, and top tips for achieving financial freedom. Join us as we navigate the vast terrain of debt consolidation in Nova Scotia and learn how to conquer your debt, one step at a time.

The Nova Scotia Debt Dilemma

Even in Nova Scotia, individuals and families can’t escape the ever-present shadow of debt that affects everyday life. Overwhelming debt can permeate every part of life, from straining relationships to negatively impacting mental health and weighing heavily on one’s emotional and psychological well-being.

As the struggle with debt grows, many are plagued by sleepless nights and declining mental health. Relationships often bear the brunt of financial stress as they falter under the weight of the debt burden.

Confronting this issue head-on is essential. Explore the paths to debt consolidation in Nova Scotia as we unveil strategies for regaining control of your financial health. 

How to Consolidate and Conquer Debt in Nova Scotia

Those in debt can be overwhelmed by multiple payments, high-interest rates, and persistent creditor demands. The stress of managing this financial turbulence can feel suffocating. It’s vital to recognize that there is a way out.

In the following sections, we’ll discuss various avenues for debt consolidation in Nova Scotia, what each process entails, and how the right one can reduce financial stress and pave the way for a debt-free future.

Avenues for Debt Consolidation in Nova Scotia

Debt consolidation is not a one-size-fits-all strategy. It offers multiple pathways to debt relief in Nova Scotia. Here, we’ll explore the various avenues for debt consolidation: bankruptcy, debt consolidation loans, and consumer proposals.

Let’s talk briefly about each of these concepts, shedding light on the suitability of each depending on your financial situation.

Bankruptcy

Bankruptcy is a legal process that offers a fresh financial start by clearing most unsecured debts. It’s suitable for those with overwhelming debt they can’t manage but has serious credit and asset implications.

Debt Consolidation Loans

Debt consolidation loans merge multiple debts into one, single monthly payment plan. These are suitable for those seeking a simplified payment structure, but they don’t reduce the total debt owed.

Consumer Proposals

Consumer proposals allow you to negotiate reduced debt payments with creditors and protect your assets while avoiding the harsher consequences of bankruptcy. They are ideal for individuals who are overextended with debt but still have some income, offering a balance between financial stability and manageable payments.

The Process of Debt Consolidation in Nova Scotia

The first step toward effective debt consolidation is understanding the process. Here, we’ll touch on the essential steps in each strategy, allowing you to gain insight into how each approach works. 

With the correct information, you can make an informed choice about your financial future, whether it’s bankruptcy, a debt consolidation loan, or a consumer proposal.

Bankruptcy

1. Contact a Licensed Insolvency Trustee (LIT).
2. The LIT will assess your situation and discuss the pros and cons of all restructuring options.
3. Work with the LIT to submit the necessary paperwork.
4. Complete your bankruptcy duties.
5. Debts are discharged when you are discharged.

Debt Consolidation Loans

1. Contact a financial professional, which could be a Licensed Insolvency Trustee (LIT).
2. Review your financial situation to determine if a debt consolidation loan is a suitable option.
3. If applicable, secure a consolidation loan at a lower interest rate.
4. Use loan to pay off multiple high-interest debts with the loan.
5. Make one manageable monthly payment to pay down debt.

Consumer Proposals

1. Contact a Licensed Insolvency Trustee (LIT).
2. The LIT will assess your situation and discuss the pros and cons of all restructuring options.
3. Create a consumer proposal with LIT.
4. Submit consumer proposal to creditors for acceptance.
5. Once accepted, make a single, affordable, consolidated monthly payment to LIT for debt settlement.

Comparing Options for Debt Consolidation in Nova Scotia

By comparing all the options available for debt consolidation in Nova Scotia and working with a Licensed Insolvency Trustee, you can determine the most suitable for your financial circumstances.

Whether you’re overextended or searching for a way to streamline payments, there’s an option that might be the solution you’ve been seeking.

Overcome Overwhelming Debt and Unlock Financial Freedom

While the weight of overwhelming debt can seem paralyzing, it’s essential to understand you don’t have to carry this burden forever. Debt consolidation in Nova Scotia is the key to unlocking financial freedom for you and your family.

Benefits of Debt Consolidation in Nova Scotia

Debt consolidation offers many benefits for those weighed down by financial stress. It goes beyond simplifying payments by combining multiple debts into one. 

Discover the following ways debt consolidation can simplify your financial life:

• Lowers or Eliminates Interest Rates
• May Improve Credit Score
• Reduces Financial Stress
• Promotes Financial Well-Being

Debt consolidation in Nova Scotia may provide the financial relief you’ve longed for. Licensed Insolvency Trustees help guide you through the debt relief process, ensuring it’s correct and legal.

Strategies for Effective Debt Consolidation in Nova Scotia

Effective debt consolidation is about more than just streamlining payments; it requires a holistic approach to your financial wellness. To prevent future financial troubles, you’ll need to change how you deal with debt and your finances.

Here are some practical strategies for taking control of your financial health:

• Create a Detailed Budget
• Build an Emergency Fund
• Develop Long-Term Financial Goals
• Use Credit Responsibly
• Conduct Regular Reviews of Your Financial Situation
• Seek Financial Education and Counseling

Incorporating these strategies will help you pave the way for a debt-free future and ensure long-term financial stability for you and your family.

Our Office

Accessibility and comfort are priorities at our multiple Nova Scotia locations. We offer convenient parking and extended office hours to ensure your visit is stress-free. Explore our transparent prices for debt consolidation services, meet our dedicated team, and discover the relief you’ve been seeking at Powell Associates Ltd.

How to Find Us

We’re located inside of the City of Lakes Business Centre, in the Burnside Park. Our office is within easy access from:

• Commodore Dr,
• Dartmouth Crossing,
• Highway 111, and 
• Burnside Dr

Our street address in Nova Scotia is:

50 Eileen Stubbs Ave, Unit 130

Dartmouth, NS B3B 0M7

We Offer Multiple Locations

If you’d like to discuss filing for bankruptcy in another city in the Maritimes, we also have offices in:

Prince Edward Island

42 St. Peters Road

Office #8

Charlottetown, PE C1A 5N5

New Brunswick (4 Locations)

133 Prince William St #302

Saint John, NB E2L 2B4

298 Main Street

Fredericton, NB E3A 1C9

The Prestige Executive Centre

500 St. George St

Moncton, NB E1C 1Y3

344 Campbell St

Miramichi, NB E1V 0J7

Parking Availability

No need to pay for parking or walk long distances through the snow or rain. Our office in Nova Scotia is handicap accessible, and we offer plenty of free parking right outside our door.

Stated Hours

• Saturday – Closed
• Sunday – Closed
• Monday – 8:30 AM–4:30 PM
• Tuesday – 8:30 AM–4:30 PM
• Wednesday – 8:30 AM–4:30 PM
• Thursday – 8:30 AM–4:30 PM
• Friday – 8:30 AM–4:30 PM

To give our clients our undivided attention, we don’t accept walk-in appointments. Please call us, and we’ll schedule a free consultation at your earliest convenience.

What Do We Charge for Debt Consolidation in Nova Scotia?

We understand the concern over costs when dealing with overwhelming debt. When relieving financial burdens, our commitment is to provide tailored debt relief solutions that prioritize your economic well-being.

Here’s what you can expect:

• Free Consultation: Your first meeting is free, allowing us to assess your situation and offer guidance for the next steps.
• Minimal Up-Front Expenses: We strive to keep your initial expenses low, ensuring that debt relief doesn’t break the bank.

In many cases, the settlements we negotiate with your creditors effectively cover the costs of your debt relief, making it financially attainable.

Meet Our Dedicated Debt Consolidation in Nova Scotia Team

Powell Associates Ltd. is authorized by the Office of the Superintendent of Bankruptcy (OSB) as a Licensed Insolvency Trustee to provide debt relief services to individuals and families. Our Nova Scotia offices have dedicated experts offering comprehensive debt solutions.

Comprehensive Debt Consolidation Services in Nova Scotia

Our goal at Powell Associates Ltd. is to make debt relief accessible to all Nova Scotians. Whether you’re considering personal bankruptcy, consumer proposals, or debt consolidation in Nova Scotia, our team of experts is here to guide you through these options.

We understand that every financial situation is unique, and we are committed to helping you find the path to debt relief that best suits your needs. You don’t have to navigate the debt landscape alone.

Reviews for Debt Debt Consolidation in Nova Scotia

Our customer service is second to none. Don’t take our word for it, though. Check out what some of our customers have to say about our services.

• Relieved! – William Jordan from Nova Scotia was stressed due to debt. Cheryl Hodder from Powell & Associates Dartmouth NS helped him understand his options and lifted a weight off his shoulders.

• Helpful! – Doug Illingworth sought debt advice from Powell Associates. Although he didn’t use their service, they offered alternative solutions, showing their willingness to help regardless.

• Compassionate! – Amanda McCann was initially told bankruptcy was her only option. Powell Associates offered multiple options and treated her like a person, not just a case.

• Supportive! – Jason Fraser praises Nabeela from Powell Associates Ltd. for her quick responses and help in understanding financial terms. He encourages others not to let pride prevent them from seeking help.

• Amazing! – Hamid Iravani had an excellent experience with Powell Associates. He felt like he was in good hands from the start and highly recommends them.

Your First Visit: Personalized Financial Assessment

When you first step into our Nova Scotia offices for your free initial consultation, anticipate a warm and confidential atmosphere. This meeting marks the start of your journey toward financial stability and a debt-free future.

It’s essential to come prepared with relevant financial documents to make the most of this meeting. Our team will guide you through a comprehensive assessment of your financial situation. 

Since every case is different, we help you identify the most suitable debt relief solution to help you regain control of your finances. You can expect a tailored approach that addresses your unique challenges and goals, putting you on the path to improving your financial health.

Ease Financial Stress with Debt Consolidation in Nova Scotia

Debt consolidation in Nova Scotia provides hope for those seeking to ease the financial stress of overwhelming debt. Still, the path from overwhelming debt to financial freedom is not one you must walk alone. Working with a Licensed Insolvency Trustee helps you regain control of your economic life and discover the path to true debt relief.

