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Debunking 8 Common Bankruptcy Myths

Posted by in Bankruptcy
1
Apr 2021

The process of bankruptcy is a troubling time for any business or person. There’s so much information to understand and legal ramifications that come along with every step. This leads to a lot of misinformation being perpetuated, with different ideas and stigmas being associated with filing for bankruptcy.

Debunking 8 common bankruptcy myths

It is important to understand what you’re getting into before you decide to file for bankruptcy. While there are many resources available on the topic, make sure you’re getting your information from the right source and remember to double check it. At Kevin Thatcher & Associates, our team is composed of licensed insolvency professionals who know the right information from the myths. We’ve put together a short guide to help guide you on your insolvency journey and debunk 8 common bankruptcy myths you might have heard in the past.

1. Everyone Will Know You Filed for Bankruptcy

No, they won’t. Bankruptcy is more common than you think; so many businesses and individuals have been hit with the financial crisis, and many do end up filing for insolvency. The most common question we get when filing for bankruptcy is if others will know. The simple answer is that it is up to you if you wish to share that information.

While bankruptcy records are public, it costs money to search government records. Newspaper notices report only the large cases of bankruptcy, which is a category that most everyday cases do not come under. As such, it is likely no one will stumble across or make the effort to find your record, keeping the matter up to your discretion to keep private or public.

2. Only Poor People Go Bankrupt

This is simply not true. Bankruptcy is more common than you think, as financial problems can hit just about anyone. People with high incomes, modest incomes, and anywhere in between file for bankruptcy. Bankruptcy itself is simply a process outlined by a set of federal rules that allows anyone who is unable to meet their financial obligations to get relief.

3. You Can Pick Any Bankruptcy Trustee to Help You

This statement is not incorrect. If you’re planning to file for bankruptcy in Canada, the law mandates that you need to file with an insolvency trustee. Trustees are licensed professionals who act as an intermediary between you and the creditors, and are licenced to help you navigate the insolvency process.

All trustee’s follow the same set of rules but you want to pick a company and Trustee you feel comfortable with as they will be with you for the entire process.

4. Declaring Bankruptcy Is a Lengthy Process

A common myth is that declaring bankruptcy takes over 7 years—this is untrue. In many cases of bankruptcy last only 9 months but the average is between 9 and 36 months. Although the number of months can differ on a case by case basis, if your case is fairly straightforward (as over 80% of the cases are), then you will not have to suffer a lengthy insolvency period.

5. You Will Lose All Your Assets

No, you will not lose all your assets and be rendered homeless. This common myth stems from the media portraying it as a process where you lose everything, but that is not true. If you file for bankruptcy, you may need to deal with the value of select assets to make the process fair for your creditors. Many assets are exempt in a bankruptcy filing. The kind and number of assets varies by jurisdiction, so be sure to check out the laws in your area. Generally, certain assets can be retained, from cars and homes to pets, as well as RRSPs, RRIFs, or locked-in pensions.

6. Your Credit Report Will Be Ruined

Filing for bankruptcy definitely affects your credit and will appear on your credit report. However, this record does not last indefinitely. For a first time bankrupt six to seven years after filing for insolvency, the charge drops off your credit report, and no one will be able to see that you filed in the first place. This will allow you to begin rebuilding your credit by taking out a secured credit card and applying for loans. Generally the accumulated debt that a bankruptcy gets rid of will affect your credit more in the long run as you continue to be unable to pay it.

7. All Your Debts Will Go Away

Another common misconception is that filing for bankruptcy makes all your debts magically disappear. While it is true that the process provides you with relief and forgiveness from the majority of your debt. You are still responsible for debts such as alimony payments, and child support. There are also debts such as student loans where the rules stipulate that you can only be completely released from the debt if you file more than seven years from when you completed your schooling.

Filing for insolvency does not generally cover secured debts such as mortgages or car loans unless you want to return them to the lender. If you want to keep these items and must maintain the payments. Another point to keep in mind is that when you declare bankruptcy on joint debts your bankruptcy only protects you from the debt and not the joint owner of the account..

8. Bankruptcy Is the Only Option to Relieve Your Debt

There are alternatives to filing for bankruptcy that any company or individual may explore. Debt management programs, orderly payment of debt, consumer proposal, refinancing your home, and debt consolidation are all viable options. When it comes to choosing the solution for your specific situation, speak with a licensed and accredited insolvency counsellor before deciding. They will help you navigate your various options and help you find the best solution for overcoming your financial difficulty.

As you can see, debt relief is a tricky process, with many common misconceptions and theories about how to go about filing for bankruptcy. The time and energy needed to understand the right solution for you can be made easier with the right team to back you up, leaving you to lead your debt-free life.

To learn more about debt relief and bankruptcy services, call Kevin Thatcher & Associates at 1-888-702-9801 or contact us here.

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5 Things You Didn’t Know About Debt Counselling

Posted by in Debt
22
Mar 2021

If you have reached a point where you feel that filing for bankruptcy is your only option, then don’t despair. Household debt in Canada is an increasingly common situation; in fact, Canadian citizens owe over $2.15 trillion in debt alone! Bankruptcy proposals have skyrocketed, so you’re not alone.

5 things you didn’t know about debt counselling

If you’re weighed down by legal threats, collection calls, and wage garnishments, you’re probably looking for a way to consolidate your problems and find a way out. What we find is that most people aren’t aware of the options available to them in terms of debt relief, and almost always just end up filing for bankruptcy. However, bankruptcy takes fees, and leaves a permanent, public record. Educate yourself on the other options available to you, as they might make more sense to your personal situation.

That’s where credit counsellors come in. Debt counselling is an easy solution to explore the debt relief options available. Counsellors will not only guide you through various programs and resources, but they will also provide customized support such as budgets and financial assessments, which will help you alleviate your situation. The program gives you the tools you need to pay off your outstanding debt and help for long-term plans for financial success.

1.   Debt counsellors are highly trained professionals

Registered Credit Counsellors are trained professionals who are registered with the Office of the Superintendents of Bankruptcy (OSB). They are required to complete training as well as minimum hours, and are certified to provide you with financial solutions. Credit counselling professionals offer their expertise to improve financial situations and help people get out of debt. They do this through money management ideas and strategies for financial wealth.

