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10 Ways To Rebuild Your Credit Score After Bankruptcy

Posted by in Bankruptcy
20
Jul 2020

If you have filed for bankruptcy in Canada, you are aware of the financial hurdles that are sure to come your way.

How to rebuild credit score after bankruptcy?

First, your credit score will inevitably go up and down throughout your bankruptcy. But you don’t have to worry. You are in the driver’s seat when it comes to rebuilding your credit score for securing your financial future.

After your bankruptcy is discharged, credit repair in Canada can be achieved efficiently by following these 10 effective solutions to put your credit score in good standing.

How to Rebuild Your Credit Score in Canada After Bankruptcy

1. Request a copy of your credit score

Keep in mind; your bankruptcy will stay on your credit report from 5-10 years. This is a long time, but look at it as an opportunity to rebuild your finances steadily. The main action during this period is to request a copy of your credit score from Equifax and TransUnion. From there, you will be able to see your current credit score and make a plan of action to increase it.

In Canada, Equifax stores your credit score for up to 6 years after filing your bankruptcy discharge. Depending on which province you filed bankruptcy, TransUnion keeps it on file for 6 to 7 years. What lenders want to see during your bankruptcy is that you have developed responsible financial habits and have kept your debts out of the red.

2. Pay your bills on time

A major part of rebuilding your credit score is to pay all your bills on time. That includes car insurance, hydro, electricity, and wifi internet. Always pay your credit card minimum payments on time. Even better, if you can squeeze in a second payment during the same payment cycle on your credit cards before the due date, multiple payments help improve your credit score.

3. Sign up for a cell phone contract

During bankruptcy, signing up for a 1-2 year cellular phone contract can help improve your credit score. Each month that you pay your cell phone bill, the cellular company will send the records of your monthly payments to Equifax or TransUnion. It tells lenders that you’re paying on time and in full every month. This establishes steady financial management.

4. Get a secured credit card

Applying for a secured Visa credit card helps improve your credit score neatly. If the credit limit is $500, put down a $500 deposit. Once you are discharged from your bankruptcy, the deposit you put on the card is considered a cash deposit and automatically puts your account in good standing.

Visa will then report this positive balance to Equifax and TransUnion monthly and will increase your credit score. If you need to use the secured credit card, pay off the balance in full every month to keep your score afloat, so it doesn’t decrease.

5. Avoid NSF and overdraft fees

Always keep track of your bank account payments, especially if you set up authorized monthly payments to pay your bills. Avoid getting a negative balance, as NSF fees and overdrafts signal financial trouble and will affect your credit score.

6. Open a tax-free savings account

Opening a Tax-Free Savings Account (TFSA) is a great way to start saving money. In case of an emergency, it’s free to make withdrawals. Just be sure not to withdraw all of the funds, as the bank might close the account.

As little as $50-$100 a month will add up during your bankruptcy, and the more you contribute to it, interest grows and shows lenders that you’re serious about saving money.

7. Open an RRSP

Similar to a Tax-Free Savings Account, opening a Registered Retirement Savings Plan (RRSP) to show lenders that you’re saving money to establish your financial future. It’s beneficial to open an RRSP because the more money you contribute, even in small amounts, the lower your income tax will be.

Keep in mind, if you open your RRSP before filing for bankruptcy, any funds you contributed can be taken to pay off your debts. Open it after your file for bankruptcy, and once your bankruptcy is discharged, start making monthly payments to rebuild your credit history.

8. Spend wisely

Cost-cutting and spending wisely can come in handy when you live on a budget. Start subscribing to online discount coupons, like Groupon and LivingSocial, for activities that you can get a substantial discount on. Stick to buying ‘needs’ and skip ‘wants’.

For groceries, using coupons can save you $5 – $10 a week. You can even get cash-back on groceries from Checkout 51. Spending wisely and cutting some corners will eventually add up, leaving you with more money to pay bills or save.

9. Live debt-free

Once you get the hang of living on a budget, trimming down the use of credit cards, and contributing to a savings account, rebuilding your credit score after bankruptcy doesn’t stop there.

Even after your bankruptcy is discharged, your long-term financial goals should include living debt-free and saving money. You don’t want to accumulate more debt the second time around and file for another bankruptcy because your finances will suffer again.

After filing for bankruptcy, expect to build up your credit score. But if you follow these 10 tips outlined in this article, you will be on your way to financial success.

These crucial steps, such as getting on a cell-phone contract, paying your bills on time, contributing to an RRSP and TFSA, and getting a secured credit card, will show lenders your consistent financial habits that will improve your credit score in Canada.

If you would like bankruptcy counselling to improve your credit rating in Toronto, the GTA, or Southern Ontario, our Licensed Insolvency Trustee is happy to help you.

For more information on how to rebuild your credit score after filing for bankruptcy in Canada, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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What Is Preference In Bankruptcy In Canada?

Posted by in Bankruptcy
6
Jul 2020

When declaring bankruptcy in Canada, your trustee goes through the initial process of assessing your liabilities and assets. From there, your trustee deals with your creditors until you get your bankruptcy discharged.

What are preferences in Bankruptcy?

However, timing is everything when you file for bankruptcy. If you made payments to your creditors before filing for bankruptcy, these payments could be considered as a “preference.” Let’s take a closer look at what bankruptcy preferences entail and if it can apply to you.

What is considered a preference in bankruptcy?

Bankruptcy preferences are payments you made before a specific period before you filed for bankruptcy. If you are in this position, your bankruptcy trustee might be able to reverse the payments back from your creditors. This process is called “avoiding” the transfer.

It is important to state that not every payment before bankruptcy is considered a preference. Generally, preferences are deemed as unfair payments to specific creditors. Bankruptcy preferences refer to the transferring of funds to a creditor within three months before filing for bankruptcy in Canada. These creditors who received payments were preferred at the cost of the additional creditors.