If you’re feeling the weight of financial stress, don’t hesitate to explore the debt consolidation options available with the experts at Powell Associates Ltd. Our Nova Scotia team will guide you toward a brighter financial future.

As Licensed Insolvency Trustees, we offer a free initial consultation, including debt consolidation, in all cities in the Maritimes, including Dartmouth, Nova Scotia; Halifax, Nova Scotia; Moncton, New Brunswick; Saint John, New Brunswick; Charlottetown, Prince Edward Island; and Summerside, Prince Edward Island.

Managing finances in today’s world can sometimes feel like a juggling act. Finding ways to simplify your financial burdens and commitments is crucial for long-term financial success. Fortunately, several options are available, regardless of your credit rating or economic circumstances.

Loan consolidation is one of many viable strategies to streamline your monthly payments, providing an opportunity for debt relief and helping you regain control over your financial well-being.

What is Loan Consolidation?

In its simplest form, loan consolidation involves merging multiple loans into a single, more manageable payment arrangement. It eliminates the hassle of keeping track of numerous due dates, interest rates, and payment amounts.

By consolidating all your loans into one payment, you’re significantly simplifying your financial landscape. This simplification makes handling your debt more accessible and gives you a clearer perspective of your financial position.

What’s the Difference Between Loan Consolidation & Debt Consolidation Loans

It’s vital to distinguish between loan consolidation and a debt consolidation loan. While the terms might seem interchangeable, each phrase serves a distinct purpose. Loan consolidation refers to combining many loans into a single payment, which reduces complexity and potential confusion regarding repayment. This can be done using various methods, discussed in this articles, and is not limited to just taking out a new loan.

Conversely, a debt consolidation loan is a new loan taken out to pay off existing debts and is one of the options for someone interested in loan consolidation. Understanding this fundamental difference is essential when reviewing options to simplify financial commitments.

What are the Benefits of Loan Consolidation?

The primary advantage of loan consolidation is that it reduces the number of monthly payments you are responsible for, but the benefits extend much further. This approach often allows you to streamline interest rates as well, potentially lowering the overall cost of your debt.

The payment process is also simplified, which reduces the chances of missing due dates and incurring late fees. Fundamentally, loan consolidation provides much-needed breathing room as you manage your finances, promoting a smoother path to debt relief.

Loan Consolidation Options

Regardless of your financial position or credit rating, there is a loan consolidation option that suits your needs. Let’s explore seven debt relief options in more detail.

Unsecured Loans

Typically offered by credit unions or traditional lenders, unsecured loans can be a valuable option in your consolidation strategy. Unsecured loans don’t require collateral, so your assets aren’t immediately at risk. 

This option is particularly beneficial for individuals with a satisfactory credit score as it provides a means to consolidate while protecting personal assets.

Pros & Cons of Using Unsecured Loans for Loan Consolidation

Debt Consolidation Loans

While effective, debt consolidation loans can be challenging to obtain for those with bad credit. In those cases, interest rates are also likely to be much higher.

This option may be helpful for individuals with high credit scores who can secure a more favorable interest rate.

Pros & Cons of Using Debt Consolidation Loans for Loan Consolidation

Low-Interest Credit Cards

Low-interest credit cards are an alternative way to consolidate your debt by transferring high-interest balances to low-interest cards. Moving to a low-interest credit card can save you money on interest payments over the long term. It’s crucial to approach this option cautiously and ensure you can manage the new card responsibly.

Pros & Cons of Using Low-Interest Credit Cards for Loan Consolidation

Cash-Out Refinance

The cash-out refinance strategy involves refinancing your mortgage for a higher amount and receiving the difference between your old and new mortgage amounts in cash, which you can use to repay existing debts. This option is viable even for homeowners with bad credit if the property has substantial equity.

A cash-out refinance is often confused with a Home Equity Line of Credit (HELOC). While similar, their variations lie in the financial mechanisms, repayment structures, and purposes they serve.

A HELOC offers a revolving line of credit secured by your home’s equity without needing to refinance your first mortgage. While cash-out home refinance options involve replacing your mortgage and receiving a lump sum for specific home-related expenses (i.e., renovations or repairs).

Pros & Cons of Using a Cash-Out Refinance for Loan Consolidation

Debt Management Plan

A debt management plan, or DMP, can be a beneficial strategy for those struggling with smaller debt loads. This option involves working with a credit counselling agency that will attempt to negotiate acceptable repayment terms with your creditors.

Debt management plans require full repayment of unsecured debt and cannot assist with government debt. Fees are charged by the agency for this service and are paid on top of the amount you pay to your creditors.

Pros & Cons of Using a Debt Management Plan for Loan Consolidation

Consumer Proposal

A consumer proposal can provide debt relief and consolidate your unsecured loans. Consumer proposals can help alleviate the burden when unsecured debt payments become overwhelming. Working with a Licensed Insolvency Trustee, you can:

• Alleviate the interest payments on your unsecured debt.
• Negotiate your existing secured debt down by up to 80%.
• Put an end to collection calls and notices.
• Protect your wages, home, and cars from liens and garnishments.

Consumer proposals cater to diverse financial circumstances. A consumer proposal may be particularly appealing for those without a house or equity to borrow against. It can also be applied to certain government debt and school loans (provided you have been out of school for over seven years).

This option can also be useful for those with bad credit as it allows you to negotiate with creditors for reduced debt repayment, addressing your debts without the need for further borrowing.

Consumer proposals are adaptable solutions for individuals struggling with bad credit, absence of collateral, and loan inaccessibility.

Pros & Cons of Using a Consumer Proposal for Loan Consolidation

Bankruptcy

Bankruptcy is a last resort option only applicable to unsecured loans and some government debts. It may also provide debt relief on school loans if you have been out of school for over seven years. Bankruptcy provides legal protection from creditors while you pursue debt resolution.

This option is a lifeline for individuals grappling with bad credit or unmanageable unsecured debt. While a significant step, bankruptcy can provide a fresh start and a chance to rebuild credit over time without the burden of staggering debt.

Bankruptcy accommodates various financial situations by providing an opportunity to recalibrate finances. This path requires professional guidance to navigate intricacies and craft a plan that aligns with your circumstances. A Licensed Insolvency Trustee is required to file a bankruptcy. They will ensure you understand the process as it relates to your situation.

If you are facing insurmountable debt, bankruptcy may be a suitable option for debt relief, though it can significantly impact your credit score and financial future. 

Pros & Cons of Using Bankruptcy for Loan Consolidation

Loan Consolidation Mistakes to Avoid

While loan consolidation can be a valuable strategy for reducing debt, there are pitfalls to be aware of as you move through the process. Navigating this path requires vigilance to steer clear of common mistakes.

Here are some common pitfalls to avoid:

1. Taking on New Debt: Taking on new debt during the consolidation process could undo your progress. While consolidating existing debt, resist the temptation to accumulate further debt.
2. Not Fully Understanding Terms and Costs: Although somewhat self-explanatory, this mistake is common. Delving into the details of your chosen consolidation method is imperative to avoid unexpected expenses.
3. Overlooking Interest Rates: Try not to let the allure of consolidation overshadow interest rates. Rates offered should be favorable and contribute to reducing your financial burden.
4. Ignoring Credit Impact: Some consolidation methods will impact your credit score. Stay vigilant of credit score implications and weigh them against the benefits of your chosen loan consolidation method.
5. Not Addressing Root Issues: Loan consolidation treats the symptoms rather than the underlying causes of debt. Failing to budget is one habit that can lead to debt. Even after loan consolidation, budgeting remains crucial to prevent overspending. Address the root issues to avoid the recurrence of debt accumulation.
6. Rushing the Decision: Deciding to consolidate requires research and evaluation. Failing to properly consider various loan consolidation options could lead to unfavourable outcomes. Meeting with a Licensed Insolvency Trustee to understand all of your options will help considerably in the decision-making process.
7. Underestimating Long-Term Impact: Loan consolidation may offer debt relief, but whichever method you choose will have a long-term impact. Ensure your chosen strategy aligns with your financial goals now and in the future.

Achieving debt relief takes patience and discipline. You must stay committed to your chosen strategy even if you don’t experience immediate results. Consulting with experts can help you avoid costly missteps and find the right consolidation approach for your needs.

Contact Us to Discuss Your Loan Consolidation Needs

Each financial situation is unique. Loan consolidation offers a practical solution to simplify your monthly payments and pave the way to a more secure financial standing. By understanding the options available to you and their respective pros and cons, you can make great strides toward financial freedom.

Whether you’re considering loan consolidation or need guidance on your debt relief journey, we’re here to help. Contact us today to discuss your unique situation. A well-informed loan consolidation approach coupled with professional guidance can make all the difference in your quest for financial stability and peace of mind.

This article will:

• provide an overview of the pros and cons of bankruptcy in Canada, 
• explore different bankruptcy alternatives, 
• identify relevant costs and risks of each, and 
• discuss the implications of a successful discharge from bankruptcy. 

Weighing up all the options will help you make an informed decision about your finances and avoid the long-term consequences that come with bankruptcy.

Bankruptcy Alternatives – A Short Summary

If you’d rather listen to this blog, just click play on the YouTube video below:

Text to audio file compiled by Word Brokers, LLC

It is important to weigh the pros and cons of bankruptcy before making a decision.

Consider alternatives to bankruptcy, such as a consumer proposal, debt consolidation, credit counseling, and debt settlement to minimize long-term financial implications. Each of these bankruptcy alternatives has its own benefits and drawbacks that should be considered before pursuing them.

Step 1: Weigh the Pros and Cons of Bankruptcy

The purpose of filing for bankruptcy is to provide debtors with a means to discharge their unsecured debt obligations and begin anew. Prior to filing, individuals must consider both the potential benefits and drawbacks of filing for bankruptcy.

Bankruptcy can provide debtors with much-needed relief, protection from creditors, and a fresh financial start or a new opportunity to begin their financial journey. However, it may incur costs, lead to the loss of non-exempt assets, cause damage to one’s credit score, and require the fulfillment of certain obligations for discharge.

Weighing the pros and cons of filing for bankruptcy is essential to ensuring that the decision to file for bankruptcy is the correct one.