2.    Debt counselling offers professional budgeting help

Credit Counsellors are with you every step of the way. They go through your financial records, assets, spending habits, and debt, and come up with a financial assessment. This assessment is the blueprint to help you out of your insolvency problems. A critical step here is to create a personal budget, which helps you resolve all your obligations. Counsellors can help you create a custom, tailored budget that is unique to you and your financial situation. This is a realistic budget that will help you manage your current expenses, and better deal with upcoming expenses in a responsible manner. This is extremely helpful for financial success, and your counsellor provide a non-judgemental assessment of your situation.

3. Debt counselling provides debt management options

Accredited Credit Counselors are there to help you deal with your finances. After a thorough financial assessment, they will provide a proper plan that will allow you to deal with debts easily. Accredited professionals are trained in the various debt allegiance programs and will suggest a structured debt management program. After years of experience, we have found that when customers are given careful advice on their options, their debt relief is successful and long lasting. Not only will they provide alternatives to filing for bankruptcy, credit counsellors may also be able to refer you to other businesses in your area if you require additional services they are unable to provide.

4. Debt counselling goes into the specifics

If you enter into financial assessment, the options will be laid out for an in-depth understanding of the process. Credit counsellors can also discuss proposals where they negotiate with your creditors to make a manageable repayment plan. They will help you arrive at a repayment plan, and structure it so that it is disbursed to your creditors on a monthly basis. Debt counselling helps break down the steps to your financial solvency and really goes into the specifics of how to help you achieve independence. It is this specific information that sets apart an expert debt counsellor from a mediocre one.

5. Debt counselling disadvantages

Remember that credit counselling itself does not reduce the total amount of the debt principal you owe. Counselling simply provides alternatives and possible solutions, where in reality bankruptcy is your quickest solution to debt settlement. However finding the right option for you can in itself can be a key step to financial success.

There you have it: 5 things you didn’t know about credit counselling. This is a very helpful resource if you’re trying to resolve debt while avoiding bankruptcy, or even if you just don’t know all the options available to you! Every situation is unique, and doing the due diligence in researching the different options will help you in the future. Debt counselling also helps with money management for long-term success, which is key in financial solvency and independence.

Reach out to our team of professionals for any of your money doubts or queries. To book an appointment, call Kevin Thatcher & Associates today at 1-866-719-8547 or contact us here.

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Bankruptcy Counselling vs. Credit Counselling: What Is the Right Option for Me?

Posted by in Bankruptcy
8
Mar 2021

Bankruptcy is a difficult time for you or your business and can greatly affect your financial goals. Expenses and debt add up and, before you know it, you’re ready to file for bankruptcy. What most people are not aware of is that every situation is unique, and filing for insolvency immediately may not be the best solution.

Bankruptcy counselling vs. Credit counselling: What is the right option for me?

The Government of Canada introduced new laws that mandate bankruptcy counselling sessions with every case of insolvency. The 1R4 directive has been implemented by the Office of the Superintendent of Bankruptcy (OSB), and calls for two mandatory credit counselling sessions for every consumer proposal of bankruptcy. This is required to complete the insolvency process—without this, the debtor will not receive bankruptcy discharge or a consumer proposal certificate of compliance.

So, what does this mean for your business? There are fees associated with filing for bankruptcy, while in comparison, an initial credit counselling appointment is free, and allows you to explore your debt counselling options before filing for a consumer proposal or a bankruptcy.

Both ways are viable, so let’s explore which one is the right option for you.

What’s the difference?

Credit counselling is more the assessment that helps a person understand their options. It involves discussing your situation and uncovering the various options available to you in clearing your debts. A trustee’s office will do this as a free consultation. It is important to note that this method means figuring out mechanisms to pay back your debts. Most people think their only option is to file for bankruptcy, but credit counselling helps you understand and assess all of your options before making the best decision.

However, in some cases, bankruptcy is the only option. If managing your debts and paying employees gets hard, and threats of getting taken to court increase, then you may want to consider filing for bankruptcy. It helps clear debts faster, and the difficult process is completed efficiently for your business. Filing will stop collection activities, and all your creditors will be notified. In addition, wage garnishments and lawsuits will be halted. Remember, though, that there are fees associated with bankruptcy, and that the insolvency process leaves a permanent and public record.

Filing for Bankruptcy

If you decide to file for bankruptcy, remember that there are certain fees associated with it. In addition, you must meet the bankruptcy requirements. Two of these requirements are:

1. You must live in Canada or do business/own property in Canada.

2. The minimum amount in unsecured debt is $1000, and you must have no way to sell it off and have very few assets to your name.

Once you file for insolvency, you will obtain a bankruptcy discharge certificate. This will effectively clear your debts, but will leave you with a searchable permanent record on the OSB website. Another important point is that going bankrupt can create issues with loans, credit, financing, and housing. It creates hassles later in life, so remember to treat it as an absolute last resort.

Credit Counselling

We suggest that before filing for insolvency, consider going to a credit counselling consultation for help. Not only are there no restrictions to speak with qualified agents, but most companies will also do a free, no obligation consultation. At Kevin Thatcher & Associates, all our consultations are free, and non-judgemental. Our team has years of experience in insolvency and will help you with your debt problems efficiently, and without having to declare bankruptcy.

What credit counsellors help with is reviewing your income, expenses, spending habits, and assets. Reviewing these factors is important, as it helps counsellors determine which approach will best tackle your unique needs. This financial assessment is valuable financial education as well. Your counsellor will also answer any questions you may have related to debt. Whether you’re unsure about the best debt relief plans, or about debt settlement, they will provide options to you on what is financially viable for your situation.

Debt Relief Options

Most people are aware of bankruptcy as a viable debt relief solution. However, there are other options that need to be explored. Some common debt relief choices are:

  • Debt consolidation
  • Credit counselling
  • Consumer proposal
  • Handle debts on your own
  • Bankruptcy

The financial assessment they provide should be a good jumping off point to start handling your finances on your own.

About Bankruptcy Counselling

A qualified counsellor is a person who has been granted a counselling certificate by the OSB and has had a minimum of 100 hours of counselling. Sixty days after the filing of bankruptcy (the same applies to a consumer proposal), the first stage of counselling must be initiated. The objective of this stage is familiarizing the debtor on issues such as money management, spending habits, warning signs of financial difficulties, and how to obtain and use credit.