Payments Made to Creditors

Within 90 days of filing your bankruptcy, if your debts exceed your assets and you pay a creditor, this payment may be deemed a preference if they received more money than the rest of your creditors.

Payments Made to Insiders

An insider is considered someone close to you, such as a family member, spouse, or business partner. If you make a payment to any insider one year before filing for bankruptcy, it will be considered a preference.

What happens when you make preference payments?

The main idea of bankruptcy is that all of your creditors get treated fairly. If you give one creditor priority over the others before filing for bankruptcy, this gives other creditors unfavourable treatment. When this happens, your trustee can void transfers.

In the case when a trustee can void a transfer, they can get back the funds you paid from the creditor. The first step starts with the trustee requesting the creditor to give back the money. If the creditor rejects the request, the trustee can file with the bankruptcy court to force the creditor to return the money.

In your position as the bankrupt, it’s advised to go along with your trustee. You will not be responsible for recovering the money from the creditors. Rather, leave this up to the bankruptcy court to decide.

How to Prevent Transfers from Happening Between Your Trustee and Insiders

It might seem convenient for your trustee to work hard to get your money back from a creditor, but it is a different story if your trustee tries to get back the money you paid to your insiders.

Here is an example. You borrowed $1,000 from your mother to pay for your car insurance. The following year you got a tax refund of $1,000, and you paid back your mom. Six months later, you decide to file for bankruptcy. The trustee tells you they plan to get the $1,000 from your mother and use it to pay your unsecured creditors.

If you end up in a similar situation, here are some solutions you can explore if you do not want your trustee to file a lawsuit on your mother for $1,000.

  1. Wait a year before filing for bankruptcy

    When it comes to paying your insiders, wait at least one full year before filing for bankruptcy. Since insiders are people you are close with, they probably know about your financial issues. Give them a heads up about your plans about filing for bankruptcy when you pay them back so that they are aware of the timeline.

    Remember with insiders; it’s not a 90 day grace period – it’s a full year or more. Regardless, to be on the safe side, wait longer than 12 months to avoid preference bankruptcy with your insiders.

  2. Talk to your trustee

    Talk to your trustee about your insider’s financial situation. They may not have the income to pay you back. Express to them that they do not have assets or expendable income. Your trustee won’t want to invest their time and resources to serve them in bankruptcy court.

  3. Talk to your insiders

    Talk to your insiders about repaying them until after you have filed for bankruptcy. This way, there will be no chance that your trustee could request a transfer of payment.

  4. Offer a payment plan

    Offer your trustee a payment plan to pay a reduced amount yourself. Your trustee is there to work with you and won’t be concerned about where you get the money from, as long as you make arrangements to pay it.

    For example, you can arrange to pay back the $1,000 or even $800. Just be sure to offer a sum of money that you can afford. You and your trustee can create a monthly payment plan or even bi-monthly payments. Also, a payment plan is better than having your insiders get a request to pay the amount to the trustee.

The Bottom Line on Bankruptcy Preferences

The bottom line about bankruptcy preferences is that you have to take into account the timing when you make payments to insiders and your creditors. Prior to filing for bankruptcy, you should be aware that your bankruptcy trustee could get the money back from the payments you made to your creditors and insiders. This process is called “voiding” the transfer.

Filing for bankruptcy does not mean bankruptcy preferences can work in your favour. If you paid back the money you borrowed from your insiders, such as family members or business partners, less than a year of filing for bankruptcy, your trustee could review those insider payments and request that they pay it back.

If you require additional information on when to file for bankruptcy in Toronto, the GTA, or Southern Ontario, we’re here to help.

To learn more about bankruptcy preferences in Toronto, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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What To Know Before Filing For Bankruptcy

Posted by in Bankruptcy
15
Jun 2020

Filing for bankruptcy can be a difficult decision, with potentially drastic consequences that will impact many facets of your life. Understanding both your situation and the bankruptcy process in Ontario is the first step in ensuring you are making a decision that will benefit you in the long term.

What should i know before filing for bankruptcy?

When considering bankruptcy, you will likely be facing many debts that appear to be insurmountable. While mishandling any issues can lead to many different problems, undertaking the proper process of filing for bankruptcy offers benefits that will help ensure your long-term future. In such a stressful time, the only way to make sure you do not make any potentially damaging mistakes is to gather all the necessary information prior to making any decision.

Know What Debts are Erased by Bankruptcy

Before the bankruptcy process, you must first understand which debt will or will not be erased by bankruptcy. Any time bankruptcy is being considered; there will always be many factors in play. It’s essential to make sure you do not lump everything together, preventing you from understanding the important details. By distinguishing which debts cannot be included, you will be prepared for any potential outcome in your situation.

With bankruptcy in Ontario, you are still required to pay alimony or support, court fines, debt incurred by fraud, and any remaining student loans. Exactly what bankruptcy entails will vary from one party to another, meaning that debt erasure may not be universal. Before knowing the best decision to make, you must know your situation once it’s resolved. Ideally, you will know exactly what has to be paid and when, and what debts will be wiped out after bankruptcy is filed.

Know What Will Happen to Your Credit

Immediately upon filing for bankruptcy, there will be repercussions on your credit score. It is important to understand that your credit score will be damaged. Understanding how your credit score will be impacted is one of the most important parts of recovering from bankruptcy. Not only does bankruptcy ruin any credit that you may have built up, but it can also leave a mark on your score for a number of years.

Knowing how to deal with your resulting credit score will give you a great advantage in overcoming bankruptcy. Even if having your credit score damaged because of bankruptcy is inevitable, it will remain one of the most important parts in the process of recovering from potentially crippling debt. Having a damaged credit score will not necessarily make it impossible for you to get credit at a later point. That being said, it is an opportunity for creditors to increase their interest rates and try to take advantage of your situation.

Your Creditors Must be Informed.

