• Every day we provide debt advice and guidance to consumers with a range of needs, and a common thread is that “knowing is not owing” – people need to have the facts so they can make informed decisions about their unique situation.
• Even if you don’t consider your debt a problem, it’s important to understand your rights and responsibilities – owing money is stressful, there are many ins and outs when it comes to debt, and unfortunately what you don’t know can hurt you financially.

Read on as we break down 10 of the most common consumer debt myths and misconceptions. 

Myths About Debt You Owe

Myth: Creditors Can Always Sue You Over a Debt Owed

Fact: Canadian law sets out a statute of limitations on debt.

In BC, the Limitations Act caps the period of time a creditor has to take legal action against you (i.e. sue you) for a debt you owe. What this essentially means is that while the debt does remain payable, if it has been two years or more since you made a payment or acknowledged the debt in writing, then your creditor may not have further recourse to collect the debt from you, beyond putting notations on your credit history and sending you mail.

Myth: Co-signing Debt Makes You Responsible for Half

Fact: By co-signing a debt, you become equally responsible for repaying 100% of the unpaid balance to the lender.

When you co-sign a debt, if the original borrower doesn’t pay back the debt the lender can demand that anyone listed in the loan or agreement (i.e. the co-signer/co-borrower) repay the entire balance – not half. This type of liability is known as ‘joint and several’.

• Read your applications and lending agreements carefully to understand the terms of borrowing and who is responsible for what – these can change depending on the lender and whether they are considering an application/account for “additional cardholders” or “co-borrowers/co-applicants.” Always check the fine print!

Myth: Marrying Someone Makes You Responsible for Paying Their Debt

Fact: One spouse is not responsible for repaying the debts of the other spouse solely by virtue of marriage or cohabitation.

You are responsible for repaying debts you’ve co-signed for or taken on jointly (as discussed above), or debts triggered as marital debts by the act of separation under the Family Law Act. You cannot be suddenly made liable for a debt owed solely by your spouse just because you got married. Essentially, there is no way to “marry into” a debt.

Am I Responsible for my Spouse’s Debts? Learn More

Myth: You Should Always Buy Insurance Protection

Fact: Credit card balance protection insurance often isn’t “worth” its cost.

Some banks are quick to sell and aggressively promote various insurance products, and while some are worthwhile considerations, like life insurance for a young family, others provide little value in most circumstances – one of these Licensed Insolvency Trustees often caution against is ‘balance protection insurance’.

• Even if you don’t carry a balance each month you pay fees into this product, which can be as high as 1% of the purchases on the card. Over the course of one year, this could take a 20% credit card interest rate to more than 32%.
• The other issue is that in most instances where you’d expect the insurance to help, it does very little. For example, if you lose your job, it may cover the minimum payments for the period you are unemployed – but very little of these payments will reduce the balance you owe on the card.

Myth: Incorporating Your Business Fully Protects Owners Personally

Fact: While corporations may protect owners from their debts to some degree, there is still a personal liability created for certain debts that cannot be avoided.

This personal liability can include debts such as:

• Wages; GST and payroll remittances
• Debts you have signed a personal guarantee for

Many business owners are aware that essentially any debts a sole proprietor or partnership business accumulate are payable by their owners, since there is no distinction between business and owner, but unfortunately, some business owners have a false sense of security when it comes to protecting their personal assets and liabilities if they incorporate their business.

Myths About Managing Debt

Myth: There’s No Forgiveness or Renegotiation Option for Government Debts

Fact: You can have government debts reduced and cleared by filing a Consumer Proposal (or forgiven through bankruptcy).

A Consumer Proposal is a legal debt consolidation remedy that can be used to stop all interest, reduce amounts owing by up to 50-80%, and work out a payment plan for what you can afford to repay. Government debts like taxes, business GST, student loans, benefit overpayments and more – plus debts like credit cards, payday loans, lines of credit, etc. can all be dealt with using this powerful tool, which will also halt a wage seizure or bank account freeze.

Myth: Minimum Payments on Credit Cards are Enough

Fact: Making just minimum monthly payments may keep your account in good standing, but it’s not enough to get debt paid off without incurring considerable interest costs.

Many individuals fall into a trap of just making the minimum payments on their credit cards and assuming that they are making progress towards getting their debt paid off. The reality is that at 20% interest, making minimum monthly payments on a $10,000 debt could take more than 25 years to clear and will cost more than $12,000 in additional – and avoidable –  interest charges.