The second stage begins within 210 days of filing the consumer proposal. It requires the counsellor to arrive at an understanding with the debtor on the cause of insolvency or refer the debtor to appropriate agencies. This stage educates the debtor further on the resources and options available to them.

Remember that mandatory bankruptcy / consumer proposal counselling is different from credit counselling! These two options vary, but both offer you relief when it comes to your finances. It is up to you to decide which option suits your situation. However, go with a credit counsellor when you’re deciding because then you’re able to see all your options laid out clearly.

Our team is here to help you always, and without judgement. To book an appointment, call Kevin Thatcher & Associates today at 1-866-719-8547 or contact us here.

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A Comprehensive Guide to Resolving Tax Debt

Posted by in Tax
20
Feb 2021

Tax season will be approaching come April, and that can mean large tax bills. Tax debt is a common problem, and it is easy to get into if you’re not careful. Maybe you owe back taxes and can’t afford to pay them back as yet? Perhaps you just forgot to file your taxes in time one year?

 A comprehensive guide to resolving tax debt

Tax bills can add up if you haven’t been paying bills on time, have missed or were late filing some years, or have been disorganized with managing your finances. Keeping track of your taxes and when they are due is essential, as it can be a great preventative measure saving you a lot of stress later.

If you do end up owing tax, the Canada Revenue Agency (CRA) is compelled to collect on any outstanding debts you may have. The CRA will usually communicate with you on upcoming payments and when they are due, and missing payments will lead to interest and penalty fees adding up. Therefore it is essential to manage your debt or outstanding tax right at the beginning because the longer you delay it, the more difficult it will be to resolve. It will become more expensive, too, as interests and penalty charges add up to extreme amounts over several months.

The CRA may utilize its strong collection powers to collect, and depending on your situation, could even press charges liable in court. Other possible outcomes could be that the CRA seize your assets, freeze your bank accounts or garnish your wages directly from your employer or pension without prior notice.

However, some solutions can address your situation and help you manage your tax debts. If you’re unable to pay them off at the onset, assessing your charges and figuring out how to handle them is better than avoiding the topic altogether.

Tax debt relief is possible with an experienced team that is knowledgeable on the strategies for resolution. Here are some comprehensive ideas on how to resolve your tax debts.

Negotiating Payment Terms

If your case isn’t very contentious, it may be possible to resolve your tax obligations through a series of payment arrangements. The CRA may allow for terms where you pay a fixed portion of your debt back for several months until the debt is resolved.

To do this, you will be required to present documents and information. You will explain your circumstances and the need for an extension and file all outstanding tax returns. After reviewing your income and expenses, the CRA may or may not accept your offer. Contact your nearest Revenue Canada office for more information.

Taxpayer Relief Programs

There are certain programs the CRA will offer to individuals with extraordinary circumstances. If you have been unable to resolve your tax debt due to financial hardship, in some cases, the CRA may forgive outstanding penalties and interest. Individuals who were unable to pay due to personal illness, mental stress, or emotional instability become eligible for these taxpayers relief programs. There is a limitation of 10 years to apply for such programs.

Using Available Finances

RRSPs or RESPs may be cashed in to pay tax debts in some cases. That may not be the best course of action for all individuals but is an option when in duress or no other choice. However, this may not be necessary, as consumer proposals can protect your RRSP and buy you time to work out another arrangement with the CRA. Also remember that cashing certain investments comes with its own tax requirements and you don’t want to pay one tax debt to end up in a new one the very next year. Talk to your investment company before you cash anything to make sure they can hold the proper amounts back.

Debt Forgiveness and Settlement

Generally, the CRA does not accept anything less than the full outstanding amount owed to them. It is understood that all individuals must pay back their debts in full. However, portions of income tax and other unsecured tax debts may be discharged in specific cases. You can file a bankruptcy or a consumer proposal with a Licensed Insolvency Trustee. This is especially helpful if you have found yourself with tax debt that you just can’t seem to get ahead of.

If you file a consumer proposal with a trustee, you could potentially settle your debt for less than the full assessment amount, principal and interest. The CRA is at liberty to decide how far that reduction will go, based on individual circumstances and assets.

Working With a Tax Specialist and Keep the New Filings Under Control

How do you determine if you should cash in those RRSPs or apply for a consumer proposal instead? There are many possible solutions to your financial problems, and it may be overwhelming trying to figure out the options on your own.

Work with a Licensed Insolvency Professional before taking action. Not only are debt relief professionals knowledgeable in their field, but they will also assist and advise you on the best course of action for you specifically. Always be careful to get credentials of the person you are working with as there are many companies who will advertise services that they can’t provide.

Lawyers and accountants may also be able to help you make sure you keep your future filing up to date, with fiscal and legal matters, maybe even with interest and penalties, but the debt issue can only be resolved through tax specialists. Tackle your tax debt problems head-on, in a responsible and organized manner through a free consult today. Part of the process of getting out of tax debt is making sure you create new habits so that you can’t fall into the same patterns.

Financing

The most easily implementable solution for small tax debts is to finance your debts. One option is to repay the CRA monthly. If this is not possible, another option is to pay the terms of a low line of credit, loan or mortgage. Always consult with financial professionals before deciding on financing. Our licensed professionals can help review your outstanding debt and help you figure out the course of action suited to you.

There you have it- a comprehensive guide on strategies to resolve tax debt. Financial difficulties are hard to deal with, and our debt specialists are here for you. We have years of experience providing dedicated service to clients and can advise you on all the different ways to deal with your situation.

To learn more about resolving your tax debt, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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4 Reasons You Need a Licensed Insolvency Trustee if You Are in Debt

Posted by in Bankruptcy
5
Feb 2021

Bankruptcy is trading your non-exempt assets or ‘what you own’ in return for your debts being forgiven. It is a common financial trouble that many find themselves in and can be challenging to go through.

4 reasons you need a licensed insolvency trustee if you are in debt

If loans or debts weigh you down, it can be confusing to figure out how to handle your situation in the most straightforward and responsible manner. The smartest solution for insolvency problems is to refer to a Licensed Insolvency Trustee.