Benefits of Bankruptcy

Bankruptcy is a legal process designed to provide debt relief to individuals who are unable to meet their financial obligations. Filing for bankruptcy offers debtors the opportunity to obtain relief from their creditors, protection from further legal action, and a new beginning financially.

The Automatic Stay of Proceedings, issued upon filing a bankruptcy filing, prevents creditors from initiating legal action and halts collection attempts, including wage garnishment in most instances. After being discharged, individuals no longer have the financial strain of their unsecured debt and can instead focus on saving and making regular payments to restore their credit.

Drawbacks of Bankruptcy

Filing for bankruptcy has a detrimental effect on one’s credit score, resulting in an R9 notation on the credit report. This notation can have a considerable negative impact on one’s credit score and remain for up to six years following the bankruptcy discharge itself.

Additionally, there are associated costs associated with filing for bankruptcy, such as a monthly surplus income costs and asset repurchase costs, where applicable. Further, individuals may be required to surrender certain non-exempt assets unless they wish to buy these assets back from the Trustee.

To be successfully discharged, debtors must complete credit counseling sessions, pay all applicable fees, and submit monthly income and expense forms with supporting documents.

Furthermore, the bankruptcy process is incredibly complex. Certain debts are not dischargeable when an individual files for bankruptcy. Reviewing your situation with a Licensed Insolvency Trustee before deciding to file bankruptcy is important.

Step 2: Consider Alternatives to Bankruptcy

Bankruptcy can have a long-lasting and serious negative impact on an individual’s credit score and financial prospects. As such, it is important to explore alternatives to bankruptcy before filing for it. These bankruptcy alternatives include:

• filing a consumer proposal, 
• debt consolidation, 
• credit counseling, and
• debt settlement.

Each of these bankruptcy alternatives has its own advantages and disadvantages, and it is important to weigh them before making a decision.

Bankruptcy Alternative #1 – Consumer Proposal

A consumer proposal is an alternative to bankruptcy and requires the assistance of a Licensed Insolvency Trustee. A consumer proposal allows a consumer to formally negotiate with their creditors regarding their unsecured debt.

This alternative to bankruptcy begins with a meeting with a Licensed Insolvency Trustee who will review your options, including a consumer proposal and bankruptcy. This is known as an initial interview. Based on the information you provide to the Trustee, they will give you a rough idea of what your situation could look like with each option.

A consumer proposal can reduce debt by up to 80%, and the repayment plan is usually in the form of a monthly payment you make over a 5-year period. There is no interest and no penalties to pay it off early.

A consumer proposal is a popular bankruptcy alternative and worth considering.

Bankruptcy Alternative #2 – Debt Consolidation

Debt consolidation is a bankruptcy alternative that involves using personal loans or combining multiple debts into a single loan with a lower interest rate. This can be a beneficial strategy for managing debt, as it can help to reduce overall interest charges.

The process of debt consolidation in Canada usually involves obtaining an unsecured personal loan to pay off existing debts. Additionally, this bankruptcy alternative offers a number of benefits, such as:

• a lower interest rate applied to debt, 
• the ability to pay off debt more quickly, 
• no damage to your credit rating and the potential to improve it, 
• no public record, and 
• sometimes offers lower costs.

However, qualifying for these loans can be difficult for those already struggling financially.

Bankruptcy Alternative #3 – Credit Counselling

Credit counselling is an alternative to bankruptcy offered by non-profit organizations to assist individuals who generally have lower debt loads. Their programs often involve repaying 100% of an individual’s unsecured debts. When a consumer’s debt load is higher than normal, these payments can often be quite high, so other bankruptcy alternatives must be considered.

Bankruptcy Alternative #4 – Debt Settlement

The final alternative to bankruptcy we’ll discuss, debt settlement, is a strategy for reducing the amount of debt owed to creditors by negotiating a settlement amount. When available, it is an effective way to resolve outstanding debt for less than the full balance. Debt settlement involves negotiating with creditors to accept a one-time payment that is lower than the total amount owed.

The debtor typically provides this payment after they have accumulated sufficient funds to make the offer. This is the biggest downfall to informal debt settlement as most individuals who owe money and are struggling do not have the means to save up a lump sum of money required to offer a settlement.

Debt settlement can harm one’s credit score, despite popular belief. Consumer beware – many ‘fly-by-night’ informal settlement organizations out there promise the world. If you pursue this alternative to bankruptcy, make sure you ask a lot of questions to ensure you are properly informed.

FAQs Regarding Bankruptcy Alternatives in Canada

Which of These Bankruptcy Alternatives offers Debt Forgiveness?

Before we get into debt forgiveness, it’s important to understand what debt can be forgiven with bankruptcy or an alternative to bankruptcy. The only debt that any of these options can forgive is unsecured debt.

• Unsecured Debt – This would include any debt not secured by a tangible object. Examples of unsecured debt include payday loans, credit card debt, medical bills, overdue utility bills, and personal loans.

• Secured Debt – This debt is secured by an object that can be repossessed if you fail to make payments on the debt. Examples of secured debt include home loans, car loans, boat loans, and home equity loans.

The only way to have secured debt dealt with is to surrender the underlying asset that is secured against the debt. The only legislated options for unsecured debt forgiveness are bankruptcy or a consumer proposal.

Are there Bankruptcy Alternatives that won’t Damage Credit Scores?

Bankruptcy, consumer proposals, debt settlements, and credit counselling will all negatively affect your credit to one degree or another. Out of all the bankruptcy alternatives we’ve listed, only debt consolidation will not negatively affect your credit score. The only problem with this is that most people considering bankruptcy or one of its alternatives may not have a decent enough credit score for debt consolidation.

Can Bankruptcy Alternatives Forgive Student Loan Debt?

If you have outstanding student loan debt that is weighing you down financially, you only have two options to have this debt forgiven: bankruptcy or a consumer proposal. Even then, student loan debt isn’t automatically forgiven.

The only way to have student loan debt forgiven through bankruptcy or a consumer proposal is if you’ve been out of school, full-time or part-time, for longer than seven years.

Will Bankruptcy Alternatives Stop Wage Garnishments?

If your wages are already being garnished, a consumer proposal is the only one of the bankruptcy alternatives that can put an end to these garnishments. Once a consumer proposal (or bankruptcy) is filed, your creditors will receive a “stay of proceedings”. This stay ends all threatened and existing wage garnishments, harassing phone calls, or liens placed on your assets.

Which of These Bankruptcy Alternatives is Right for Your Situation?

Every situation is different. If you have very good credit and want to keep it that way, a debt consolidation loan may be the best bankruptcy alternative for you. If you only have a few very small debts you’re unable to pay, reaching out to your creditors with a debt settlement may be best.

For anyone whose debts are overwhelming, and there just doesn’t appear to be any relief in sight, a bankruptcy or a consumer proposal may be what you need to get back on track financially. The best way to be sure if bankruptcy or a bankruptcy alternative is what’s right for you is to reach out to a Licensed Insolvency Trustee. They will go over all of your financials with you to help you decide what’s best for your situation.

FAQs Regarding the Pros and Cons of Filing Bankruptcy in Canada

What Will I Lose If I File Bankruptcy?

It is a common myth that an individual loses everything when filing for bankruptcy. During the initial interview, your Licensed Insolvency Trustee will cover any potential risks (and rewards) a bankruptcy would provide and compare that to other bankruptcy alternatives. In most instances, you will get to keep your house, your cars, and any other assets you may have.

Does Bankruptcy Affect Your Life?

Generally speaking, most day-to-day activities will not be impacted because you filed for bankruptcy. Activities that involve credit, however, can be impacted. These are items such as obtaining new credit, activities that involve a credit check, etc. Normally, however, these can be mitigated with a proper plan.

How Long Does It Take To Rebuild Credit After Bankruptcy?

Rebuilding your credit after bankruptcy takes commitment and dedication to creating and maintaining good credit habits. Depending on where you start from and the steps you take, reaching a healthier financial standing could take up to two years or more from when you are discharged.

However, with consistent effort, you will see improvements as you move along.

What Are The Disadvantages Of Filing For Personal Bankruptcy?

The main disadvantage to filing for personal bankruptcy is the negative credit impact. In addition, if you are required to file bankruptcy more than once, the repercussions become more severe. As a result, filing for bankruptcy should only be done as an absolute last resort after careful consideration.

Pros and Cons of Filing for Bankruptcy in Canada & Bankruptcy Alternatives – Our Conclusion

Filing bankruptcy has always been a popular option for resolving overwhelming debt. While this approach has several benefits, such as debt relief and protection from creditors and legal action, it can also lead to long-term financial repercussions. With that in mind, considering bankruptcy alternatives, prior to filing for bankruptcy for overwhelming debts, is a wise decision.

Consumer proposals, debt consolidation, credit counseling, and debt settlement are all potential bankruptcy alternatives that may help reduce long-term effects while providing debt relief in the short term. Each of these alternatives to bankruptcy comes with its own unique set of pros and cons, as well as differing levels of risk and reward.

The best course of action, whether it’s bankruptcy or one of the bankruptcy alternatives discussed above, should be tailored to the individual’s specific needs and financial situation. Seeking the advice of a Licensed Insolvency Trustee can help ensure that a given option is appropriate and provides the most benefit possible.

Powell Associates Ltd offers debt relief options, including bankruptcy and bankruptcy alternatives, in all major cities in the Maritimes, including Fredericton, New Brunswick; Halifax, Nova Scotia; and Charlottetown, Prince Edward Island (PEI). Feel free to reach out to us for a free, no-obligation consultation.

In recent years, the number of debt consultants in Canada has seemingly increased significantly. These businesses claim to offer to help consumers reduce their debt, stop interest, and stop collection calls.

These claims seem great – I mean who wouldn’t want all those benefits? The issue is that all of these claims are misleading at best, and deceptive at worst.

The Truth is only Licensed Insolvency Trustees are licensed by the Federal Government to administer debt relief solutions that can reduce debt and debt payments, stop interest, and stop collection calls.

In a nutshell – this means that most debt consultants will charge you a fee and ultimately refer you off to a Licensed Insolvency Trustee to complete the process. The same process could have been achieved for free by contacting a Licensed Insolvency Trustee directly.