The moment you decide to file for bankruptcy, you are giving your finances up for public scrutiny. Any creditors, including family members and business associates, will be involved in the process and will understand your situation. Complete honesty is crucial to maintain the integrity of the process; that means you may have to deal with uncomfortable financial information being provided to your creditors.

The reality is that these people need to know about your finances because they will be directly impacted by the process. It is important that creditors, or any individual who is owed a debt, know what is going on with their money. The bankruptcy process can add different kinds of strain on an individual’s life, but attempting to hide any information from public scrutiny will only worsen the process and threaten the potential results.

Know What Kind of Paperwork to Expect

Filing for bankruptcy is a complicated process, and the only way to simplify it is with organized paperwork and proper documentation. Full disclosure is essential to any bankruptcy case, and the only way to establish reliability is with proper documentation. With an adequate e-paper trail, everyone will have access to all the necessary information. Unfortunately, navigating that trail can be a tremendous task and will often set people back.

First and foremost, it is important to make sure that your paperwork is in order. Before knowing what will need to be done when the process begins, make sure you understand every detail of your situation. By having your situation documented, it will be much easier once you begin the bankruptcy process.

Get the Help Available to You

Things will often be overwhelming when dealing with bankruptcy, and many obstacles seem insurmountable. While the process will inevitably be difficult, it is important to have a proper understanding of what to expect before the process begins. Fortunately, there are experts available to you at a moment’s notice, making sure you are never left alone to handle such a complicated endeavour.

The best way to ensure you are making the right decision is to seek out an expert opinion. With so many different factors involved in a bankruptcy, it will be much more costly to try and handle things on your own. Before taking any action, make sure you call Kevin Thatcher & Associates at 1-866-702-9801 for a free consultation that will give you the information needed. You can also access any additional information at www.billfixer.com and even book your free consultation online.

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Should You Include Debt From Family In Bankruptcy?

Posted by in Bankruptcy
1
Jun 2020

While facing bankruptcy, you will inevitably be forced to address various creditors who are involved with the accumulated debt. One of the more difficult and frustrating kinds of loans to assess will be debt from family. Debt with family members is the same as any other unsecured debt and must be included.

Should You Include Debt From Family In Bankruptcy?

There is an assortment of ways to resolve family settlements, but declaring bankruptcy further complicates many situations. In order to make sure all sides are protected, it is crucial to understand what kind of regulations there are on family debt when declaring bankruptcy. Before the bankruptcy, talk to your trustee, get information you need to know how your family will be affected.

Establishing Relationships for Settlements

In order for a family member to know what kind of payment to expect if their loan is included in the bankruptcy, the first thing that needs to be established is the relationship between the two parties. The settlement will depend on how the two parties are connected, giving a better idea if they are entitled to any collection.

Have Proper Documentation

One reason why a family loan can be more complicated than most business transactions is because of how informally it might be done. Remember that once a bankruptcy is filed, there must be proper documentation for everything. Regarding family settlements, the date is crucial. Without appropriate documentation of when the loan was given, it may not be possible to get the family settlement you would otherwise be entitled to.

When dealing with bankruptcy, proper documentation is equally as important for family debt as it is for any other kind of interaction. Under the bankruptcy and insolvency act, all family loans and debt are to be included when declaring for bankruptcy. Theoretically, any family loan should be able to lead to a family settlement. The issues will only arise when there is no way of confirming the transaction on a document.

Keep Your Family Informed

When considering family debt while declaring bankruptcy, it’s important to keep any family members involved as informed as possible. While they may be entitled to a family settlement because of the bankruptcy, the valuation of the payouts will often be complicated. The reality is that the creditors who are owed money when bankruptcy is filed do not get the full value in a settlement.

It’s important to make sure you have the information needed to include family debt in bankruptcy properly, but the resulting family settlements will not completely resolve the debt. When another family member has to sacrifice earnings as a result of the settlement, it’s imperative to make sure they know what to expect when the process is complete. If a family member is left in the dark, there can be further complications that will end up harming both parties.

By communicating with your family, you can establish all the information needed to include family debt in bankruptcy properly. Additionally, all parties will be on the same page with what to expect, and no one will be left sacrificing more than they realize. Thus, it is important to make sure both parties know what a family settlement will entail.

Stay Prepared Ahead of Time

If you ever find yourself in the difficult position of considering bankruptcy, make sure you get all the information needed before the process begins. Family debt can be the most difficult aspect of declaring bankruptcy, and there is no reason for you to go into the process without knowing exactly where you stand with any debts.

In order to make sure you know exactly where you stand with all family members involved with bankruptcy, call Kevin Thatcher & Associates at 1-866-702-9801 to book your free consultation. For any additional information, or to book a consultation online, visit www.billfixer.com, where you can expect to get all the help you may need while looking into family settlements when filing for bankruptcy.

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What Happens To Your Credit Score After Bankruptcy?

Posted by in Bankruptcy
25
May 2020

Filing for bankruptcy in Canada has some serious financial repercussions. However often, by the time you file for bankruptcy your credit score is not very good. Specifically, your credit score will go through several changes during the period of bankruptcy. So what happens to your credit rating during bankruptcy?

How will bankruptcy affect your credit score?

First, it will fluctuate, then go down. But by being proactive, you can learn how to deal with the changes properly and start planning for your financial future with the right steps. We will discuss what happens to your credit rating after filing for bankruptcy and effective solutions you can do to start improving and rebuilding your credit score for the future.

How long will bankruptcy affect my credit score?

Your bankruptcy will be listed on your credit report anywhere from 5-10 years. During this 10 year period, it will be challenging to obtain new credit. But, there are things you can do to improve your credit score.

Two main credit rating companies keep track of your credit score. Equifax will keep your credit score on file for up to 6 years after receiving your bankruptcy discharge for first time bankruptcy. TransUnion keeps it on file for 6 to 7 years, depending on which province you live in.