A Licensed Insolvency trustee is an individual who is licensed to administer proposals and bankruptcies in Canada. Following the Bankruptcy and Insolvency Act, licenses are distributed via the Office of the Superintendent of Bankruptcy.

The majority of Canadian insolvency laws have been written in a way that allows for individuals to file for personal bankruptcy, rather than following elaborate legal procedure and Court mandates, as in other countries.

This is where a trustee comes in. Licensed Insolvency Trustees in Toronto help file any bankruptcy claims (without involving the court in most cases) and are experienced and educated in the field. Not only are trustees there for consultations, but they are also trusted professionals who will explain all manner of debt-relief options, in addition to bankruptcy.

Trustees aid you in the process from start to finish- from deciding to file and collecting the documentation to communicating with your creditors. This is helpful, as every case is different and should be tailored to individual needs.

Below are the four reasons you need to consult with a bankruptcy trustee for your financial burdens:

1. A bankruptcy trustee is there to assist you in working with your creditors.

Licensed Insolvency Trustees are parties that work on behalf of the creditors, and are licensed by the federal government to administrate a bankruptcy or proposal. They offer simple guidance and administrate the insolvency process efficiently and correctly. They must ensure that all parties comply with their duties and responsibilities and that legal procedures are followed.

In Canada, insolvency issues are met in court only if the case is contentious, if duties are not completed, or if the discharge is opposed. An Insolvency Trustee can execute the process without you having to attend court if everything goes smoothly.

2. A bankruptcy trustee is a licensed specialist

Trustees have undergone extensive training and are bankruptcy and insolvency specialists. Not only do they have the required knowledge to advise you on a range of solutions, but they are also the only ones with the license to execute these solutions.

Do not confuse a Licensed Insolvency Trustee with a ‘debt consultant,’ who advises you on dealing with debts and then refers you to a licensed professional. Most trustees help you sort out your financial problems in addition to executing the insolvency process. There is no need to pay a referral fee to see a trustee in Canada and they are required to post on their listings or ads that they are Licensed Insolvency Trustees so that they are easily identifiable.

3. A bankruptcy trustee completes the process from start to finish

Trustees are there to help you understand your options, review and advise you, as well as prepare the paperwork. First a first time bankrupt the process is usually 9 or 21 months if everything goes smoothly, but bankruptcy trustees aid you in the process from start to finish.

Here are some of the responsibilities of a trustee:

Consulting

Trustees will assess your debt and advise you on all the alternatives available to you in your situation. Once you decide to go ahead with a particular course of action, trustees will begin work on getting the process started.

Compiling Documentation and Paperwork

A Trustee’s office will always be available to answer any questions you may have. After reviewing the information in great detail, the bankruptcy documents are signed. Trustees then coordinate with the Office of the Superintendent of Bankruptcy, which indicates the bankruptcy process. Bankruptcy forms are electronically filed at the Office, and you will be officially registered.

Settlement and Administration

In this stage of the process, trustees will notify your creditors that you have entered into a Bankruptcy or a Proposal along with the particulars of the situation. They will mail over any documentation. This will drastically reduce any calls from creditors demanding payment as once notified they are required to deal with your trustee.

Reviewing

Trustees also review all your assets. It is a common misconception that you have to give up everything you own when filing for bankruptcy. Trustees will assess your assets and decide which ones to turn over. Simple clothing, furniture and vehicles are some of the many items that are considered exempt. For non-exempt assets Trustees work to obtain a fair value for your assets and divide any money amongst your creditors.

Counselling

When filing for bankruptcy, it is mandated that you must perform specific duties. That includes items such as; giving the trustee your credit cards, attending meetings if the creditors want one, and answering questions that the government may ask (although this happens rarely). Insolvency trustees will outline all these duties so you can complete them, as well as the 2 required credit counselling sessions. These sessions will help you review the causes of your bankruptcy, your budgeting goal for the future, and budgeting for a better future. They are meant to set you on a good path for when you are finished the bankruptcy process.

4. A bankruptcy trustee can offer free consultations

The sole objective of trustees is to help you deal with your debts and financial difficulties. Consultations are offered free, with no obligations. Setting up a quick consult will help you figure out the courses of action available to you without having to make a decision. All our trustees are experienced and knowledgeable and can provide specific options to fit your needs.

Those are the four reasons you need a Licensed Insolvency Trustee. We understand the stress financial burdens lead to and are here to help. Our office is dedicated to helping individuals, and our years of experience in the field make us authority figures on all matters related to insolvency.

To learn more about hiring a Licensed Insolvency Trustee to deal with your bankruptcy or proposal, call Kevin Thatcher & Associates at 1-866-702-9801 or contact us here.

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5 Tips to Creating a Debt Repayment Plan

Posted by in Debt
16
Jan 2021

Whether you are over your head in credit card debt or several months behind in paying your bills, it can be overwhelming. Keeping track of multiple creditors and making many monthly payments is difficult, especially if you don’t feel like you are getting anywhere. You may not be able to see a way out. However, it doesn’t have to be like that. There are several options open to Canadians to find debt relief, including creating a debt repayment or management plan with the help of a financial professional.

5 Tips to Creating a Debt Repayment Plan

What Is a Debt Repayment Plan?

Financial professionals often help clients create a realistic debt repayment plan that involves accumulating all the debt into one lump sum. This can help borrowers reduce the amount they spend on interest, and can also bring down your monthly payments. It is important to know that this is not a plan that reduces what you owe to creditors, but rather a strategy to help you pay back every cent you owe. Thus, you submit your payment to your financial professional who, in turn, distributes it to your creditors on your behalf. A debt repayment plan usually lasts for 5 years, after which you should have paid off everything you owe.

Benefits of a Debt Repayment Plan

There are many good reasons that lead Canadians to create a debt repayment plan, such as:

  • One payment. A repayment plan lumps all your debt into one single monthly payment. This can relieve a lot of stress because you won’t have to keep track of multiple creditors each month.
  • Lower interest rates. Financial professionals, such as a Licensed Insolvency Trustee, can often get you lower interest rates or have them frozen. So, you are spending less on your debt overall. A consumer proposal stops the interest and gives you a set amount to work towards.
  • Freedom from debt. Having a structured plan to pay off your debt can help you get there faster. It will also give you a timeline for being debt free.
  • Support. A financial professional can offer you support and advice that can help you break bad spending and borrowing habits. So, once you become debt free, you can stay that way.