• Banks must disclose exactly how long it will take to pay off a debt if you make only the minimum payments, so you can see this breakdown on your own bill.
• If you can only afford minimum payments each month, you very likely have a debt problem and should talk with a Licensed Insolvency Trustee as soon as possible.

Compare Your Debt Options

Enter your total amount of debt (excluding mortgage and car loan) and we’ll show you a list of options.

Myth: Your Credit Score is a Reliable Indicator of ‘Financial Health’

Fact: A credit score is essentially a numeric rating used by lenders to determine whether they will loan money, and at what cost.

Part of the problem with taking a ‘good’ credit score as an indication of financial and debt health is that habits that drive a high rating are often at odds with habits that lead to financial success. Since a credit rating mostly measures whether you pay your bills on time it considers nothing about whether those bills are too high or if you have any savings or assets at all.

Myth: Debt Consolidation Must be Done by Borrowing

Fact: You can consolidate your debt without borrowing or interest by making a Consumer Proposal.

Many people considering how to manage their debts believe their options amount to consolidation loans, credit counselling programs, or bankruptcy – but these are not your only options!

• Consumer Proposals are an effective debt solution that allows you to consolidate your debts, repaying what you can afford, with the unpaid balance being forgiven by your creditors.
• This consolidation option requires no borrowing and interest charges (such as a consolidation loan), nor require you to pay added professional fees (such as credit counselling).

Myth: Canada has Government-Sponsored Debt Relief Programs

Fact: The Canadian government does not offer grants or programs for personal debt repayment other than the options provided by a Licensed Insolvency Trustee.

The Canadian government does not have government grants or debt programs available, but it does regulate legitimate legal debt relief options that are available through Canada’s designated debt help professionals – Licensed Insolvency Trustees – namely Consumer Proposals (to consolidate and cut debt) and bankruptcy (to get debt forgiveness), as well as some student loan relief administered through Canada Student Loans.

Get Information and Advice About Your Debt and Debt Options 

The best and safest way to get accurate information about debt, and your debt options and resources, is to reach out directly to a Licensed Insolvency Trustee local to your province and ask to have a free consultation – you don’t need a referral to talk confidentially with us.

• Sands & Associates is available for help seven days a week and we have options for in-person appointments, as well as full support over the phone and online videos.
• In about 30 minutes you should have a clear understanding of your situation and next steps in the debt solution you decide best fits your needs. Knowing is not owing! 

Get solutions, support, and a debt-free plan that’s right for you.

The post Debunking Common Consumer Debt Myths appeared first on Sands & Associates.

• Virtually all your debts can be included in a Consumer Proposal, everything from credit cards to payday loans, outstanding taxes to student loans and more.
• Typically creditors will agree to accept repayment of 20-50% of your balance to consider the debt fully settled, and interest charges are automatically frozen.
• You’ll have up to five years to pay off the agreed amount of debt, usually via monthly payments.
  • For example, if you owe debts totalling $25,000 you might offer to pay $210 a month for three years (36 months), repaying a total of around $7,500 to cut your debt by 70%. The balance of the debt is legally eliminated at the end of the Proposal.

Filing a Consumer Proposal can be a great way to streamline your debt repayment, and despite being a legal solution, the process is generally straightforward. Read on to learn details around how a Consumer Proposal works, and some of the ways a Consumer Proposal does and doesn’t impact you.

Key Ways a Consumer Proposal Will Affect You 

A Consumer Proposal Provides Protection from Creditors

When your Consumer Proposal is filed it acts as a shield to protect you and your assets from your creditors. This Consumer Proposal effect is an especially welcome relief to anyone worried about overdue payments or outstanding accounts since a Consumer Proposal will:

• Stop creditors from contacting you for money, and stop all collection activities that may have been happening.
• Halt legal action creditors may have been taking against you.
• Immediately remove wage garnishments or account freezes (even from the government).

A Consumer Proposal Restructures Your Debt Payments

Because a Consumer Proposal will consolidate (and cut) virtually all your debts, rather than juggling multiple accounts and payments, you’ll have one simple (usually monthly) payment to make to your Licensed Insolvency Trustee.