How to Rebuild Your Credit Score During Bankruptcy

1. Pay bills on time

It is essential that during the period of bankruptcy to pay your bills on time. That includes cell phone bills, hydro, internet, electricity, and rent. It’s time to get organized and place all the due dates on a calendar, so you can start budgeting around your bills due dates. When you get into the hang of paying your bills on time, lenders will see you are managing your payments regularly. You can also set up automatic payments so bills are not missed. If you are setting up such payments remember you must manage your bank accounts to avoid NSF fees.

2. Get a contract cell phone

During bankruptcy, it might be tempting to get a pay-as-you-go cell phone, as you think you’re saving a little money. But getting a new cell phone with a 1-2 year contract can help you rebuild your credit score and is beneficial in many ways. Pay as you go minutes can end up a bigger payments per month.

The cell phone company will report your monthly payments to Equifax or TransUnion, and this shows lenders that you’re paying your bills on time. By paying your cell phone in full every month, it establishes healthy financial management.

3. Apply for a secured credit card

Along with getting a cell phone on contract, applying for a secured credit card like Visa or Mastercard can help you reestablish your credit rating. Here’s how it works: You put a deposit of $500 or more if they give you a credit limit of $500.

By putting down a deposit on the secured credit card, once your bankruptcy is discharged, your credit limit considers your cash deposit a form of good standing. This is because it shows you didn’t spend it.

Since Visa and Mastercard credit cards report your credit standing to Equifax and TransUnion every month, this will help rebuild your credit history. Your credit score can start increasing if you pay your balance off in full every month. Credit card companies can be difficult to deal with so see if the bank you are dealing with already has a secured credit card option.

4. Keep a positive balance in your account

Be sure to keep track of your bank account amounts and never go below a zero balance. For example, if you have authorized monthly payments to pay your bills, be sure there is money in your bank account when they debit your account.

It’s important to avoid a negative balance as having overdraft and NSF Fees affects your credit score. Avoid overdrawing your account, as this signified financial trouble to the credit bureaus.

5. Don’t apply for credit too often

During bankruptcy, you might be tempted to apply for new credit cards; however, this tells lenders that you are in financial trouble. The more you apply, the more your credit score decreases. It will leave a “soft” inquiry on your credit rating and once declined; your credit score will be affected. Try to wait 6 months between each new application to avoid a drastic dip in your credit score.

6. Build up your savings

Open a savings account, like a Tax-Free Savings Account (TFSA), and contribute to it every month. As little as $25-$50 a month will build during the time of bankruptcy. Similar to opening a secured credit card and having a cell phone on contract, contributing to a savings account establishes financial responsibility.

7. Live on a strict budget

Create a budget based on all the bills you need to pay and don’t go over it. Items like food, gas, and entertainment can be budgeted every week. As well, look for deals or discounts like Groupon, which can help you save money on outings or services that you would normally pay full price. When thinking of a purchase, decide if it is a “want” or a “need”, wants can wait!

8. Avoid payday loans

We advise staying away from payday loans, as they have sky-high interest rates that are virtually impossible to pay back. They also don’t help with rebuilding your credit score. If you find you don’t have enough money to live on a budget, then make the minimum payments on your bills and spend less on items on your budget.

9. Open an RRSP

Opening an RRSP (Registered Retirement Savings Plan) before filing for bankruptcy can result in the funds to be used towards your debts. However, once you receive your discharge, you can start contributing to it again.

Similar to a secured credit card and Tax-Free Savings Account, when lenders see that you are contributing funds to an RRSP, it represents financial responsibility. Remember, the more money you contribute to an RRSP, even in small increments, you can get a higher income tax return.

Filing for bankruptcy will affect your credit rating. But if you follow the steps outlined in this article, you can develop a regular payment schedule that credit bureaus will be able to see.

Through these small, but crucial steps, lenders will see that you are becoming financially responsible. If you require additional bankruptcy counselling on how to improve your credit rating in Toronto, the GTA, or Southern Ontario, we’re here to assist you.

For more information on how bankruptcy affects your credit rating, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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How Will Bankruptcy Impact Sponsoring My Family?

Posted by in Bankruptcy
11
May 2020

Bankruptcy can cause issues when someone is planning to sponsor their family for permanent residency so they can join them in Canada.

How does bankruptcy affect sponsoring my family?

Does bankruptcy affect an individual’s family immigration sponsorship process? Yes, it does. However, there are steps you can take to alleviate delays and mishaps while waiting for sponsorship approval.

For newcomers to Canada who have to file bankruptcy, while planning to sponsor their families, there are steps you should take to ensure you don’t stretch regular delays. We’ll outline the 5 most important factors that bankruptcy can have on you when you want to sponsor your family to come to Canada.

Can I sponsor my family while I’m bankrupt?

While you are bankrupt, you cannot sponsor any family member to come to Canada. During time you are an undischarged bankruptcy. When you file for bankruptcy, the primary effect that debt has on immigration is that you cannot apply to sponsor your family to immigrate to Canada.

But this isn’t a permanent situation. Once you get your bankruptcy discharge, you will then be allowed to submit a sponsorship application to immigration Canada.

While bankrupt, what other restrictions do I face sponsoring my family?

During the period of bankruptcy, here are some common restrictions that exclude you from sponsoring your family overseas:

  • Non-payments of child support and alimony. It is crucial you don’t miss paying alimony or child support as the Canadian government will think since you are missing existing payments, you will not be able to support your sponsored family relatives financially..
  • Non-payments, missed or late payments of immigration loans or bank loans.
  • Present bankruptcy that is not discharged.

What’s the difference between discharged and undischarged bankruptcy?

“Undischarged” is the time when you are bankrupt. The period of undischarged bankruptcy usually lasts 9 or 21 months for first-time bankruptcy. If you have filed bankruptcy for a second time or more, your undischarged period can last up to 24-36 months before you are released. During this time frame, you cannot apply to sponsor your family.

“Discharged” means that your bankruptcy period is released. This is a good time in your life, as this means you are discharged from your debts. Once the government of Canada sees that your bankruptcy is discharged, they give you the green light to begin your duties to start the sponsorship process.