How to Create a Debt Repayment Plan

Creating a debt repayment plan can be done in a few easy steps, including:

  1. Contact a financial professional. Set up an appointment for your first meeting. Ensure that the profession is qualified. Licensed Insolvency Trustees are licensed by the Federal Government but there are lots of companies who are not and they could end up taking your money and not paying down creditors, so choose carefully.
  2. Assessment. The financial professional will discuss your options with you and help you make the best decision for your situation.
  3. Create a plan. You and your financial professional, a Licensed Insolvency Trustee, will need to discuss what you can afford to pay each month towards your debt. You’ll also need to consider if your creditors will agree with a debt repayment plan.
  4. Approach creditors. Once your financial professional has a plan in place. Depending on the path you choose (such as a consumer proposal) a trustee will notify your creditors on your behalf. They will help you work out a settlement that the creditor can agree to.
  5. Start paying off your debt. After your creditors have agreed to a consolidation, such as a consumer proposal, you can start making your monthly payments to your trustee. They will ensure that the money is disbursed according to the plan.

Tips for Creating a Debt Repayment Plan

To get out of debt you’ll need a plan. It is important to be realistic and create a timeline that you can stick to. You may also want to talk to a professional about your debt relief options, including consolidating your debt. Here are some tips for creating a debt repayment plan that is right for you:

  1. Talk to an Insolvency professional. Talk to a trustee about all your options including filing a consumer proposal or a bankruptcy. They will have some great information and be able to explain all your options while answering a multitude of questions.
  2. Use the avalanche method. In this approach, you pay as much money as possible on the debt with the highest interest rates, while still paying the minimum on your other debts. Once the debt with the highest interest rates has been paid off, you roll that payment into one on the debt with the second highest interest rates. Once that one has been paid off, you put the payment towards the debt with the next highest interest rates and so on, until you have paid everything off.
  3. Alternatively, try the snowball method of debt repayment. With this approach, you pay as much as you can afford to on the loan with the lowest amount owing. Again, you continue to pay the minimum on your other debts. Once you have paid off the debt with the least amount owing, you roll the payment into the debt with the next smallest balance owing and so on.
  4. Take out a debt consolidation loan. Banks and financial institutions offer debt consolidation loans that enable you to borrow enough to pay off your debt. Then, you only have to focus on paying down the consolidation loan.
  5. Create a budget. It may sound boring, but a budget can help you keep your spending under control. It is essential to gain a full understanding of your financial situation. However, when you do make a budget, it is just as important to stick to it. So, don’t forget to add a little extra wiggle room for emergencies and unusual expenses.
  6. Take a class. While you are paying off your debt, it is also a good idea to develop new money habits. There are many workshops that you can find that will help you learn to budget, control your spending, save money, make wise investments, and even find cost-saving ideas.

No matter how much money you owe or who you owe it to, tackling debt can be a challenge. It is easy to become discouraged when your monthly payments don’t seem to make a dent in your debt. Moreover, the time and energy you invest to keep track of multiple payments can leave you exhausted at the end of the month. If you find yourself in an overwhelming debt situation, understand that you have options that can help you get out of debt and start living a debt-free life.

If you are interested in learning more about debt repayment plans, call Kevin Thatcher & Associates at 1-888-702-9801 or contact us here.

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What to Do if Your Business Needs Debt Consolidation

Posted by in Debt Consolidation
1
Jan 2021

Canadian debt levels are on the rise again according to Statistics Canada. Recent numbers show that the average Canadian owes $1.71 for every dollar they spend. Things don’t look much better for Canadian businesses. About 44 percent of businesses say they have reached their borrowing limit. The average business borrowed $110,000 just to survive the pandemic.

What to Do if Your Business Needs Debt Consolidation

In this climate, it is easy to see how businesses are looking for some debt relief. One of the best ways to get that relief is by consolidating debt into a lump sum. This allows companies to reduce the interest they pay, simplify the paying process, and pull themselves out of debt without hurting their credit rating or reputation. It can also lower the monthly sum that they pay each month.

What Is a Business Debt Consolidation Loan?

In a business debt consolidation scenario, you take out a loan from a bank or financial institution that will enable you to pay off all your other debt. It can cover other loans, credit card debt, and overdue bills. Essentially, you are borrowing a large sum of money to pay off all the small debts you owe and place them under one, single loan. Then, you’ll make monthly payments to your consolidation loan until it has been paid in full. It is one of the best options for people and businesses looking to get out of a risky financial situation.

Benefits of a Business Consolidation Loan

For companies that are in serious debt, a consolidation loan has several benefits, including:

  • A single monthly payment rather than several different ones.
  • Consolidation loans often come with a lower interest rate, which can save money over time.
  • You’ll have a set amount of time to pay off your debt. So, you can count on being debt-free in two to five years.
  • The fees that most lenders charge for a consolidation loan are reasonable.
  • You’ll stop accruing more debt while trying to get out of it.

Drawbacks of a Business Debt Consolidation Loan

While there are several advantages to use a debt consolidation loan for relief, there are some drawbacks, including:

  • You may be required to put down some collateral or security for the loan.
  • If your business doesn’t have a good credit score, it may be difficult to find a lender willing to work with you.
  • Interest rates can still be higher than other loan options.
  • If you don’t have collateral, these unsecured loans can have considerably high interest rates. While most lenders don’t approve these types of loans often, if your business has a high net worth and a strong credit score, then you might be eligible.
  • Unless you are willing to change your spending and budget habits, a consolidation loan won’t solve the problem for the long term.

Finding the Right Consolidation Loan

When it comes to finding the right business consolidation loan that is right for you, there are several things to consider, including:

  • Loan amount. You’ll need to find a lender who offers you enough money to cover all your debts.
  • Fees. Be aware of what fees you’ll be expected to pay for the duration of the loan.
  • APR. This is the annual percentage rate. It will dictate how much interest you pay each year.

Remember that even if you find a loan with a low interest rate, if you are paying a lot of fees, it still won’t be the best business decision.