Unfortunately, identifying debt consultants can be incredibly difficult. In this article, we will discuss two main methods of determining if you are dealing with an unlicensed debt consultant:

• Asking debt consultants questions and seeing how they answer, and
• Knowing what to look for on their websites.

Method #1: Debt Consultant Q&A

Here are some simple questions you can ask to determine if an individual is a Licensed Insolvency Trustee. We have also included the response you will receive from a Trustee. If you receive any other answers, it is likely because you are not dealing with a licensed debt professional.

Q 1. What license do you hold to offer consumer debt advice?

A LIT will respond: I am/we are licensed by the Federal Government, specifically the Office of the Superintendent of Bankruptcy (‘OSB’).

An unlicensed debt consultant will likely respond: We are accredited by X organization, we have great reviews, and have been around for X years.

Q 2. How can I independently verify that you are licensed to do this work?

A LIT will respond: You can visit the OSB’s website at: https://www.ic.gc.ca/app/scr/tds/web/list-liste where you can browse all active LITs in Canada.

An unlicensed debt consultant will likely respond: You can look us up online or on Google.

Q 3. How are your fees paid?

A LIT will respond: Our fees are regulated by the Federal Government and, for most files, are based upon a Tariff located within the Bankruptcy And Insolvency Act General Rules sections 128 to 129.

An unlicensed debt consultant will likely respond: We base our fee on your debt load and the work involved.

Q 4. Do I have to pay anything before I actually file?

A LIT will respond: No. Your first payment is not due until you actually file.

An unlicensed debt consultant will likely respond: Yes, absolutely. I need to get paid and we need to ensure you can afford the payments you want your proposal to be at.

Q 5. Do I have to swear an oath about the truthfulness and completeness of the information that will be provided?

A LIT will respond: Yes, you need to swear an oath in front of a commissioner of oaths (usually the trustee themselves).

An unlicensed debt consultant will likely respond: You will be required to swear an oath in front of a government officer (sometimes also referred to as a court officer).

Q 6. Can I leave out any assets or debts?

A LIT will respond: No – you must disclose all assets and debts. This includes all of your secured and unsecured loans, lines of credit, payday loans, etc as well as all of your assets such as property, vehicles, cash, investments, etc.

An unlicensed debt consultant will likely respond: Certain debts and assets can be left out.

Don’t be fooled by non-answers.

LITs will almost always answer in a nearly identical manner. This is because of how regulated the insolvency process is.

Consultants, on the other hand, may answer in all kinds of different ways to try and convince you that you require their services.

Method #2: Reviewing Their Websites

Let’s first start with what you should be seeing on a properly regulated firm’s website. Trustee advertising standards come from Directive No. 33 which specifies exactly what is required to advertise insolvency searches as a LIT firm.

One of the first requirements is to identify ourselves as a LIT firm. You can see at the top of this page, and every other page on our website.

Most Trustees also include the LIT designation at the top of the page, but you may also find it in the main section of their website or in the footer.

Furthermore, another requirement of advertising guidelines is that they shall not be untrue, misleading, or deceptive in nature. This is usually where most consultants claiming to offer debt solutions falter.

Example #1

We recently fell across a website that had a calculator on their website. In this example, the calculator defaulted to having $25,000 of debt. The calculator made some fairly incredible claims. Let’s break down the first two claims

• ‘Reduce it to $12,000’ – While this sounds great, it is impossible to know even an estimation of how much debt could be reduced without conducting a full assessment. Furthermore, even after a full assessment, there is still some uncertainty. With consumer proposals, creditors get to vote on your offer. Even a bankruptcy has some uncertainty to it as your payments can vary based upon your income and assets you receive after you file and before you are discharged.
• ‘Your monthly payments will be $200 for 60 months’ – We wanted to highlight the ‘will’ in this sentence. Just as the last claim this calculator made, it is impossible to know even an estimation of what the payments will be for the same reasons as noted above.

Because of the nature of how the insolvency system works there are simply no guarantees, and companies who claim guarantees are simply lying.

Example #2

You’ll notice a theme in that the claims made by unlicensed professionals are almost always incredibly certain, for example: You will have a payment of… You do qualify if…

But the truth is significantly more complicated than this. Whenever someone wishes to file a consumer proposal or bankruptcy they must undergo a full financial assessment to understand their assets and liabilities, among other items. This includes understanding the composition of unsecured debt and secured debt, what types of debt are owed (credit card debt, student loan debt, business debt, etc), and many more.

An individual does not simply qualify for ‘debt relief’ just because they are a Canadian Citizen and owe more than $5,000 in debt.

Example #3

This is an ad we have seen around the internet lately. We have removed any identifiable markings.

This one is better than the previous two examples we looked at. Nothing in the ad text itself is incorrect or misleading. One may confuse this ad to be legitimate.

However, as per the requirements imposed by the government on LITs, you can tell immediately that this is not a licensed and regulated trustee firm as nowhere in the ad does it identify itself as being a Licensed Insolvency Trustee.

Need help with your unsecured debts? LITs are the only debt professionals who are legally allowed to administer Consumer Proposals and Bankruptcies

Most debt consulting companies who claim to offer debt relief via ‘government debt relief programs‘, in fact, refer files off to LITs for consumer proposals and bankruptcy. They simply charge a fee, grab information from consumers, and then send them off to a LIT for filing who has to redo the entire assessment process.

Save yourself the headache, and most importantly money, by contacting a trustee directly.

The risks associated with using a debt consultant instead of a licensed insolvency trustee

When an individual or business is struggling with debt, it can be difficult to know where to turn for help. In recent years, the popularity of so-called “debt consultants” has grown, as these individuals claim to be able to provide relief from financial troubles. However, it is important to be aware of the risks associated with using a debt consultant instead of a licensed insolvency trustee.

Debt consultants (sometimes referred to as debt consolidation consultants) are not regulated by any government body that regulates legislated debt relief options (consumer proposals and bankruptcies), which means that they are not held to the same standards as Licensed Insolvency Trustees. As a result, they may not have the knowledge or experience necessary to provide effective assistance.

Additionally, debt consultants usually do not have any formal complaint mechanism, or if they list one on their website is handled entirely via internal processes. While this isn’t always a bad thing, LITs have oversight from two main bodies; the government (the Office of the Superintendent of Bankruptcy) and the Canadian Association of Insolvency and Restructuring Professionals, their professional organization.

For these reasons and many more, it is typically best to work with a licensed insolvency trustee directly when trying to resolve debt problems.

How to find a reputable and qualified debt professional in Canada

If you are facing financial difficulty and are considering filing for insolvency, it is important to choose a reputable and qualified Licensed Insolvency Trustee.

In Canada, there are several professional organizations that oversee the insolvency industry and protect consumers. The main organization is the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

This organization has strict standards for membership, and its members must adhere to a code of ethics and standards of professional conduct. CAIRP also provides a member directory on its website. We are proud members of CAIRP.

You can also ask friends, family, or your financial advisor for recommendations. Once you have found a few potential trustees, be sure to interview them to ensure that they are a good fit for your needs.

Powell Associates Ltd. – Licensed Insolvency Trustee

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.
• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free, no-obligation consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

This article was written by Angela Rodgers, CIRP, LIT. She is a Licensed Insolvency Trustee and the President of Powell Associates Ltd. She has worked in the insolvency industry for over 20 years. No matter if you are looking at filing bankruptcy, a consumer proposal, or simply looking for debt management advice, Angela can help.

If you have bad credit, you may feel like you are out of options when consolidating your debt. However, this is not the case! There are several ways that you can consolidate your debt, even if you have a low credit score. In fact, Debt consolidation is one of the methods we discuss in our 10 ways to pay off debt fast article. In this blog post, we will discuss several methods that you can use to get your debt under control.

Consolidating debt when you have below-average credit can be incredibly difficult. Most banks will not even try to submit a loan application which may leave you believing your only option is to go to one of the high-interest, predatory-lending, type institutions or even worse, payday lenders.

In this article, we are going to answer whether or not debt consolidation loans for bruised credit or bad credit are a good idea. We will also cover the other debt consolidation options that are available to you no matter your credit score.

Are debt consolidation loans even a good idea when you have bad credit?

The answer to this question really depends on your exact financial situation. In general, if you have sufficient income to support the debt consolidation loan payment, then a debt consolidation loan, regardless of the interest rate, will not cripple you and potentially allow you to get ahead without further damaging (and potentially even improving) your credit.

However, we regularly see that people who seek out debt consolidation loans are unable to actually afford the new payment. This leaves them in an extremely vulnerable state that pushes them further into the hole and can further worsen their credit.

We most often see this when people assume that a single monthly payment on a new debt consolidation loan is going to be easy to manage, even if in reality it is the same amount as the total of the previous debt payments. While it may be easier to manage in terms of remembering when the payment due date is and tracking if it is paid or not, if the payment is the same size or higher than the combined total of the previous payments you may still be stuck in a position where you struggle financially.

So should I get a debt consolidation loan?

We certainly do not think consolidation loans are a bad idea. In fact, in many instances, they can be a great idea and sometimes better than the alternatives we will discuss shortly.

A debt consolidation loan is typically a personal loan or line of credit that is used to pay out and consolidate other debts you have.

A debt consolidation loan is usually best suited when used to consolidate credit card debt, payday loan debt, or other high-interest debt. However, they can also be used to consolidate debts that have high monthly payments. This does involve stretching out the time it will take you to pay back those specific debts, but if cash flow is a problem it can be worth it because your monthly payment may be reduced.

We also caution against getting a secured consolidation loan to consolidate unsecured loans unless you have thoroughly run the numbers. Unsecured debt consolidations loans carry much lower risks.

For an unbiased review of your situation do not hesitate to reach out to us for help.

The different ways to consolidate debt, even if you have a low credit score

The main options available to you are as follows:

• Consumer Proposal;
• Bankruptcy; and
• Debt Management Plans.

Consumer Proposals

To put it in simple terms, a consumer proposal is a legal way to make a deal with your creditors. You can make this deal if you owe more money than you can afford to pay and want to avoid bankruptcy. You offer to pay them back over time and they get to vote on whether or not to accept your offer. It is uncommon that a deal cannot be negotiated. These are sometimes referred to incorrectly as a government debt relief program.