• Since your debt may be cut by up to 50-80% with no interest charges or added fees, Consumer Proposals usually save people paying off debt a considerable amount of money and time.
• Most people opt to handle payments for ‘secured debts’ that are in good standing outside their Consumer Proposal, so normally a Consumer Proposal won’t include secured debt agreements you’ve decided to continue paying, such as your mortgage or vehicle financing.
  • Many clients find themselves in a much better position to continue to make payments on their home mortgage or car loan after they have significantly reduced their other consumer debts through a Consumer Proposal.

Book Your Free Consultation

A Consumer Proposal Temporarily Affects Your Credit Rating

Like other types of debt consolidation or settlement, filing a Consumer Proposal does temporarily reduce your credit score. Here’s what you should know:

• Your Consumer Proposal will be noted on your credit history for three years after the debts included in your Proposal are paid off – or – for six years from the date your Proposal started, whichever is soonest. This is often considerably less time than it would take you to pay off your debt on your own.
• You can seek new credit any time, even while your Proposal is active, and most people are able to get basic things like a credit card shortly after filing their Proposal.
  • Secured or prepaid cards can also be good alternatives to have the convenience of a credit card but enjoy the break from debt accounts.
    • Keep in mind that a secured card, rather than a prepaid card, will normally provide updates to credit bureaus to help you rebuild your credit after filing the Consumer Proposal.
  • If your mortgage comes up for renewal during your Consumer Proposal this shouldn’t be an issue, provided it is paid up to date.

Many people worry about whether consolidating their debt with a Consumer Proposal will have a long-term (or even permanent) impact on their credit score, but the reality is that the effect is generally far less severe than they fear, and for most people the benefits far outweigh the temporary inconvenience.

• It’s also important to know that despite a ‘good’ credit score, many people dealing with a debt problem can’t get help from their bank to deal with their debt, notwithstanding that they may have a high credit score and are not missing payments.

Key Ways a Consumer Proposal Will Not Affect You 

A Consumer Proposal Doesn’t Make Your Spouse Pay Your Debt

Filing a Consumer Proposal should not affect your spouse in any way unless they have co-signed or guaranteed debt together with you.

• Having a spouse or common-law partner does not on its own trigger a shared liability with the other spouse/partner, nor does it give your creditors recourse to ask them for payments, nor mean they must do a Consumer Proposal too.
• Unless you’ve given your creditor means to collect from both of you by taking on joint debt or triggered a division of “family debts” by separating or divorcing, your spouse isn’t responsible for repaying your debt.
• Your financial responsibilities are in fact so separate that where there is no co-signer, guarantor, or co-cardholder, it is possible for one spouse to file a Consumer Proposal without the other one being aware, as typically only creditors are notified of your Proposal.

Book Your Free Consultation

A Consumer Proposal Doesn’t Affect Your Employment

For most people a Consumer Proposal in no way affects their job and you can change jobs or switch careers at any point.

• Overall, the Consumer Proposal process is very private and in normal circumstances your employer is not notified about your Proposal unless your wages are being seized – this is because your Licensed Insolvency Trustee will contact your payroll department to halt the garnishment when your Proposal starts.
• If you still need reassurance that a Consumer Proposal won’t impact your employment, know that the federal Bankruptcy and Insolvency Act, which governs Consumer Proposals, specifically states “No employer shall dismiss, suspend, lay off or otherwise discipline a consumer debtor on the sole ground that a consumer proposal has been filed in respect of that consumer debtor.” (S. 66.36)
• Also, for business owners – you can be self-employed during a Consumer Proposal, including being the director of a corporation.

A Consumer Proposal Doesn’t Take Away Your Tax Refunds

A Consumer Proposal doesn’t impact how you file your tax returns or cause you to ‘lose’ your tax refund or other tax credits you may be eligible for, even if you included a prior income tax (and/or business GST) balance owing to Canada Revenue Agency in your Consumer Proposal.

• While your Consumer Proposal is active you’ll need to ensure your tax returns are filed up to date and that any balances owing from these new returns are paid.
• If you regularly owe money to Canada Revenue Agency a clause may be added to your Proposal that allows you to include the exact amount you owe for income taxes up to the date you start your Consumer Proposal, even if that tax return isn’t yet due.

Book Your Free Consultation

A Consumer Proposal Doesn’t Prevent Immigration Sponsorship 

If you have a Consumer Proposal you can still apply to sponsor someone to immigrate to Canada, bearing in mind that you should always refer to the Government of Canada for the latest rules and guidelines. This is an important distinction between Consumer Proposals and bankruptcy, as a person who has not yet been discharged from bankruptcy will need to wait until their bankruptcy is finished before making an application to sponsor immigration to Canada.