Other things that you should think about before you apply for a business consolidation loan include how much you owe. Many businesses use credit cards and loans to cover costs like equipment and supplies. However, if you’ve hit a slump in your sales and are unable to build enough revenue to keep up with your debt payments, it can start to hurt your business in different ways. You may find the interest rates rising, your businesses’ credit rating dropping, and you’ll also run the risk of bankruptcy. Before making any decisions that will impact your business long term you may want to discuss your options with a Licensed Insolvency Trustee.

It is also important to consider the type of debt consolidation that is right for your business. Along with an unsecured loan, you could consider a credit card balance transfer, a home equity loan, or seek the help of a debt management program.

Applying for a Business Debt Consolidation Loan

If you are considering applying for a business debt consolidation loan, it is a good idea to talk to a professional first. The reality is that although they can sound like a good option, debt consolidation will not be the best option for all businesses. The amount of money you owe, the type of debt you owe, and the reason for taking out the loan are key in knowing whether a debt consolidation loan is right for your business.

There are a few steps involved in the application process. They are:

  1. Research loans and lenders to find the one with the right terms for your business. Find out what the fees are, how strict their policies are, and compare interest rates.
  2. Once you decide on the loan and lender that is right for you, fill in all the application forms and submit them.
  3. Wait for approval from the bank or financial institution.
  4. Once approved, get access to your money and pay off all your creditors.
  5. Set up a monthly payment schedule for your loan and stick to it.
  6. Pay off the loan and become debt-free.

It is important to have a plan and talk to a professional about your options and whether or not a business consolidation loan is right for you. If you are interested in learning more about consolidating your business debt, call Kevin Thatcher & Associates at 1-888-702-9801 or contact us here.

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Eight Things to Know Before You File for Bankruptcy

Posted by in Bankruptcy
15
Dec 2020

Many view filing for bankruptcy as a last resort — and it is. Bankruptcy is a pivotal debt relief solution that becomes necessary when you cannot stay on top of your bills due to unemployment, bereavement, and other extreme life events.

Eight Things to Know Before You File for Bankruptcy

Bankruptcy offers debt relief to prevent legal action from being enforced by creditors while ensuring that your obligations are settled at a healthy, manageable pace. Getting out of insolvency through bankruptcy is not merely an easy reset — it requires examining all other alternatives, such as debt consolidation, or a consumer proposal, before making the best decision for your situation. Even then, it’s important to remember that a bankruptcy filing is a legal agreement: you will have ongoing obligations to meet to restore your financial health.

What to Do When Filing for Bankruptcy

Are you on the verge of bankruptcy and considering filing? Here is everything you need to know before filing for bankruptcy in Toronto:

1. You Need to Consult a Licensed Insolvency Trustee

When you fall behind on regular payments, creditors may already think that your financial situation has shifted drastically. However, until you formally declare bankruptcy, you will continue to owe these amounts and remain liable for legal action and enforcement.

To initiate a bankruptcy filing in Ontario, you first need to consult with a Licensed Insolvency Trustee. They are federally regulated professionals tasked with insolvency procedures charged with examining consumers’ financial situations, debt, and potential courses of action. A trustee will review your financial situation with you, discuss your options for debt relief, and walk through the process of declaring bankruptcy.

During your meeting, you will need a list of your debts and obligations, including their respective amounts and creditors. Also, present your, current income, and expenses to provide a clear picture of your financial situation and establish why bankruptcy or an alternative debt relief solution is necessary.

2. Only a Licensed Insolvency Trustee Can File a Bankruptcy

A free consultation or meeting with a trustee can help you learn everything you need to do or prepare for a bankruptcy filing. More importantly, you cannot file one on your own — only a Licensed Insolvency Trustee can administer a bankruptcy filing in Ontario. Make sure to contact your trustee following the meeting and pay any required deposit before moving forward.

3. You Need to Prepare Bankruptcy Documents

You will work with your trustee to prepare necessary documents that describe your financial situation and justify a bankruptcy filing. Make sure to be honest and accurate to be discharged from your debt.

  • Personal information such as your name, address, date of birth.
  • Assessment Certificate: this document certifies that you have met with a Licensed Insolvency Trustee, have been made aware of all of your debt relief options, and choose to move forward with a bankruptcy filing.
  • Monthly Income and Expense Statement: Form 65, which details your monthly budget for living expenses.
  • Statement of Affairs: known as Form 79, this lists all of your current assets (i.e. bank accounts, insurance policies, vehicles, and other property) and liabilities with corresponding amounts owing and respective creditors.
  • Assignment for the General Benefit of Creditors: the official declaration for declaring bankruptcy in Ontario, which assigns your non-exempt property to the Trustee.

4. Your Trustee Will Communicate With Creditors and Collections Stop

Your Trustee is the only person legally allowed to file bankruptcy paperwork on your behalf through a centralized electronic filing system in Canada. Once your documents are submitted, your Trustee will receive a Certificate of Appointment, which officially marks the beginning of the bankruptcy period. Following this, your creditors will be notified and instructed to communicate with the Trustee.

The Certificate of Appointment also enacts the Stay of Proceedings — this prohibits creditors from engaging in any debt collection, including charging interest, sending collection agents, garnishing wages, and enforcing any legal action to collect the amount owing.

5. Filing for Bankruptcy Does Not Cancel Your Debts

A bankruptcy declaration is not a “get out of jail free card.” Bankruptcy prevents legal action and allows you to follow a set of procedures that allow you to be discharged and move forward debt free.

When you file for bankruptcy, you will be subject to ongoing obligations. These include dealing with your non-exempt assets by the Trustee, with any resulting funds added to the bankruptcy estate. The amount will be distributed to your creditors in full or partial payment of your debt.

An essential step is surrendering your credit cards to the Trustee for cancellation. You will also need to demonstrate healthy financial habits moving forward; this starts with credit counselling sessions where you will learn strategies for managing your finances and avoiding debt in the future.

6. You Need to Make Bankruptcy Payments

The trustee has a cost to administrate your bankruptcy. This amount will be outlined before you file and your amount owing will be paid through monthly payments.There may also be payments determined based on your income which the trustee will also review prior to your filing

These surplus income payments are calculated based on your monthly income and expense statements, which account for your household’s living expenses. For the entire duration of your bankruptcy period, your Trustee will manage all of your contributions to the bankruptcy estate and administer these funds for distribution to your creditors.