Practical Options for Debtors Who Want to Sponsor a Family Member

If you don’t think you can wait out the undischarged period of bankruptcy and want to sponsor your spouse for Canadian residency, don’t file for bankruptcy. Rather, apply for a consumer proposal instead.

A consumer proposal is a legal contract agreeing to a settlement where you outline a payment plan with your creditors. A consumer proposal might work in your favour if you don’t have a large amount of debt. This is because you can arrange to pay a portion of the full amount that you owe to your creditors.

If your creditors agree to your consumer proposal, you can make payments and be debt-free within a time frame of no more than 5 years, and once the amount is paid off, your debts are discharged. This avoids filing for bankruptcy, and even though it lasts up to 5 years, you are not restricted like a bankruptcy and are able to apply to sponsor your spouse and family. However, there are conditions.

The government of Canada might still reject your sponsorship if you have filed a consumer proposal because it signifies that you are in great debt. Having savings and the proper means to take care of your sponsored family is important but if debt is a factor, you are not likely to be able to anyways.

Depending on the amount of your debt stated in the consumer proposal, the government may then assess if you will be able to keep up with your payments and cover the costs to take care of your family when they review your overall budget.

Remember a consumer proposal deals with your debts as does a bankruptcy, and keep in mind that a consumer proposal follows the same steps as a bankruptcy.

Another option would be to borrow money from your family to pay off your debts, thus avoiding filing for bankruptcy or a consumer proposal. If you have access to family money, you could waive the waiting period and start the application process.

Does a consumer proposal affect my sponsorship?

Now that you discussed some options to filing for bankruptcy, a consumer proposal might seem like a good option after all, right? All in all, a consumer proposal won’t affect your sponsorship application. But as stated, the Government of Canada can still say “no” if they deem your debt to be unmanageable with the addition of your family during the payment plan.

Besides unmanageable debt, here are some circumstances that can hurt your chances of sponsoring your family:

  • Your Canadian citizenship or permanent residency has been revoked
  • You are incarcerated
  • You have been charged with a criminal or sexual offence in Canada
  • You stopped making child support payments
  • You stopped making payments to the Immigration and Refugee Protection Act
  • Your salary does not meet the minimum requirements
  • Your bankruptcy remains “undischarged” under the considerations of Bankruptcy and Insolvency Act

Filing for bankruptcy does not mean that you won’t be able to sponsor your family, but you will have to follow a guideline that is time-sensitive. As you can see, if you plan to sponsor your family while bankrupt, it will cause delays until you are discharged.

But, if you stay on track of your payments, should you choose a consumer proposal or until your bankruptcy is discharged, you can start your application process. If you require additional bankruptcy immigration counselling in Toronto, the GTA, or Southern Ontario, we’re here to help.

Always consult with your immigration lawyer when making a decision that could affect your sponsorship.

To learn more about how bankruptcy affects sponsoring your family, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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9 Ways To Reduce Your Student Loan Debt

Posted by in student loan
20
Apr 2020

Education is one of the most important tools you can acquire to help build a solid foundation for your future. Investing time and energy in your education can be laborious, but ultimately fruitful. Unfortunately, the costs associated with pursuing higher education can be very high, usually requiring students to take a loan and eventually pay it back when they are financially able to do so. This being said, paying off student loans can be very problematic for new graduates, and is the second-largest type of consumer debt after mortgages.

Ways to decrease student loan debts

With the economic situation creating difficulties for young and fresh graduates to find jobs, paying off their student loans cannot usually be a top priority. Nonetheless, if you are a newly graduated student, still in school, or have begun to establish yourself into a career, it’s always a good time to focus on reducing and paying off any remaining student loans you may have. Luckily, there are some ways to help reduce the burden of your student loans through several methods, such as better loan terms, lower monthly payments, or shorter repayment periods. If you have a student loan that you would like to reduce significantly, we’ll share 9 ways you can do just that.

  1. Continue budgeting and prioritize your loan

    • College life may be a thing of the past for you, but that doesn’t mean you have to leave the college lifestyle behind, at least not right away. It’s not always easy living on the bare minimum and focusing on studying and saving over the course of your college years. So it’s tempting to stop saving and spend a little more freely once you’ve graduated and found a job. However, if there are pending student loans in the mix, it may not be time to let your finances go out of check just yet. Try to continue living frugally by sharing expenses with roommates, using public transport, and cooking at home, for example, to help save as much of your money as possible. The best way to do this is to create a realistic budget for every month and stick to it. The more money you put towards paying off your student loans, the faster you will be debt-free and finally able to take on some of your new financial goals and enjoy the money you earn.

  2. Employer assistance

    • Many governments and private employers offer assistance with student loan repayment or tuition reimbursement programs. If you’re looking for a new job, it’s always a good idea to see the kinds of benefits your potential employer is offering or inquire about tuition assistance programs if you are already employed.

  3. Start making payments while in school

    • Many student loans do not expect you to begin making payments until after you have graduated, nor does your loan accumulate interest while you are still in school. Start putting aside money to pay down the loan if you can while still a student then start payments on the loan as soon as you can. If you can bring down your principal amount significantly before the grace period ends, you can spare yourself from paying a large amount of interest.

  4. Pay more than the minimum

    • Every debt that you have usually breaks down your payments and provides you with the minimum required payment to be made per month. If you stick to the minimum, you will eventually be able to pay off the debt, with a significant amount of added interest, over a relatively long period depending on the size of the debt. You can, however, decrease the amount of interest being added to your principal amount by making larger payments and aggressively paying down your loan every month. This will quickly pay down your principal amount, decreasing your balance, and get you out of debt faster.

    • In order to come up with extra money to pay down your student loan, you could try picking up another job or extra shifts, offer lessons or tutoring services or rent out a room in your home. Any extra money generated by an additional job or business can be funnelled directly towards paying off your student loan.