• Neither a Consumer Proposal nor bankruptcy prevent you from applying for citizenship in Canada, nor from leaving the country (for vacation or permanent relocation) – just be sure to keep your Trustee informed as to your address if you move before your Proposal or bankruptcy are complete.

Is a Consumer Proposal a Good Solution for Me? 

For people who owe debt totalling less than $250,000 (excluding their mortgage), and want to make their debt payments more manageable, a Consumer Proposal is one of the best debt consolidation options available.

If you’ve been wondering about a Consumer Proposal but worried about navigating any aspects of the process, be sure to talk with a Licensed Insolvency Trustee about your concerns. It’s vital that you have all the facts about how to deal with your debt and the opportunity to explore all your options together with a qualified professional.

• A Consumer Proposal can only be filed by working with a Licensed Insolvency Trustee. We are Canada’s only official debt help professionals and Licensed Insolvency Trustees alone are qualified and endorsed to help you make a Consumer Proposal.
• Consumer Proposals are a unique debt solution – they are not the same as bankruptcy, nor are they the same as credit counselling or other types of informal debt settlement plans.
• If you’ve been advised against a Consumer Proposal by anyone besides a Licensed Insolvency Trustee, it is recommended you contact a Licensed Insolvency Trustee for a second opinion.

You can connect directly with a Licensed Insolvency Trustee local to your province and ask to have a free, confidential consultation to talk about your situation and options.

• Sands & Associates serves all of BC and our Licensed Insolvency Trustees and Insolvency Estate Managers are available to talk with you seven days a week. In just half an hour we can help you better understand your situation and choose the debt-free plan that’s right for you.
• You’re welcome to talk with us confidentially over the phone, by online video, or in person at a local office near you – whatever you find most comfortable and convenient.

You are not alone in finding a way to move forward – we’re here for you with support and solutions.

Talk with a local Sands & Associates Licensed Insolvency Trustee today and find your best debt solution.

Book Your Free Consultation

The post How Does a Consumer Proposal Affect You? appeared first on Sands & Associates.

Where Your Credit Score Comes From

Your credit score is a constantly changing number (between 300 and 900, with 900 being the best) that is calculated based on your credit history, and you’ll gain or lose points depending on your actions.

• Credit scores are intended to help a lender decide whether they will offer you credit, how risky it may be to do so, and the borrowing terms they will offer you.
• Because Canada’s two credit bureaus have access to different information and use their own formulas to calculate your score, you probably won’t have the same rating with both agencies.

Credit bureaus don’t disclose the exact algorithms they use to calculate your score, but some of the factors from your credit history they use include:

• Payment history: This is the most important factor. Do you pay all your bills on time, every time?
  • Note that ‘non-credit’ accounts such as your cellphone plan and special accounts like your mortgage can provide information to credit bureaus. If you’re keeping your account paid up to date this may not offer you any benefit, but, if left unpaid, these accounts are likely to reflect negatively on your credit history and score.
• Credit usage: How much credit do you have, and what types of accounts? How much of your available credit are you using? Have you gone over your limit?
• Length of history: How established are your accounts?
• Credit seeking: How many ‘hard’ credit checks are noted in your report within the last three years? Have you been seeking a lot of credit in a short period of time?
  • Credit checks are categorized as ‘hard’ or ‘soft’ hits. Hard hits may refer to checks done as you apply for credit, and soft hits may happen when a business wants your report to update a record, or when you ask for a copy of your report.

By having a general idea as to what influences your credit score, you can understand some of the actions that you’ll want to take, and which to try to avoid.

Learn More About Credit Reports (and How and Why to Check Yours)

Common Causes of Low Credit Scores

By understanding that your credit score is largely influenced by your payment history, you can consider why your score might be low. Do any of the following scenarios sound familiar?

• Making payments late, not making the full payment required, or having a payment bounce.
• Going over your borrowing limit.
• Using a high proportion of your available credit, which lenders may view as risky (even when your payments are being made as required).
• Having unpaid accounts passed to collections.
• A lot of credit checks being done, which lenders often interpret as urgent credit seeking.
• Not having enough credit history established, or closing a longstanding account which results in losing the credit history, resulting in too little information for potential lenders to consider your credit use.