The consumer proposal is arguably the most effective form of debt consolidation, depending on your goals. It allows you to:

• Avoid bankruptcy;
• Reduce your monthly payments and/or debt load, often by up to 80%;
• Have no long-term consequences.

Despite popular belief, consumer proposals usually have the lowest monthly payments compared to other options. Read here to learn more about if a consumer proposal is worth it.

Bankruptcy

Bankruptcy is a legal process that allows you to get out of debt. Unlike a consumer proposal, creditors do not have the option to vote against your bankruptcy.

It is the most severe form of restructuring that most view as a last-resort option. However, it should not be dismissed as it is sometimes the best option to get out of debt.

Bankruptcy is based upon your household size, your household income, and realizable equity in your assets. Based on this, you will make a payment into your bankruptcy estate that may increase or decrease as your financial situation changes during the term of your bankruptcy. Once discharged, you will be released from your unsecured debts.

Debt Management Plans

A debt management plan is an agreement between you and your creditors to pay back 100% of what you owe over a period of time, usually 36-60 months. This is different from a consumer proposal or bankruptcy in that it does not involve any legal process and doesn’t involve any reduction of debt. However, it is a type of debt consolidation agreement that can sometimes be of assistance depending on your debt levels.

It is the closest option to a traditional debt consolidation loan. However, the credit impact of a debt management plan is the same as a consumer proposal. We see people turn to debt management plans when they are unable to qualify for a debt consolidation loan without understanding the true credit impact.

How to choose the best method of consolidation for your specific situation

Choosing the best option for your situation is highly dependent on your situation. We will break down just a few of the categories we look at when offering a free debt review.

Income

Understanding what your income will look like now and in the near future can drastically change the approach taken to deal with your debt.

The stability of your income also can be a critical factor in determining which option is best for you. Bankruptcies are more forgiving as it relates to decreases in income whereas proposals are more forgiving as it relates to increases in income.

Examples

If you know your income is going to drop in the near future you might:

• file a bankruptcy knowing your payments may decrease when your income drops, or;
• file a consumer proposal ensuring your Administrator takes the income decrease into account when computing the proposal payments so that you are not saddled with an unmanageable monthly payment when your income drops.

If you are a seasonal worker, keep in mind that if you file a bankruptcy, the trustee will be monitoring your income during the time you are bankrupt. Your income will be averaged over the term of the bankruptcy but if you have a considerable number of higher earning months during the period of bankruptcy, your bankruptcy payment may be higher; a consumer proposal can be structured to account for variations in income, for example, you could propose to pay a higher monthly payment when you are working and lower (or no) payments while you are off.

If you suspect your income will increase, you might want to file a consumer proposal over bankruptcy. There are a few reasons for this:

• if your income increases during bankruptcy, your payments may increase and your bankruptcy term may be extended and you may not know the exact total amount of your payments until the end of your bankruptcy, at which point you may need to make larger payments at the end of your bankruptcy in order to receive your discharge on time;
• your income is not monitored after a consumer proposal is accepted therefore your monthly payment, once accepted, will not change;
• you have the ability to apply extra payments to your consumer proposal payments to finish your proposal faster if your income increases.

If you are not sure which option to choose, but want certainty with respect to having a known monthly payment then a consumer proposal will provide that.

Disposable Cashflow

How much disposable cash flow you have plays an important role in any debt relief decision. Typically speaking, the higher your cash flow the easier it will be to implement various debt consolidation programs.

Generally speaking, debt management plans have the highest monthly payment of all the above-mentioned debt consolidation options.

Bankruptcy often has a lesser monthly payment, but despite popular belief can still be quite high.

Consumer proposals often have the lowest monthly payments because they are structured over 60 months.

The viability of some options such as the traditional debt consolidation loan rely heavily on disposable cash flow; you have to be certain that you will be able to make and maintain your payments as agreed. Unlike a consumer proposal or bankruptcy, if a consolidation loan payment is missed then that missed payment will be reported to both the Equifax and Transunion credit reports.

Asset Composition

The composition of your assets primarily impacts the options of a consumer proposal and bankruptcy. This is because some assets are unrealizable or exempt under provincial and federal laws.

For example, RRSPs are completely exempt in both a consumer proposal and bankruptcy except for the last 12 months of contributions (exemptions may differ by Province and we would be happy to discuss your specific situation with you).

Our understanding is debt management plans do not take into account assets.

Debt Composition

If you are looking to just consolidate credit card debt and other ‘normal’ unsecured debts such as personal loans and lines of credit then you have many debt consolidation options available to you, including the option of a debt consolidation loan (understanding the conditions we spoke about at the beginning of the article).

However, once you start having debts such as income tax arrears or student loan debt the options available to you start to lessen; especially if your credit is severely damaged.

Tips for staying on track with your debt consolidation plan

Whichever option you decide upon it is incredibly important to be diligent with managing your money. To help in your debt-free journey here are a few tips when consolidating when you already have poor credit.

A Budget Is A Must

No matter which debt consolidation program you choose and even if you choose to continue the course you are on all sound financial plans begin with a budget. Take an inventory of:

1. What expenses you have;
2. What income you make; and
3. The goals you have.

With this information, develop a spending plan. Making a budget is not natural, nor is it easy. It takes time so do not beat yourself up if your budget doesn’t work out the first few months. Keep trying, make adjustments, and eventually you will nail down something that works for you and your family.

Don’t Forget About An Emergency Fund

We recommend that as soon as you enter into your chosen debt consolidation program that you begin building an emergency fund. We recommend aiming for a starting amount of $1,000 saved and then gradually work yourself up to having 3-6 months of bare-bones expenses saved up.

Forget About Your Credit Score

If you are struggling to pay back your debt, temporarily forget your credit score. Your credit score can always be rebuilt. We see it far too often that consumers avoid dealing with their debt and end up putting themselves in a far worse situation.

This can lead to applying for a debt consolidation loan that you may not be able to afford which just makes the situation worse.

Avoid Additional Credit Card Debt

Avoiding additional credit card debt is very important. The interest rates associated with credit cards are incredibly high. Some cards have an interest rate of 29.99%; especially those designed for individuals with poor credit.

While credit cards may seemingly have low monthly payments, this is usually due to them requiring interest-only (or near!) payments. While this might sound good at the time of purchase, remember that the minimum payments really start to add up. Your best bet is to save money and pay cash.

Try And Avoid Additional Debt Consolidation Loans

The debt consolidation loan rat race is real. Companies often make it seem like there is easy debt consolidation for Canadians. While this may be true sometimes, there are often negatives associates with it.

You get one debt consolidation loan, everything feels good, you loosen things up a bit, and realize months later you are in the exact same spot as you were before but with the old consolidation loan and the accounts you had previously consolidated racked up again.

Debt consolidation loans are great when they are properly planned for, but remember that in most instances the bank or lending institution’s job is to lend you money and oftentimes will not dig into your budget to ensure you can adequately afford it.

Conclusion

Every debt consolidation plan should first begin with a thorough, and most importantly, honest evaluation of your current financial state. With this, you can make a sound decision, which will be free from emotion which can sometimes cloud our better judgment.

If you are dealing with unmanageable debt and are considering a debt consolidation loan (or were denied debt consolidation loans) but are not 100% sure if it will help, do not hesitate to reach out. We’d be pleased to review your situation and provide you with guidance and debt consolidation advice.

This article was written by Angela Rodgers, CIRP, LIT. She is a Licensed Insolvency Trustee and the President of Powell Associates Ltd. She has worked in the insolvency industry for over 20 years. No matter if you are looking at filing bankruptcy, a consumer proposal, or simply looking for debt management advice, Angela can help.

Can I Inherit Debt After Someone’s Death? This is a common question asked by those who are appointed executors of a deceased person’s estate, those worried about dying in debt, and by curious minds. We will endeavour to answer this question in this article. While it may seem like a straightforward question, there are many considerations to be had.

Before we begin – If you are currently struggling with suicidal thoughts we urge you to contact the Canada Suicide Prevention Service by calling 1-833-456-4566 which is available 24/7/365.

Have you ever wondered if you can inherit debt in Canada? If you have, you’re not the only one. It can be difficult enough to manage your own debt without having to take on someone else’s debt after death. While the simple answer is no, you do not inherit debt, you may still be responsible for debt-related obligations.

Disclaimer: We are not lawyers and we always recommend seeking legal advice as it relates to a deceased individual’s estate. We will cover things at a very high level in this article but the contents herein should not be used as legal advice. We do not claim to be an expert in Wills and Estates.

The first thing you need to know: A deceased individual has an ‘estate’

When someone passes all of their possessions that do not have named beneficiaries or that are not subject to specific legislation or laws go into what is known as an ‘Estate’. This is simply a term that is used to describe the affairs of a deceased individual. When an individual passes, an executor is assigned to manage the estate in accordance with the deceased individual’s will and in accordance with the law. Without getting too complicated, the executor is usually a lawyer or someone else who has been appointed by the deceased to manage their estate and finalize their financial affairs.

An executor has many responsibilities which may include:

• Making funeral and burial arrangements;
• Locating the deceased’s final will;
• Paying estate fees;
• Locating and notifying all beneficiaries named in the will, or under the law if there is no will;
• Getting an appraisal for the value of the estate;
• Applying to have the will validated by a court (probate);
• Completing a final tax return for the deceased, as well as any returns required for the estate;
• Notifying creditors that the person has died;
• Paying all outstanding debt owing by the deceased, such as credit card debt, personal loans, etc.;
• Dividing the estate as outlined in the will (or legislation, if there is no will); and
• Providing financial information about the estate to the beneficiaries.

Source: Canada.ca

It is also important to note that an estate is a legal entity. What this means is that an estate can own property and even owe debts. In saying this, the estate of a deceased exists purely to distribute its assets in accordance with the Will of the deceased as well as the law.

For assets that exist within an estate, a legal process called Probate often occurs. Probate is a legal proceeding administered by a lawyer/the court which determines the validity of the Will and determines who will serve as an executor or administrator of the estate when there is no Will, or when someone declines to become an executor.

So is an estate obligated to pay a debt?

In short, yes. An estate is obligated to pay its debts. However, it is only obligated to pay its debts with the assets that may exist within the estate. While one may think that all property (whether physical, such as real estate, or intangible such as stocks/bonds) exists within the estate, this isn’t always the case.