  5. Apply for public service loan forgiveness

    • Public service loan forgiveness is designed to forgive student loans after a certain number of payments for eligible individuals. In order to qualify for public service loan forgiveness, you must be employed full-time by a government or a not-for-profit organization that qualifies. This plan allows you to be forgiven of your debt after about 120 qualifying payments; however, there are restrictions, so it’s important to understand everything that is required of you if you are eligible for this option.

  6. Refinance your student loan

    • Refinancing your student loan can be done through a private lender so you can get a better interest rate on your loan. Over time, the lower interest rate can help you save a significant amount of money. However, it’s important to keep in mind that if you choose to refinance through a private lender, you forfeit the federal repayment options such as public service loan forgiveness or income-based repayment. If you’re confident that you will not be losing your job in the foreseeable future, then refinancing could be a good option for you.

  7. Consolidate your student loans

    • If you have multiple federal student loans, you may be eligible for consolidation. Consolidation is a process that takes multiple student loans and combines them into one loan, with an interest rate that is a weighted average of all of the interest rates. This means that although you won’t be saving money on interest, you will be simplifying things for yourself by combining all of your debts into one. You can also adjust your repayment period to whatever suits your financial situation, which will ultimately determine how much your monthly payments and overall interest payment will be down the road.

  8. Readjust your repayment plan

    • The repayment plan you choose should be best suited to your financial and employment status. A number of different repayment plans exist, including income-based repayment (IBR), pay as you earn (PAYE), revised pay as you earn (REPAYE), and income-contingent repayment (ICR). These plans are designed to help you adjust your payment amount and the repayment period based on your income.

  9. Apply for loan deferment or forbearance

    • If your financial situation doesn’t allow for student loan payments at present, loan deferments and forbearance allows you to pause or reduce your monthly payments temporarily. Deferments stop interest from accumulating, while loans in forbearance do not. There are, however, strict requirements to be considered eligible for loan deferment or forbearance.

As you walk across the stage at graduation, brimming with happiness, your mind may jump to the jobs and opportunities ahead of you. It’s tempting to think that the days of saving and skipping some purchases are over for you. Unfortunately, a significant roadblock in these plans is student loans. Student loans are no easy endeavour to overcome, but they should be prioritized as a smart financial decision for your future. Using one or more of the tips outlined above is a great way to start chipping away at and speeding up your student loan repayment.

Our team at Kevin Thatcher and Associates understand how difficult debt can be, which is why we can provide you the advice and guidance you need to ensure that your debts, whatever they may be, do not become overwhelming and unmanageable. Call Kevin Thatcher and Associates today at 1-866-702-9801 to book your free consultation, or visit our website here to learn more about our services.

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What Alternatives Are There To Bankruptcy?

Posted by in Bankruptcy
6
Apr 2020

Financial troubles can be very difficult to manage, and you may find yourself drowning in more debt and have so many bills to a point where they become unmanageable—in situations where your assets are limited, and you have no extra income, paying off your debts may not be realistic. Luckily, there are ways to help you discharge your debts using the assets that you have to help deal with your creditors and arrest any legal action they may be taken against you. The first that usually comes to mind is through filing for bankruptcy.

What are the options available for bankruptcy?

When you file for bankruptcy, you find a trustee to whom you surrender all of your non-exempt assets. The trustee will take your assets and turn them into cash to pay off all of your creditors so you can be discharged from all or most of your debts. However, bankruptcy can pose a major negative impact on your overall credit, and require you to part with quite a few assets other than those that are essential for your living and working.

Additionally, there are certain types of debts that are excluded from bankruptcy, including secured debts (mortgage or car loans), student loans that are less than 7 years old, and child and alimony support payments. There is also a fee associated with bankruptcy and takes a minimum of 9 months of payments to be discharged, with the possibility of further delay. For this reason, there are alternatives to bankruptcy that are sometimes not as widely known, but, nonetheless, they are used more often than bankruptcy. You should be aware of all your options before making any important financial decisions, so let us walk you through some of your alternatives to bankruptcy.

  1. Careful budgeting and debt repayment

    • This is one of the most straightforward alternatives to bankruptcy. If you are struggling to pay many debts, you have to ask yourself whether these debts are absolutely unmanageable on your own. Or, will a carefully designed budget allow you to set aside enough money to pay them off? The key to succeeding through debt repayment is to create a realistic but strict budget, where you cut down on all types of expenses not considered essential for living. Try to live off of the minimum requirements for a while and direct as much extra money as you can towards paying off your debts. Remember, pay the minimums to all, any extra funds would go to the debt with the highest interest rate.
    • Once you’ve created your monthly budget, organize your list of creditors and the amount of money you owe to each one. Once this information is organized, you can determine how much money is available for each of your debts and how long it will take for you to be completely debt-free.
    • It’s important to keep in mind that repaying your debts on your own is a simple way to avoid any other third-party intervention. However, if debt repayment through budgeting won’t help you repay your loans within about five years at most, then this may not be the option for you.
  2. Create a Consumer Proposal to eliminate your debt

    • A commonly used option for individuals struggling with debts is to use a consumer proposal. A consumer proposal serves as an agreement between you and your creditors regarding how your debts will be settled. A licensed insolvency trustee will be in the middle  and help negotiate with your creditors on your behalf so that you can agree about how your debts will be settled.
    • Consumer proposals have proven to be very effective. They can help you negotiate an extremely low settlement so that you may only have to pay less than 50 percent of your total owing amount. This means the burden of your debt will be reduced significantly, and you can make larger monthly payments if your financial situation improves to pay off your debt faster and stops the interest charges.
    • Creditors understand that when an individual puts forth a consumer proposal, they aren’t too far from bankruptcy. Creditors also understand that if they work to negotiate the terms of a consumer proposal, they will receive more money than they would if an individual files for bankruptcy. In order to salvage the most money for themselves, creditors will be more inclined to agree to a consumer proposal. That being said, there is a possibility that your creditors could refuse your proposal. Ultimately, though, a consumer proposal benefits both the creditor and the debtor.
  3. Refinance your debt with a debt consolidation loan