Difficulty in managing debts and payments may not be the only cause of a low credit score. On the contrary, steps you may take to keep control of your finances can cause a lower credit score, such as:

• Having minimal credit history, or only having one type of credit account: This means lenders have less credit history to consider in assessing your lendability.
• Closing a credit account you are no longer using: You will lose any positive payment and credit history associated with this account.

Can I Do Anything About my ‘Bad’ Credit?

Any time you don’t pay your debts as agreed your credit score will be impacted in some way, but, if you’ve had trouble with this, know that while positive information for active accounts can be kept on your credit report indefinitely – negative information does expire.

Timing for common ‘negative information’ to expire in BC is as follows, and this can vary depending on the province / territory and credit bureau:

• Late payments and NSFs both show for up to six years from the date reported (even if you pay the past-due balance).
• Collections accounts will be removed six years from the date of your last payment.
• Judgments from court action show for six years as well.
• Bankruptcy is only shown on your credit report temporarily, for just six years after you are discharged (released).
• Credit counselling plans show for two years after your debts included in the plan are paid off.
• A Consumer Proposal will show for only three years from the date you finish it, or six years from the date it was filed (whichever is soonest).

Fortunately, as your credit history is constantly being updated, you have opportunity to take the right steps in establishing a good payment history – the combination of a strong payment history and time are the main keys to a good credit score. People who have trouble making payments, experience debt collections or judgments, and even file for personal bankruptcy can and do move on to establish a fresh credit history sufficient for new mortgages, vehicle financing, credit cards, etc. often within a quicker timeframe than they thought possible.

Consumer Proposal VS. Credit Counselling – Understand the Key Differences

Tips to Improve Your Credit Score

To create a positive payment and credit history that will grow your credit score, aim for the following, and remember to give yourself time:

• Build an account history with consistently positive credit use:
  • Make your full payments as required on time – every single time – even if your account is in dispute.
  • Reach out to your lender right away if you think you’re going to have trouble making your required payment.
• Don’t have too many credit accounts and use less than half (under a third is even better!) of the credit limit you have available on your accounts.
• Limit your hard credit checks to only what is necessary (i.e. rather than applying for many credit products, do deep research and apply only for the products that suit you best).
• Establish a consistent employment history.
• Accumulate some savings.
• Request a copy of your credit report from each credit bureau and check them for errors and fraudulent activity once a year.
  • If you find any errors or fraud, take the steps to have these issues flagged and corrected.

For many people focused on establishing a positive credit history and score, the single best thing you can do is get your debt paid off as soon as possible. Once your debt is cleared you can a) reset your debt-income balance and b) focus on establishing a new, positive credit history that is manageable and not costing you interest.

Consumers should understand there is no way to ‘fast track’ repairing your credit history. Companies that advertise such services are likely a scam, seriously misrepresenting their abilities, or trying to sell you a service or even financing that is unnecessary and/or very expensive. Watch out for anyone who:

• Makes promises or guarantees about what they can do for your credit score.
• Tries to pressure you into purchasing services or high-interest financing.
• Asks for upfront fees for their services, or who wants to charge you a referral or administrative fee to connect you with another professional.

Unqualified Debt Advisors – What Consumers Need to Know

The Number One Way to Improve Your Credit – Focus on Paying Off Your Debt

If your current debt repayment plan would require more than five years for you to pay off your non-mortgage debts, connect with a local Licensed Insolvency Trustee for some free advice.

• You can get professional insights and advice into solutions to help you get debt under control so you can move forward and bring your other financial goals into focus.
• There is no cost to talk confidentially to learn about your options, and no referral required.

BC Licensed Insolvency Trustee and President of Sands & Associates Blair Mantin shares credit rating tips and insights with Global News.

How Can a Licensed Insolvency Trustee Help?

Licensed Insolvency Trustees are Canada’s only officially designated professionals dedicated to helping people solve debt problems, and we can support you in this in a few different ways, including (but not limited to):

• Assessing your financial situation and exploring your options to deal with your debt, including refinancing, focused do-it-yourself payment plans, credit counselling, Consumer Proposals and more.
• Helping you understand your rights and remedies with regards to a debt or creditor, as well as resources and legislation that can aid you in your specific situation.
• Working together on a debt solution such as a Consumer Proposal.
  • Formal debt solutions allow many people to get their debts paid off and establish a solid credit score faster than if they were to continue trying to pay down their debt at their current pace. What’s more, you can potentially save thousands of dollars in interest charges.