Many assets, such as registered retirement accounts such as RRSPs & TFSAs, and life insurance contracts to name just a few, can be set up so they skip probate and the Will completely. This is done by naming a beneficiary within the specific accounts. Contact your financial institution that holds your account/policy to do this.

Joint assets, such as jointly held real estate (joint tenants), will usually pass directly to the joint owner as well when an individual passes.

Because most Canadians hold their wealth inside of registered investment accounts, real estate and life insurance contacts, it isn’t uncommon for those with large amounts of wealth to have very little funds and property enter into their estate when they pass.

Because of this, it is not uncommon for the amount of debt an individual possesses prior to death to exceed the funds and property that has entered the estate.

So Can You Inherit Debt In Canada?

So, Is debt inherited in Canada? Thankfully, in Canada, you do not inherit the debt of your parents, partner, children, etc. when they pass away. The only time this is not true is if you co-signed on a debt such as a joint credit card or have a personal loan with the deceased.

However, as an executor of an estate and as indicated above, you do have an obligation to pay any unpaid debts owing by the deceased individual. This does not mean that you are personally responsible for paying the bills, or experience any sort of debt inheritance, but rather that you are there to facilitate the payment of these debts via the funds available inside of the estate.

If you find yourself as an executor, you should consult a lawyer to answer questions and concerns you may have. Probate and deceased individual’s estates can be incredibly complex.

The two possible exceptions

Of course, as with everything in life there are always exceptions to the rules.

Mortgages / Other Secured Debts

In the event that an individual passes and leaves, as part of their Will, a property to their child that has a mortgage on it, the beneficiary of the property will be required to ensure the mortgage is satisfied or else the mortgage company may look at repossessing the property and selling it to recoup the loan balance.

This is usually done in two ways:

• The beneficiary would obtain their own mortgage to pay off the old mortgage; or
• In certain situations, the existing mortgage company will assign the old mortgage to the new owner of the property.

This can also be true of a car loan or any other debt that is secured against an asset.

Taxes of the deceased person

When someone dies, they are deemed to have disposed of all of their assets. This often results in capital gains. In the event you receive property on which taxes were payable and the taxes were not paid CRA could come after you for the amount of taxes that should have been paid.

If you suspect you are subject to this or want to learn more information, we recommend you contact a lawyer specializing in Wills and Estates.

Can A Deceased Person File A Bankruptcy

Without getting too complicated; yes. A deceased person can file a bankruptcy if they are an insolvent estate. There are many reasons why an Executor may want to pursue bankruptcy for the deceased person’s estate.

These include, but are not limited to:

• Stress Reduction – Creditors may continue to call the surviving spouse, despite their objection. We have seen this most often with supplementary credit cards given by the deceased to the surviving spouse. Unless the surviving spouse co-signed a debt, they do not likely have any real obligation to pay a creditor (with exception to the above-mentioned items, if they are the Executor). Despite this, creditors will often try to extract funds from the surviving spouse. Bankruptcy provides formal protection against these calls to the estate and often creditors stop calling other parties as well.
• Re-prioritization of debts – Some debts are treated differently under the Bankruptcy and Insolvency Act. Spousal and child support arrears, for example, are given higher priority in bankruptcy than they are normally in a deceased estate. Source: nelliganlaw.ca
• The complexity of the administration – The estate may have many claims against it which could increase the complexity relative to the potential benefit received from the estate.

Conclusion: So Does Debt Get Passed Down In Canada

While we have attempted to answer the over-arching question of what happens to debt after death and do you inherit debt – I hope it is clear that the topic is incredibly complex and professional legal advice is needed. We recommend, as mentioned several times throughout this article, that you contact a lawyer specializing in wills and estates.

Should you require debt relief solutions for a family member, or otherwise, who has passed away, do not hesitate to reach out to us.

Frequently Asked Questions

What happens to credit card debt after death?

In theory, the credit card debt upon death (and other debts owed) does not stop being owed simply because an individual has passed. However, practically speaking, unless there is enough money to pay the credit card debt within the estate, the credit card debt ‘dies’ along with the individual. This means it is uncollectible by debt collectors.

Often times the credit card companies will request the death certificate of the deceased to confirm they have truly passed.

Will credit card companies try and make my children pay for my debt?

If you have unpaid debt and you pass, it is possible a credit card company may try and make your children pay for the remaining debt from their own pockets. This is why it is critical for your children to seek legal advice when you pass to ensure they understand their rights.

It is possible, if you had credit card insurance, that the insurance company will pay off the outstanding debts when you die. Always review the insurance coverage you have.

Do creditors have a right to use my life insurance policy to pay my debts when I die?

Unless your life insurance policy is missing a beneficiary which would make any insurance payments payable to your estate, your life insurance policy would bypass your estate entirely and the proceeds would be paid to the beneficiary.

This is why it is highly recommended to name a beneficiary on your life insurance contracts. The last thing anyone wants is money that is intended for a loved one to inadvertently be lost due to a simple error and be used to pay debts of the estate vs to go to the intended recipient.

This article was written by Angela Rodgers, CIRP, LIT. She is a Licensed Insolvency Trustee and the President of Powell Associates Ltd. She has worked in the insolvency industry for over 20 years. No matter if you are looking at filing bankruptcy, a consumer proposal, or simply looking for debt management advice, Angela can help.

When you are struggling with mounting debt and facing debt problems, it can be difficult to know where to turn. You might have heard of consumer proposals and debt consolidation, but you may not know which option is right for you. In this blog post, we will compare the two options and help you decide which is the best solution for your unique situation.

To put it simply, debt consolidation is the process of combining all of your monthly payments into a single monthly (or whatever frequency you prefer) payment. This means that technically speaking a consumer proposal is a type of debt consolidation program. Other forms of debt consolidation include a debt consolidation loan, debt management plans and can even include bankruptcy despite people thinking of them differently.

Let’s break down the debt relief pros and cons one by one.

Debt Consolidation Options

Consumer Proposal

A consumer proposal is a legal debt settlement process that allows you to repay a portion of your unsecured debts and have the rest forgiven. This is an option for people who are unable to repay their debts in full and are struggling to make their monthly payments. A consumer proposal can be an effective way to get out of debt, especially if you want to avoid bankruptcy.

While a proposal does affect credit, most consumers who file them wish they would have done so sooner. A proposal will stop creditor calls, it will usually free up considerable amounts of cashflow, and oftentimes allow for a healthy savings account to be set up over time. Read here to determine if a consumer proposal is worth it for your situation.

A consumer proposal is usually what people are actually looking for when they are looking for debt settlement programs and are often what some debt consulting companies refer to as a government debt-relief program.

A consumer proposal is filed through a Licensed Insolvency Trustee (LIT).

Debt Consolidation Loan

A debt consolidation loan is another option for people who are struggling with debt. This involves taking out a new loan to pay off your existing debts. The benefit of this option is that you will have one monthly payment instead of multiple payments. Debt consolidation loans can also help you get a lower interest rate on your debts, which can save you money in the long run.

However, debt consolidation loans are a double-edged sword – if you already have affected credit you may get declined, or worse, fall victim to predatory lenders a consolidation loan may put you in a worse situation. Read more about debt consolidation loans when having bad credit here.

An easy way to avoid the above-mentioned concern is to be honest with yourself on your budget. If the new payment doesn’t fit inside of your budget, then you should explore other options.

Debt Management Plans

A debt management plan is an option that requires a credit counselling agency. The credit counsellor will contact your creditors on your behalf which usually results in the reduction or elimination of interest. While it can be an effective option when dealing with smaller debt loads, the monthly payments can still be quite large depending on the principal amount owing.

Debt Management Plan vs Consumer Proposal

The main difference between a consumer proposal and a debt management plan is that a consumer proposal is a legal debt settlement process, while a debt management plan is not. A consumer proposal typically results in a reduction in the overall debt load whereas debt management plans simply reduce or eliminate the interest charges.

Also, creditors voluntarily participate in a debt management plan, whereas creditors do not have a choice but to participate in a proposal if it is accepted by the majority of creditors.

This is particularly important if you are struggling with CRA debt such as income taxes, or other government debt like student loans where debt management plans will not work.

A typical consumer proposal could reduce a $30,000 debt to $15,000 with payments of $250 per month, whereas credit counselling would have payments of ~$525-550 for the same initial debt load.

It should be noted that credit counselling plans have the same effect on your credit as a consumer proposal.

Bankruptcy

Bankruptcy is a legal process that allows you to have your unsecured debts forgiven. It takes into account your household income, your family size, and realizable assets. While bankruptcy is often believed to completely eliminate all payments, this isn’t true. Bankruptcy will release you from most but not all obligations.

The main benefit to bankruptcy over other options is the amount of debt doesn’t play as important of a role in bankruptcy as it does in other options.

Because of how bankruptcy payments are calculated they can often be the most expensive, on a monthly basis. This can be quite the shock to most people as bankruptcy is often seen as the least expensive option. While this may be true overall, it isn’t true on a per-payment basis.

A bankruptcy is filed through a Licensed Insolvency Trustee.

So, which option is right for you?

The answer depends on your unique situation. We highly recommend meeting a Debt Solutions Advisor or Licensed Insolvency Trustee to discuss your specific situation. For convenience, we have added the basic pros and cons of each option below and we have also included links to more in-depth articles about each topic. You can also check out our general article on 10 ways to pay off debt faster.

Pros and Cons of Consumer Proposal

Consumer proposals are usually best suited for individuals who are not able to obtain and afford a consolidation loan, want to avoid bankruptcy, but still want to pay what they are able to settle their debts.

Specific Blog Link: Consumer Proposals

Pros:

• Can eliminate up to 80% of your debt
• Stops interest from accruing
• You make one monthly payment to the trustee who then distributes the funds to your creditors on your behalf
• Your assets are protected

Cons:

• Will have a negative impact on your credit score
• If your financial situation isn’t that bad (typically when you have more assets than liabilities) a consumer proposal may not be as good as other options.

Pros and Cons of Debt Consolidation Loan

Debt consolidation loans are a good option if you can pay off your existing debts in a reasonable timeframe, but want to accelerate the process and can get a lower interest rate by consolidating your debt.