    • Organization is essential when you’re in debt. Knowing who your creditors are and how much you owe each one is key to ensuring that you keep up with all of your payments. For this reason, a debt consolidation loan is used to help combine several loans into one single loan. If you receive a debt consolidation loan, you use the money you receive to pay off all of your debts and then focus all of your attention on one single loan.
    • The single consolidated loan can now be your main focus, and it usually has a lower interest rate compared to your other individual debts that you were previously paying. Although you are still making payments to pay off a debt, paying a single, low-interest debt is significantly more manageable.
    • The key here is that the overall interest rate is lowered.
  4. Utilize a debt management plan to repay your debts

    • This option involves a debt management plan, which is filed by a credit counselling agency on your behalf. This plan allows you to consolidate your debt without the need to qualify for a new loan, which is usually beneficial for individuals with bad credit. You will be required to repay all of your debts in full, but the one helpful aspect of this option is the possibility of qualifying for interest relief.
    • The credit counselling agency will be able to use the debt management plan to help you if you have a consistent income, but are having difficulty with the mounting interest on your debts. Therefore, your credit counsellor can help arrange a debt repayment plan with a low-interest rate or, ideally, no interest at all.
  5. Negotiating your debt with your creditor

    • Negotiating is another option that is done by someone else, such as a lawyer, on your behalf. Again, negotiating your debt requires that you pay back your loan, but it is a way to help you if your financial situation will be improving in the upcoming future. If you are projected to return to work within a month or two, for example, you can ask your creditors to suspend or lower your monthly payments temporarily until your financial situation improves. Creditors will be more likely to negotiate the terms of your payments if you approach them before you fall too far behind in your payments.

Just as individual financial situations can differ from one person to the next, so do the solutions to your financial problems. There are pros and cons to each of the options described above. In order to make the right decision for you, speak to a debt expert to get the right advice for your situation. At Kevin Thatcher and Associates, we offer you expert and personalized financial advice. Let our team help you steer through your financial troubles and work towards a debt-free future. We specialize in bankruptcy, consumer proposals, and debt consolidation. Call Kevin Thatcher and Associates at 1-866-702-9801 to book your free consultation today or visit our website here to learn more about what we have to offer.

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Why You Should Have An Emergency Fund

Posted by in Money Management
16
Mar 2020

Emergencies are unpredictable; they aren’t planned, but they can be planned for. Emergencies usually demand urgency, and this can include paying for unexpected expenses. For this reason, it’s always a smart financial decision to put aside monthly savings towards an emergency fund. We may take all measures to avoid an emergency, but the best planning is to stay prepared. Emergencies don’t usually allow you much time to readjust your budget and can be financially demanding in a short period. If you continue to put aside money towards an emergency fund steadily, you can save yourself from any panic if you are ever required to pay a large sum of money in a short period. Emergencies can include any number of situations, including your car breaking down, time off from work, or urgent veterinary procedures, or a pandemic, to name a few. It’s important to differentiate unexpected expenses from those that occur occasionally and should be considered their own category when budgeting. If you haven’t already set up an emergency fund, we’ll walk you through some of the benefits of doing so.

How to tackle financial emergencies?

  1. Keep out of debt

    • When you are faced with an emergency that requires a significant amount of money, such as for vet treatments or car repairs, they usually require fast action and immediate payment. If you don’t already have an emergency fund set up for these kinds of large and unexpected expenses, you may not have enough money available in your bank account at the time. In these situations, you may be required to take out a loan, and trying to pay off loans can put you into debt, especially with the high-interest rates. Some loans can be particularly costly, such as payday loans or cash advances on credit cards, which are usually associated with very high-interest rates. Anticipating and preparing for emergencies beforehand by contributing to an emergency fund can help you avoid taking loans and going into debt.
  2. Remain in control of an emergency

    • Emergencies can vary widely. However, one common factor between most emergencies is the need for some sort of payment, whether big or small right away. In order to stay in control of an emergency, having a sufficient amount of money at your disposal is the best way to remain prepared and in control. Don’t let the financial demands of one emergency create more problems for you.
  3. Put your mind at ease

    • For many individuals, not knowing what’s going to happen next is both exciting and part of the spice of life. But for many others, being prepared for the future with an emergency fund is the best way to keep their mind at ease and remain relaxed knowing they can financially handle whatever may come their way.

How do I get started with my emergency fund?

If the concept of an emergency fund is new to you, but something you are definitely ready to set up, here are some tips to help you begin contributing to it:

  1. Start small, but start somewhere

    • Saving is no easy task, especially if you’ve got bills or a mortgage to pay and a family to support. Finding any money to put away can be a difficult task, so it’s okay to start saving a small amount. Be realistic when creating your monthly budget and allot whatever you can towards your emergency fund. Even if you’re only setting aside a little at a time, it’s better than nothing, so there’s no need to worry if it takes you months or even years to reach your goal for your emergency savings.
    • One of the best ways to add more to your emergency fund is to eliminate or reduce one of your monthly expenses. The expense you choose to eliminate should be one you may want, but don’t necessarily need. The money you save from this expense can be put towards growing your emergency fund. There are several little ways that you can save a lot of money, such as by making your lunches at home, using public transit, etc.
    • However long it may take you, try to aim to save at least 3 to 6 months of income. Save gradually and consistently, and you will get there. Remember if you can save $50 per pay period and you get paid biweekly, you’ll have $1300 saved up in a year.
  2. Open a savings account

    • Once you’ve committed to creating an emergency fund, you’ll need an account to save all your money in. There are certain features you should look for in the savings account you open for your emergency fund. The purpose of an emergency fund is to have money at your disposal when an unexpected expense comes up, so your account should:

      1. Be easy to access
      2. Be separate from the account you use for daily transactions
      3. Offer the ability to earn interest on the money you save
      4. Allow transactions without any penalty fees or transaction fees
    • Additionally, help make things easier for yourself by automating your savings, so that a certain amount of money at a set frequency will be transferred from your regular account to your savings account(e.g. $50 per pay period). With automatic deposits, you can forget about reminders and calendars while still saving in the background.
  3. Make saving a habit, not a chore

    • Saving doesn’t have to be a forced process, especially if you try to work it into your everyday life. You don’t always have to set aside large sums of money because, in reality, every little bit helps and it’s the small steps that lead to big results. This means that even loose change that you collect over time in a container can add up. Don’t be afraid to use whatever tools and reminders you may need to keep you saving regularly so that, over time, saving becomes a habit and not a demand or chore.