Your Trustee will also file your annual tax return. They will file a pre-bankruptcy return for the current year up until the period of bankruptcy declaration, and then a post-bankruptcy return for the remainder of the period. .

7. You Will Be Discharged From Bankruptcy Upon Completion of Your Duties

It may provide you with some relief to know that you won’t remain bankrupt forever. You will be discharged from bankruptcy and released from debts; essentially, you will be able to start fresh.

Note, however, that you can only be discharged from bankruptcy once you have fulfilled your obligations, such that neither your creditors nor the Trustee object. You may qualify for an automatic discharge after nine months if it is your first time declaring bankruptcy and you do not have any surplus income. For second filings, eligibility for automatic release begins after 24 months.

If you are not eligible, the Trustee will have to petition the courts to discharge you, wherein you will undergo a hearing to present the facts of your bankruptcy case. Afterwards, you may be discharged or required to take additional steps as determined by the court before you can apply to the Registrar in Bankruptcy.

8. There Are Alternative Options if You Cannot Fulfill Bankruptcy Obligations

The fact is, you cannot be discharged from bankruptcy unless your obligations are fulfilled, and you have fulfilled your bankruptcy duties. However, if your financial situation continues to deteriorate even after your filing, you can work with your Trustee to make arrangements to complete your bankruptcy duties.

This can be helpful if your income changes such that you cannot afford the monthly surplus income payments to settle your obligations. A Trustee may be able to negotiate an extension of your bankruptcy terms to ensure fulfillment and eventual discharge.

For more information about filing for bankruptcy in Toronto, call Kevin Thatcher & Associates at 1-866-702-9801, or contact us here.

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Bankruptcy or Consumer Proposal: Which Is Right for Me?

Posted by in Bankruptcy
2
Dec 2020

As Canadians grapple with financial instability, many are forced to re-examine their finances to ensure their survival and secure their future amidst this turmoil.

Bankruptcy or Consumer Proposal: Which Is Right for Me?

Unemployment benefits and social assistance, lines of credit, and emergency savings are designed to assist with precarious financial situations. Despite these, many people in Ontario continue to risk unemployment, lose their homes, run the risk of bankruptcy, and require consumer proposals to navigate their financial situation.

If you find yourself in a state of insolvency, it’s important to remember that you have options — and these can make all the difference in helping you recover and return to a solid financial footing.

The question is, which insolvency option is right for you? Learn the difference between personal bankruptcy and consumer proposals, and make an informed choice that secures your financial future:

Bankruptcy vs. Consumer Proposal: Quick Facts

Some debt is normal: whether it’s your monthly credit card statement, car payments, or a mortgage, it is unavoidable but manageable with regular payments as long as your income is stable and supports your expenses.

Debt becomes a problem — and requires relief through insolvency options — when your financial situation changes so drastically, so much that you can no longer afford these regular payments. Unfortunately, because debt is an obligation, you may face legal action enforced by creditors.

Debt relief options like bankruptcy and consumer proposals exist to help you avoid these dire legal consequences, offer a “financial reset,” and a path back towards solvency. These two differ in how they handle your debt.

A bankruptcy filing requires liquidating or surrendering some non-exempt assets to creditors to eliminate debts. In contrast, a consumer proposal allows you to keep your assets with lower monthly payments.

A Closer Look at Filing for Bankruptcy

In simplest terms, going bankrupt means being unable to afford financial obligations, including debt payments and even regular living expenses.

Short of facing legal action enforced by creditors, a bankruptcy filing presents you with a tradeoff: deal with the value of your non-exempt assets for creditors to relieve you of your debts. This legal process is managed by a Licensed Insolvency Trustee who monitors your compliance with bankruptcy duties.

Aside from dealing with your non-exempt assets, a bankruptcy filing requires attending crediting counselling sessions and filing monthly reports on your income and expenses. These are designed to help you get a handle on your finances and ensure that your remaining obligations are settled through residual monthly payments proportionate to your income. Once these duties are complete, you could be discharged from bankruptcy within 9 to 21 months.

What Is a Consumer Proposal?

Consumer proposals are an alternative debt relief solution. This is a formal agreement that you enter with your creditors, and like bankruptcy, is managed by a Licensed Insolvency Trustee who will help you negotiate the terms of debt repayments.

When you enter into a consumer proposal, you will be required to pay part or all of your unsecured debt with a value of less than $250,000 at a reduced rate over a specified period.

A consumer proposal guarantees that your debts are settled at a rate that you can handle. This agreement protects you from debt collectors and wage garnishments, especially as interest stops accumulating upon filing.

Consumer Proposal vs. Bankruptcy — Which Is Better?

Both debt relief solutions are designed to help you overcome insolvency and return to financial security. However, they differ in how they handle debt relief and settlement, especially in terms of asset repossession or surrender and fixed payments.

Bankruptcy filings are much more severe than consumer proposals. Aside from requiring asset surrender, monthly bankruptcy payments are determined by your income, which puts you at a disadvantage if your income is expected to increase.

Consumer proposals do not require asset surrender and instead settle outstanding debts through predictable, fixed payments. Further, while a bankruptcy stays on your financial record for six years and impacts your credit score significantly, a consumer proposal only affects your credit rating for three years, to a lesser extent.

Monthly Reporting and Payments

Both debt relief solutions require the fulfillment of monthly duties. In the case of bankruptcy, your monthly reporting and responsibilities consist of payments proportionate to your income.

You will also be required to submit a monthly budget for expenses and provide your Licensed Insolvency Trustee with a copy of your pay stubs. These financial documents will establish the payment amount and determine whether you need to make surplus income payments.

Consumer proposals are a lot less stringent and reactive to changes in your financial situation. Unlike a bankruptcy filing, there are no monthly reporting tasks, and you do not need to inform the trustee of changes to your income.

Monthly payments are also easier to accommodate since these remain fixed for the duration of the agreement and do not change when your financial situation shifts. Essentially, consumer proposals are more affordable in the long run.

Credit Score While in Debt Relief

A bankruptcy filing severely impacts your credit score — it indicates that you are a bad loanee, so much that you were previously unable to keep up with debt obligations and require rehabilitation to return to solvency. When you claim bankruptcy, you will be assigned an R9 credit score — the lowest rating — and will remain on your credit history for 7 to 14 years.