Specific Blog Link: Debt Consolidation

Pros:

• One monthly payment instead of multiple payments
• Can help you get a lower interest rate on your debts
• Can be used for secured debt as well, not just unsecured debt.

Cons:

• Unless your interest is reduced, your payment may end up being the same or close to the same as your old payments. It could be higher if you consolidate minimum payment debt to an amortized loan such as consolidating credit cards & lines of credit to a personal loan.
• You may get declined or become a victim of predatory lending practices which could affect your credit negatively.
• If you use an interest-only payment consolidation loan (such as a line of credit) and you do not pay more than the minimum payment you will never reduce the principal amount owing.

Pros and Cons of Debt Management Plans

Debt management plans are ideal for individuals with smaller amounts of debt who want to pay their creditors in full.

Specific Blog Link: Debt Management Plans

Pros:

• The credit counselling agency will contact your creditors on your behalf which usually results in the reduction or elimination of interest.
• Can be an effective option when dealing with smaller unsecured debt loads.

Cons:

• Monthly payments can still be quite large depending on the principal amount owing.
• Your credit report & score will suffer as your creditors may report the debt management plan to the credit bureau.

Pros and Cons of Bankruptcy

Bankruptcy is usually the last resort option for most and is ideal when other options do not work.

Specific Blog Link: Bankruptcy

Pros:

• Usually the cheapest option, overall.
• It takes into account your household income, your family size, and realizable assets.

Cons:

• Because of how bankruptcy payments are calculated they can be more expensive than other options, on a monthly basis.
• You may be required to give up assets if you cannot afford to retain them.
• Will have a negative effect on your credit report & score.

Debt Consolidation and Your Credit Report & Score

The question of credit report & score impact comes up anytime someone is looking to get assistance with their unsecured debts and reduce their monthly payments. This isn’t a surprise.

Credit scores are an incredibly important part of our lives, however, what is more important is having the cash flow necessary to actually live our lives.

When people are struggling to pay their debt obligations, the truth is that credit only serves to help people dig themselves further into the hole. We recommend solving the real problem, the debt, rather than trying to preserve a credit score that only aids in obtaining more debt.

Your best bet: Speak with a Licensed Insolvency Trustee

If you are unsure about which option is best for you, the best thing to do is speak with a LIT. They will be able to review your unique financial situation and provide you with the advice and guidance you need to make an informed decision as to which option is best for you. The Financial Consumer Agency of Canada also has some great resources here.

This article was written by Angela Rodgers, CIRP, LIT. She is a Licensed Insolvency Trustee and the President of Powell Associates Ltd. She has worked in the insolvency industry for over 20 years. No matter if you are looking at filing bankruptcy, a consumer proposal, or simply looking for debt management advice, Angela can help.

Are you struggling to pay off your debt or facing a major debt repayment you are not sure how to navigate? If so, you’re not alone. Millions of Canadians are in the same boat. But don’t worry – there are plenty of ways to pay off your debt faster.

As Licensed Insolvency Trustees we are in a unique position in that we see the challenges people face when trying to pay off their debt. We also have a lot of experience helping people get out of debt and we’ve seen what works and what doesn’t. Let us help you learn the best ways to pay off debt faster.

In this blog post, we’ll share ten easy tips that can help you get out of debt sooner rather than later. These can be used both individually and collectively to fast-track your results. If paying off debts is a priority to you keep reading to learn more!

Make a budget and stick to it

Any financial planner will tell you that one of the most important steps to take in managing your money is to create a budget and stick to it. A budget is simply a plan for how you will earn and spend your money over a period of time. It can help you to stay on track with your finances and make sure that you are not spending more than you are earning. Without a budget, it is all too easy to overspend and find yourself in debt.

Creating a budget can be daunting, but there are many resources available to help you get started. Once you have created your budget, make sure to review it regularly and make adjustments as needed. By following a budget, you can take control of your finances and improve your financial situation.

Steps to creating a budget

Making a budget may seem like a daunting task, but it doesn’t have to be. By following a few simple steps, you can easily create a budget that will help you save money and keep your finances on track.

Calculating your income

The first step is to calculate your income. This includes all sources of income, such as wages, interest, and investments. Once you know how much money you have coming in, you can start to figure out how much you need to spend each month.

Expenses (Spending Habits)

Next, take a look at your spending habits. Where are you spending most of your money? Once you have a good idea of your spending patterns, you can start to allocate your expenses into different categories. For example, you may want to create categories for eating out which includes coffee, take-out, and restaurants. Or you may want to be more specific and separate those if you want a better picture on them later. Budgets can be as rigid or as flexible as you desire – but one thing is true if what you are doing isn’t working, switch it up.

Putting it together

Once you have your income and expenses figured out, you can start to put together your budget. Start by allocating money for essential expenses, such as housing and food. Then, factor in your non-essential expenses such as eating out and subscriptions.

Now that you’ve created your budget, it’s time to stick to it. This may require making some changes to your spending habits. But by following a budget, you can take control of your finances and improve your financial situation. Now, if you are struggling with budgeting to get out of debt you may want to consider more severe options.

Create a Debt Reduction Plan

When it comes to getting out of debt, there is no one-size-fits-all solution. The best way to reduce your debt will depend on your individual circumstances. However, the best place to start is by creating a debt reduction plan also known as a debt repayment plan.

First, take a look at your financial situation and figure out how much debt you have and what your minimum monthly payments are. Then, use the budget you created in the previous tip and see where you can cut back on spending to free up more money to put towards your debt.

Once you have extra cash available, you can start making extra payments on your debts. If you can’t afford to make large additional payments, even making small additional payments can help to accelerate the process of getting out of debt.

Most importantly though, is that you need to create a plan that will actually work. There is only a finite amount of money coming in and you shouldn’t be hoping that you end up with enough money to pay your bills. If your budget says you are falling behind, you should look up professional debt help services.

PS – Debt reduction plans shouldn’t be confused with debt management plans!

Pay off high-interest-rate debt first

When it comes to paying off debt, there are a few different strategies that people can use. One popular method is to focus on paying off high-interest debt first. The reasoning behind this is that the more interest you pay, the more money you lose each month. By targeting your high-interest debts first, you can save yourself a lot of money in the long run.

Another benefit of this approach is that it can help you pay off your debt at a much faster pace. The sooner you get rid of your high-interest debt, the less money you’ll have to pay each month in interest charges. As a result, you’ll have more money available to put towards your other debts.

Pay more than your minimum payments

If you have credit card debt, payday loan debt, or any other type of high-interest debt, make sure to pay more than the minimum payment each month. This will help you to pay off your debt faster and save money on interest. While it may be tempting to only make the minimum payment, remember that doing so will only prolong the process of paying off your debt and end up costing you more in the long run.

If you can, try to double or even triple your minimum payment each month. You may need to cut back on other expenses to do this, and it might be a struggle but if your budget says you have the wiggle room then aggressively tackle your debt down.

Don’t forget an emergency fund

While this article is about getting out of debt it is still highly recommended that you save up an emergency fund before you aggressively tackle your debt.

Get rid of unnecessary expenses

To free up more money to put towards your debt, you may need to get rid of some unnecessary expenses. Take a close look at your budget and see where you can cut back on spending. For example, you may be able to save money by eating out less often or canceling your gym membership.

Every bit of extra money that you’re able to save can be used to make additional payments on your debts. The more money you can put towards your debts each month, the faster you’ll be able to pay them off.

We are not saying that you shouldn’t have any fun – simply prioritize what is more important to you. If you are reading this article, we would guess that becoming debt-free tops that list and so perhaps you may be willing to give up Netflix (for example) to get out of debt sooner!

List of expenses that can be easily cut or reduced

• Eating out
• Online Subscription services
• Cable TV
• Gym memberships
• Shopping for unnecessary items
• Reduced internet plan
• Reduced cell phone plan

Sell unused belongings for extra cash

Want to kickstart your debt repayment journey? One way to free up some extra money each month is to sell any unused or unwanted belongings.

Take a look around your home and see if there are any items that you no longer need or use. You may be surprised at how much money you can make by selling off some of your unwanted belongings.

Not only will this give you some extra cash to put towards your monthly payments, but it will also help to declutter your home. And who doesn’t want that?

PS – We know this one sounds extreme, but it’s amazing the amount of stuff that sits around most households not getting used.

Negotiate lower interest rates with your creditors

This tip isn’t something we would recommend if this is the only thing that would save an individual. Because otherwise, there is usually a bigger problem at play. However, for someone who is making decent headway otherwise, negotiating with your creditors to lower your interest rates & reducing your minimum payments can be a great way to speed things up. The lower your interest rates and payments are, the more money gets applied directly to the principle.

This can be a difficult process especially if you have multiple debts, but it’s worth it if you’re able to get a lower interest rate. To increase your chances of success, make sure to do your research before negotiating with your creditors. You should have a good idea of what kind of interest rates are reasonable before you start the process.

Take advantage of balance transfer offers

If you have credit card balances, you may be able to take advantage of balance transfer offers. Many credit cards offer 0% interest on balance transfers for a certain period of time. This can be a great way to save money on interest and pay off your debt quicker.

Just be sure to read the fine print before you sign up for a balance transfer offer. Some offers come with fees or other penalties that could end up costing you more in the long run.

The way a balance transfer offer works is by reducing your effective interest rate for a certain period of time. For example, if you had $10,000 in credit card debt @ 19.99% interest, you would pay $1,999 a year in interest charges. If you were able to find a balance transfer offer (with an adequate credit limit) that charged a 2% flat fee (or $200) you would be able to apply the difference of $1,799 to the $10,000 balance.

Warning – This can be a double-edged sword. We do not recommend this option unless you have a clear trajectory to pay off your debt and have a fully-funded emergency fund.

Use the debt snowball method to accelerate debt payoff

The debt snowball method is a debt payoff strategy that involves paying off your debts in order of smallest to largest. Once you’ve paid off your smallest debt, you’ll have extra money to put towards your next debt on the list. This method can help to keep you motivated as you see your debts gradually disappearing.