Pay Off Debt Faster with a Consumer Proposal

A Consumer Proposal for example, can be used to consolidate virtually all your debt (everything from consumer credit cards, payday loans, lines of credit, etc. to government debts like CERB overpayments, tax balances and more) and cut the amount of debt you need to repay down to an amount that is affordable for you.

You’ll have up to five years to pay this reduced balance off, which is often as little as 20% of your balance, with zero interest or added fees. This can offer you advantage in several ways, short and long-term, allowing you to:

• Improve your cashflow and household budget immediately by significantly reducing your debt payment to one consolidated monthly payment that you can afford.
  • With a reduced debt payment, what else could use your financial attention? Savings, retirement, or simply more breathing room to meet your day-to-day living costs?
• Stop ongoing interest charges and/or penalties.
• Ease financial anxiety and debt-stress.
• Gain peace of mind by having a clear plan to pay off your debt and a definite debt-free date.
  • Consider what goals you have – or could have – once you’re debt-free!

In less than an hour a Licensed Insolvency Trustee can help you assess your situation and put together a customized debt-free plan, solutions, and resources to help you better manage your debt so you can move forward with your life. Your debt-free future could be closer than you think!

Take charge of your debt – book your free, non-judgmental debt consultation with a local Sands & Associates debt help expert now.

The post Bad Credit? Here’s What You Can Do appeared first on Sands & Associates.

Read on to learn some of the ways being debt-free can change your life, and hear some expert tips to help you get there faster. As Canada’s only licensed debt experts, Licensed Insolvency Trustees help people every day who are looking for debt solutions, and we see many positive changes in our clients once they make the decision to take back control of their debt.

How Is Life Different, Debt-Free?

People often say that knowing what they do now, they wish they hadn’t waited so long to take charge and get help with their debt. Money isn’t the only thing that improves when you’re debt-free – your overall wellbeing can benefit too, including:

• The weight of debt-stress and worries or anxieties about your debt is lifted.
• You can stop feeling as though you are being controlled by your debt payments or creditors.
• Having dealt with your debt for good allows you to stop holding space for the debt and instead have space for your future, in your thoughts, plans and finances.
  • It’s almost impossible to think about your future goals when you’re juggling the financial pressures of daily life plus trying to manage high debt payments.
  • Taking debt out of the equation when you’re budgeting can hugely improve your cash-flow and make goals feel a lot more attainable.
  • Picture what even an extra few (if not several!) hundred dollars could do for you a month.
    • 30% of clients previously polled said being debt had previously caused them to put life events on hold.

Facing overwhelming debt can impact people in many negative ways, affecting our physical, emotional, and mental health, and even our relationships with other – and it can be very difficult to see there is light at the end of the tunnel when you’re weighed down by present challenges, or past misconceptions or self-blame.

Dealing With Debt

Your debt and the situations that may have caused it do not define you and are often due to circumstances or events outside your personal control. Money problems can happen to anyone at any time, regardless of your personal finances or financial literacy and money skills.

Many people “do all the right things” and still end up struggling financially, needing help to get out of debt – there is no shame in asking for help, you owe it to yourself.

You do have a future, and you are deserving of a fresh start, with life free from debt and its overwhelming stress. Please know that you are not alone – there are many other people facing similar challenges, and better still, there are solutions and professionals here to help you.

Debt Help Services for BC Consumers

Licensed Insolvency Trustees are Canada’s only debt help practitioners who are regulated and endorsed by the federal government to provide debt help. Sands & Associates is BC’s largest firm of Licensed Insolvency Trustees focused exclusively on debt management services and support for consumers and we offer our full suite of services in-person and online for residents across BC.

• At Sands & Associates it’s important to provide our expertise and advice in a way that’s clear and actionable, and to treat people with kindness, respect, and empathy always. We appreciate that it can feel overwhelming or intimidating asking for help, especially with such a personal issue.

8 Things Canadians Should Know About Debt Relief Services

Whether you know you have a debt problem or you’re hoping to find more effective ways of paying off debt, the best place to turn for debt advice is a Licensed Insolvency Trustee. Working with a Licensed Insolvency Trustee you can count on having a free, confidential consultation where you can get accurate professional advice, and an impartial representative that will help you weigh your full range of options. No referral or special qualifiers are needed – you can simply call or connect directly.