In contrast, consumer proposals are a lot less severe, meriting a slightly better R7 rating that indicates you have entered into a fixed repayment settlement. This rating only remains for three years after you complete payments or six years after you file.

Filing Taxes While in Bankruptcy or Consumer Proposal

Since your tax information provides a snapshot of your financial situation in a year, significant developments like a bankruptcy filing or consumer proposal need to be documented.

However, when you file for bankruptcy in Ontario, you will lose all eligible tax refunds or credits you were owed since these are considered part of your assets. In contrast, a consumer proposal allows you to claim tax refunds and credits.

Bankruptcy vs. Consumer Proposal: Choose the Best Option

Deciding between these two debt relief solutions comes down to your specific financial situation. While consumer proposals allow you to retain your assets, and require fixed payments, they appear to favour many people with assets.

However, the best choice is not clear-cut: a Licensed Insolvency Trustee can examine your case and help determine the most viable option based on your surplus income, assets owned, and the total amount of debt owed.

Declaring bankruptcy may or may not be the best option for you as it comes at the cost of your non-exempt assets and eligible tax credits. In contrast, the terms of a consumer proposal are easier to manage and are based on what you can afford to pay. It’s essential to determine your eligibility and consult with a Licensed Insolvency Trustee to choose between the two.

For more information about consumer proposals and declaring bankruptcy, call Kevin Thatcher & Associates at 1-866-702-9801, or contact us here.

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What Happens to Surplus Income During Bankruptcy?

Posted by in Bankruptcy
20
Nov 2020

The idea of bankruptcy can be scary if you have been experiencing ongoing financial challenges. However, if all other solutions have failed, it could prove to be the best decision you ever make.

What happens to surplus income during bankruptcy?

The decision to file for bankruptcy is never easy. When you work with a Licensed Insolvency Trustee, we will make every effort to find ways to help you pay off debt and make your month to month money struggles more manageable.

Once we’ve determined bankruptcy makes sense for a client, their next question is usually, “What happens to surplus income during the bankruptcy process?” Here we explain surplus income and how it is handled.

What is surplus income?

Surplus income is one of the concepts many people filing for bankruptcy have difficulty wrapping their heads around. Bankruptcy rules are designed to help people eliminate debt and protect the creditors’ rights who loaned you the money. That’s a delicate balancing act that requires a fair solution, which is where the concept of surplus income comes in.

Surplus income uses three principles:

  • The more someone who files for bankruptcy makes (also dependent on certain other factors), the more they have to pay into their bankruptcy to benefit their creditors.
  • The government rules on income allow those who file for bankruptcy to keep enough of their income to cover general living expenses, referred to as a ‘surplus income limit’ or threshold and then they must give a portion of their income over this amount to the bankruptcy for a set period.

The surplus income limit is set by the Office of the Superintendent of Bankruptcy each year. It is based on family size, with those with larger families getting more of their surplus income because they need more to survive.

Is my Surplus Income Limit fixed?

No. The government understands inflation, and therefore, surplus income limits increase each year. It is also designed to keep people from facing other financial struggles. For example, if you earned $100,000 a year and filed for bankruptcy, you will pay more than someone who earns $20,000 per year. Adding to the equation, someone with three kids can keep more of their surplus income than a single person, so they have enough to cover living expenses.

How is surplus income tracked?

Once bankrupt, you will have to submit monthly budgets and proof of earnings. Half of any money you earn over the limit will go to your creditors. Some other things to keep in mind:

  1. Net income

    Surplus income is based on your net income, meaning the amount of money you receive after your paycheque deductions like taxes, CPP, EI, and union dues. However, this does not include deductions such as non-mandatory RRSP contributions or Canada Savings Bond purchases. These are included in the income used to calculate your surplus income.

  2. All cash inflows

    Your surplus income is not only based on the money you earn at work. It comprises all forms of cash inflows that you receive, including child or spousal support, CPP, OAS, pensions, and more. It’s best to report any income you receive to avoid misrepresenting your income. Your trustee will tell you if you mention something that isn’t included.

  3. Non-discretionary expenses

    Non-Discretionary expenses are mandatory life expenses that the government rules will give you extra credit for. These are expenses such as; special medical expenses, child support payments, day care expenses, and some others. If you have these expenses and give the trustee monthly proof of them, they will reduce your required surplus income payments.

Again, it is important to share everything with your trustee to ensure your situation and deductibles are considered.

How is surplus income calculated for married couples?

Married couples who file a bankruptcy take their combined average monthly net earnings to determine their surplus income limit. It is then based on whether you have kids or not and the payment will be split by each’s percentage of the household income. The same contribution applies to 50% for any surplus.

How long do I have to pay the surplus income penalty?

It depends on whether this is your first bankruptcy or not:

  1. First-time bankruptcies

    At the end of the first six or seven months, your trustee will average out your income. If it is over the limit set by the government, your bankruptcy is extended for 12 months. A bankruptcy lasts a minimum 9 months unless you are over the earnings limit. In this case, you are bankrupt for 21 months.

  2. Second-time bankruptcies

    At the end of 22 months, your trustee will average out your income. If it’s over the limit set by the government, your bankruptcy is extended for 12 months. A Bankruptcy for a second time bankrupt lasts for a minimum of 24 months unless you are over the earnings limit. In this case, you are bankrupt for 36 months.

  3. Third bankruptcy

    In this case, there is no set discharge date. Your file will have to go to bankruptcy court where they will decide on your discharge.

Just keep in mind, if you declare bankruptcy once, the best way to avoid filing again is to listen to the advice provided by your financial counsellors. They will help get you back on track, so you avoid getting into debt again.

How do I ensure I track my surplus income accurately?

There is a reason you work with a trustee when filing for bankruptcy. Our job is to work on your behalf to make sure you adhere to bankruptcy rules. We are in your corner and will calculate your surplus income for you. We will explain your limit to be more efficient in managing your living costs and understanding the cost of your bankruptcy.

Can I avoid paying surplus income?

Yes and no. If you do file for bankruptcy, you are on the hook for your surplus income. However, if you discuss your finances with a trustee first, we might find other options that may work better, like a consumer proposal.

For more information about what happens to your surplus income during bankruptcy, call Kevin Thatcher at 1-866-719-8547 or contact us here to schedule a free consultation.

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