To use the debt snowball method, make a list of all of your debts from smallest to largest. Then, focus on making the minimum payments on all of your debts except for the smallest one. Put as much money as you can towards paying off the smallest debt until it’s gone. Then, move on to the next debt on the list and repeat the process.

While the snowball method may not be the most efficient way to pay off your debts, it can be a great way to stay motivated and see progress being made. In fact, studies have shown it to be more successful than the debt-avalanche method (paying highest interest to lowest interest) as people are more apt to stick to the plan.

Refinance your debt

Refinancing your debt can be a great way to save money on interest and pay off your debt depending on your credit history. When you refinance, you’ll take out a new personal loan or line of credit with a lower interest rate and use the money to pay off your existing debts. This can help you to save money on interest and become debt-free more quickly.

Just be sure to do your research before refinancing your debt. While taking out a personal to pay off debt can make sense, it is a double-edged sword. Make sure that you understand the terms of the new debt consolidation loan and that it is right for you. Sometimes, people end up paying more in the long run by refinancing their debt because they believe a single payment is better than multiple payments despite the fact their new loan may have a higher interest rate.

Enroll in a Debt Consolidation Program

If you’re struggling to keep up with multiple debt payments, you may want to consider enrolling in a debt consolidation program. These types of programs can help you to consolidate your debts into one monthly payment with reduced interest. Most unsecured debts can be included in a debt consolidation program. This includes, but is not limited to lines of credit, personal loans, credit cards, payday loans, and income tax debt. Typically, if you are wondering how to pay off big debt with little income, this is the route you want to explore.

The two main debt consolidation options are the consumer proposal & bankruptcy and are often referred to as Government Debt Relief Programs.

Consumer Proposal

A consumer proposal is a legal debt relief program that allows you to make an offer to your creditors to settle your unsecured debts for less than what you owe. If your offer is accepted by the majority of your creditors, it will become legally binding and you’ll be required to make payments according to the terms of the proposal. Debt settlement through a consumer proposal can be a very effective way to cut your debt depending on your circumstances.

Beware – There are many debt settlement companies that claim to offer debt relief programs that simply refer you off to a Licensed Insolvency Trustee after charging you a fee. Only a Licensed Insolvency Trustee firm can file a consumer proposal.

Bankruptcy

Bankruptcy is a legal process that allows you to eliminate most unsecured debts. Once you’ve filed for bankruptcy, you will make payments based on your household situation, your family income, and your assets.

Both of these options have their pros and cons, so it’s important to speak with a professional before making a decision.

BONUS – Use cash & avoid credit card debt

One of the best ways to avoid a large credit card balance is to simply not use your credit cards. If you only use cash or debit for your purchases, you’ll never have to worry about paying interest on a credit card balance. Knowing how to manage money and pay off debt is difficult but switching to a cash-mostly budget will make it much easier.

While this may not be possible for everyone, it’s a great way to avoid debt if you can swing it.

Conclusion – Being Debt Free Is Possible

This article has provided you with 10 easy ways to pay off debt quicker. If paying off your debts is a top priority, and you are looking for the fastest way to pay off debt then it’s important that you read these steps and strategies to help accelerate the process. It can be challenging to keep up with multiple payments while trying to live life, but there are many options available for people in this situation.

Take some time today and explore which of these methods would work best for your situation before starting on any new commitments or purchases. With careful planning and smart decision-making, you’ll have more money put towards paying down your debt than ever before!

Common Questions About Paying Off Debts

This article was written by Angela Rodgers, CIRP, LIT. She is a Licensed Insolvency Trustee and the President of Powell Associates Ltd. She has worked in the insolvency industry for over 20 years. No matter if you are looking at filing bankruptcy, a consumer proposal, or simply looking for debt management advice, Angela can help.

Part 2 – Work from Room to Room

In Part 1 we discussed how to get your Financial Deep Clean started by getting rid of your financial junk – regular expenses, usually relatively small, that add up over time. When deep cleaning your house, breaking up the work into manageable tasks by working on one room at a time will keep you from becoming overwhelmed with the overall task. The same is true with Financial Deep Cleaning.

Let’s focus on three financial ‘rooms’; the Kitchen (cooking), the Bedroom (clothing), and the Home Office (Insurance & Interest). But there are additional “rooms” in your household budget that you could also examine such as, vehicles, sports/recreation, and entertainment.

Kitchen

One monthly expenditure on which you can have an immediate and drastic effect is the cost of feeding yourself.

• Save money by developing good food prep habits that you can carry forward after the world returns to normal. For most of us, staying at home in quarantine forces us to cook for ourselves, more than we may have been used to.

• Save money by cooking from scratch. Every time you buy a pre-cooked meal or processed food you are paying someone else to do the work of preparing food for you. Obviously, it takes more time to cook from scratch and everyone must evaluate what their time is worth.

• The amount of savings will differ depending on where and how you buy your ingredients.  However, your food budget will look much better when making more foods from scratch.  Some big winners in this department are bread, roasted chicken, and soup stock, as well as a number of snacks.

Bedroom

First, get rid of deadweight and donate or sell clothes you don’t use or that don’t fit.

• Buy high-quality clothes. While it may seem counter-intuitive to spend more on clothes, higher quality clothing will last longer in the end. This goes double for footwear. Feel free to ignore this point in the case of young/fast-growing children.

• Buy clothing at the right time, i.e. out of season. A winter jacket will cost less in the spring and a bathing suit will cost more in early summer.

• Care for your clothes properly and don’t wash them too often. An article of clothing has a set number of washes before it begins to fade and look old. Obviously, undergarments (and face masks!) need washing after each use but sweaters and most pants can be worn a few times.

• Buy clothes that suit you and your needs. Buying an article of clothing because it was on sale was not a good deal if it doesn’t fit properly or match your style.

• Don’t be above browsing the thrift store. You’ might be surprised at what you can find.

Home Office

Insurance

• Shop around, especially if your broker has few options. Get quotes from at least three insurance companies, comparing them by holding certain variables constant; eg. deductible, coverage amount, and liability coverage – so you are comparing apples to apples. Once you have established which company you want to go with, you should be able to tweak the policy to suit your needs.

• Bundle your coverage.  Combining home (or tenant) and auto coverage together with one company should result in discounts.

• Look at your life & disability insurance policies. Find out if you are insured through your work and what that insurance entails. Are you are insuring your loans, credit cards, or lines of credit with a number of separate policies? Consider the cost of insurance per $1,000 of coverage. Speak with a broker to discuss one comprehensive policy that might accomplish the same coverage or more for the same cost or less.

Interest

Interest is the cost of borrowing money and it applies to credit cards and mortgages alike. Basically, there are three factors that will ultimately determine the amount you spend on interest:

1. the amount borrowed,

2. how long you borrow it for, and

3. the interest rate.

To reduce the number one factor, borrow only when you need to and only the amount you need and no more.

Pay your debt down as quickly as is reasonably possible. This will reduce how long you borrow.

To reduce the interest rate you pay:

• Shop around for the best rate when seeking new debt and ask for a reduction in the interest rate for existing debts. Just ask.

• If you have debt spread across different loans, lines of credit, or credit cards, focus on paying down debts with the highest interest rates in order to reduce overall interest cost.

• If your debts are out of control and have become too much to service comfortably, consider speaking with a Licensed Insolvency Trustee to discuss the options; consumer proposal or personal bankruptcy.

Working from room to room, making changes that save you big money and small, is more work than de-cluttering. It can be fun, though, almost like following an investigation or playing a game. Deep cleaning your financial rooms can save you a lot of money, significantly reduce your monthly “burn rate” and significantly reduce your stress. In the third part of this series, we are going to discuss getting organized and staying organized. Follow us for Part 3 next week.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.

• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.

• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.

• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

]]> https://maritimetrustee.ca/blog/will-i-lose-my-canada-child-benefit-i-file-for-bankruptcy/ Tue, 27 Sep 2016 06:00:00 +0000 https://maritimetrustee.ca/uncategorized/will-i-lose-my-canada-child-benefit-i-file-for-bankruptcy/ The short answer is no, you will not lose your Canada Child Benefit (CCB) if you decide to file personal bankruptcy. While your CCB will not be affected by bankruptcy, you are required to report your CCB when calculating and reporting your household income.  These monthly reports will determine whether or not you have “surplus income”, which in turn will impact how long you are in bankruptcy and how much you will be required to pay.

Will I Lose My Canada Child Benefit (CCB) If I File For Bankruptcy

The short answer is no, you will not lose your Canada Child Benefit (CCB) if you decide to file for bankruptcy protection under the Bankruptcy And Insolvency Act (BIA).

The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help them with the cost of raising children under 18 years of age.  The CCB might include the child disability benefit and any related provincial and territorial programs.

While your CCB will not be affected by bankruptcy, your Licensed Insolvency Trustee will require that you include the CCB when calculating and reporting your household income.  These monthly reports will determine whether or not you are in “surplus income”, which in turn will impact how long you are in bankruptcy and how much you will be required to pay.

Under the BIA, a person who files for bankruptcy will be required to pay additional funds into his bankruptcy estate based on guidelines established by the Government of Canada.  These guidelines set net monthly income thresholds for a person or family to maintain a minimal standard of living in Canada.  Every dollar that a bankrupt family makes above this level is subject to a surplus income payment of 50% while a person remains bankrupt.  All forms of household income, including the Canada Child Benefit (CCB), are included in this calculation.

For example, the 2021 guideline for a household of two is $2,799.  A single parent with employment earnings of $3,000 with a CCB of $550 will have total household income of $3,550.   The calculation of surplus income will be as follows:

Total household income of $3,550 (less) guideline of $2,799 = surplus income of $751.  The bankrupt’s share of the household income is 85% ($3,000/$3,550) therefore his surplus income will be $637.50 (85% of $751).  He will be required to pay $318.75 (half of $637.50) into his bankruptcy estate for 21 months, if he is a first time bankrupt, or 36 months if he has had a prior bankruptcy.

For separated or divorced spouses, the child tax will be considered part of the household income for the parent who has primary custody of any children.

Another common question that is asked is ‘Will I lose my house if I go bankrupt‘. The short answer – It is unlikely but read the article for more info.

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Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

• You won’t be stuck in an assembly line process.

• You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.

• We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.

• We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

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