Managing finances and saving money can sometimes be difficult with all the other expenses demanding our attention. Despite what your financial situation may be, putting money aside towards an emergency fund is always the right idea, and the amount you choose or are able to set aside should be based on your personal circumstances. Whatever opportunities you have to put away some extra money should be seized, so if more of your income is available to you, then add that money to your savings. Redirecting money towards your savings is a great way to help your fund grow quickly and reach an amount you’re content with. Make sure you continuously review your financial goals and readjust your budget as needed. Unfortunately, your financial status isn’t always going to remain steady and can be unpredictable, so it’s important to always have money at your disposal to help you navigate through unexpected circumstances. If you feel that you could use some financial advice to help you get on track and stay there, let our team at Kevin Thatcher and Associates give you the guidance you need. Call Kevin Thatcher and Associates today at 1-866-702-9801 to book your free consultation or visit our website here to learn more about us.

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Should You File for Business Bankruptcy?

Posted by in Bankruptcy
15
May 2019

Contemplating commercial business bankruptcy is difficult and stressful. The majority of people have invested significant sums into and thousands of hours into their business and commercial business bankruptcy is on par with losing a loved one or facing a major illness when it comes to stress.

Should You File for Business Bankruptcy?

Options Before Commercial Bankruptcy

Even though the pressure feels as though it is enormous and there seems to be no way out, there are sometimes other options besides bankruptcy. It’s always good to discuss your situation and run through your options with a licensed trustee. It may turn out that you do not need to declare bankruptcy.

If you are having financial difficulties, and are considering filing for bankruptcy, first consider other options. For example, you ideally you should put forward a payment plan and explain to them in detail how you intend to repay them. If your creditors agree, you won’t need to declare commercial business bankruptcy and, with careful planning and preparation, you may be able to continue with your business.

You can also discuss with your creditors that you may want to look at selling your assets, re-do your budget, or sell some of your business’ assets to lighten the debt load.

Another more formal option is to file a Division 1 Proposal, sometimes called a business proposal. Such a proposal is an arrangement to repay what you owe to creditors without actually declaring bankruptcy. It is similar to a consumer proposal but allows you and your licensed insolvency trustee to deal with higher amounts of money.

A Division 1 Proposal means that you will be required to work with a licensed insolvency trustee and pay creditors a portion you can afford over a set period of time. A Division 1 Proposal is available to individuals with debt higher than $250,000, excluding what is owned on your main residence.

Try to Improve Your Finances First

At times there are small to medium-sized businesses that are profitable but have hit a hard patch. Again, a licensed insolvency trustee can help you resolve this kind of issue and help you get your business back on sound footing.

One of the biggest issues that affect a business is slow cash flow, mostly caused through late payments by clients who owe you money. You can insist that your invoices be paid on time, or hire a bookkeeper who sends out regular reminders and makes frequent calls to debtors.

Managing your business in an economic downturn is an important thing to learn. If your cash flow is good, your business can still be affected negatively if an economic downturn or uncertain plays out. Ways to prepare for this are keeping expenditures as lean as possible and being able to offer special offers or discounts during this time. An accountant and marketer can help you with these strategies.

Do you own a proprietorship or in a partnership?

If your business is a sole proprietorship or a partnership, your business assets cannot be held separately from your personal assets. It’s important to be aware of this fact because of the implications; small business bankruptcy in this situation is the same as personal bankruptcy.

By declaring bankruptcy, in effect, you surrender all your inventory and possessions to a licensed insolvency trustee. In return, you are legally free of your debts; they have been eliminated. You also get a chance to begin again. A key requirement of this is that you report your income to your licensed trustee on a monthly basis. However, despite your new start, your credit report will be affected so if in the future you want to take out a loan, this will not be easy.

Alternatively, you will have liability protection if your business is incorporated are by law, because it is viewed as an independent legal entity.

Commercial Business Bankruptcy

For some business, deciding to declare commercial business bankruptcy might be the only way forward. However, you must read about all your options and discuss your decision with a licensed business bankruptcy trustee. It’s unwise to make this decision all alone, especially if you are feeling stressed, anxious, or very tired.

Bankruptcy is the main option when your business fails and you are unable to pay bills. Once you have reached the decision with professional support. Acting quickly means that creditors cannot take your inventory or your assets to cover the debts you owe them. They will also be unable to take any of your wages. In a situation when bankruptcy has been declared, your licensed insolvency trustee will handle assets and sell them so that payments can be made to your creditors.

Starting Again After Commercial Bankruptcy

Once you have declared commercial business bankruptcy and have paid your creditors through your licensed insolvency trustee, you may decide that after a time you want to begin another business. If you do make this decision, it’s important to access advice and tools from the beginning, so that whatever problem pulled your business down in the past does not rise again. Or, if it does, you will be capable of dealing with it.

Most provinces and some larger municipalities have programs and courses to help you access the knowledge you need to begin running your own business again. You can also consider taking night classes are a local community college or seeking out a business advisor at your bank.

For more information about business bankruptcy, call Kevin Thatcher at 1-888-329-5198 or contact us here.

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