Consumer Proposals are Canada’s number one alternative to bankruptcy and can have many advantages over other solutions like consolidation loans and credit counselling programs. For example:

• The dual advantage of cutting debt and stopping interest makes the monthly payments in a Consumer Proposal often the lowest among debt management options.
• You’ll gain breathing room and legal protection from your creditors.
• With personal one-on-one financial counselling included in the process, you’ll have the opportunity to gain more confidence in financial literacy skills, improving your ability to control and manage your daily financial affairs, as well as gaining a better understanding credit and borrowing.
  • Many people also say they are more open in discussing money matters and even sharing their financial skills and knowledge with others after their experience working with a Licensed Insolvency Trustee.

We help with debt so you can move forward with your life; whether you need a total financial fresh start, debt forgiveness and creditor protection, or reorganization and structure to pay off your debt – we’re here for you.

Ready to get working on your debt-free future? Connect with a caring local Sands & Associates debt expert.

The post The Debt-Free Difference appeared first on Sands & Associates.

Read on to learn about the credit counselling and financial literacy resources available to individuals working with a Licensed Insolvency Trustee on a personalized debt-free plan.

Goals of Financial Counselling Sessions with a Qualified Insolvency Counsellor 

Licensed Insolvency Trustees help people deal with their debt, and if you’ve decided to work with a Licensed Insolvency Trustee on a debt solution like a Consumer Proposal (a special type of debt consolidation) or personal bankruptcy (a legal debt forgiveness solution), you’ll complete two one-on-one financial counselling sessions as part of either insolvency process – and there is no added cost to you for this service.

The “Insolvency Counselling Program” is intended to help people boost their financial literacy, gaining confidence in their ability to manage their personal finances, and provide tools and resources for ongoing future success in money matters. After completing a Consumer Proposal, or exiting personal bankruptcy, people have a financial fresh start and can move forward with their lives – debt-free.

Who is a Qualified Insolvency Counsellor?

The Licensed Insolvency Trustee who is ultimately responsible for your Consumer Proposal, bankruptcy, and related counselling sessions may lead your counselling sessions themself, but most often these private, one-on-one sessions are led by a Qualified Insolvency Counsellor who works closely alongside your Licensed Insolvency Trustee. This is a registered professional financial counsellor who has:

• Successfully completed a practical course for this unique type of counselling.
• Proven to and been registered by your Licensed Insolvency Trustee as possessing the necessary training, experience, knowledge, skills, and competencies to lead insolvency counselling.
• Completed ongoing professional development training every two years.
• Demonstrated that they are of good character.

Quality of care and service is of the utmost importance in these matters, and your Licensed Insolvency Trustee cannot register anyone as a Qualified Insolvency Counsellor who is involved with activities that may be a potential conflict of interest, or could potentially negatively impact the people they are counselling.

4 Questions to Ask When Choosing a Credit Counsellor

Financial Counselling Topics – Stage 1: Budgeting and Planning

Your first confidential counselling session with a Qualified Insolvency Counsellor will usually take place shortly after you file your Consumer Proposal or declare bankruptcy (somewhere between ten and 90 days), and this one-on-one session might be done in-person, or remotely via videoconference (or over the phone).

Budgeting is the focus of this conversation, and the goal here is that you’ll come away with information and support to help you create and maintain a functional household budget realistic for your personal situation.

• A balanced budget is an important financial tool, and every consumer should have one. Budgeting isn’t about restricting what you can and can’t do, it’s about making confident and thoughtful decisions about how you will use your income.
• No two situations are the same, and it’s important to consider and strategize the different components of your budget to find what works best for you and your household.
• In a Consumer Proposal your debt will be combined then cut into one consolidated (usually) monthly payment, (or in a bankruptcy most people pay a minimal administration fee), and this is typically a substantial reduction from the multiple payments you may have previously been trying to manage in your budget.

How Much Debt will a Consumer Proposal Eliminate? Learn More

This first financial counselling session is a great opportunity to work with a professional to fine-tune your new spending and saving plans, and maybe even learn some new tips and best practices. Your Counsellor will plan to review your budget together with you, and offer support such as:

• Mapping out a plan for record-keeping, and how you will track and check-in and evaluate your estimated VS actual income, expenses, and general budgeting in future.
• Developing strategies to adjust your budget, and for managing unexpected changes to your budget or impacts to your income.
• Addressing any other circumstances or financial difficulties you may want extra guidance on or support / resources for.

Financial skills take time for everyone to learn, and there are often some trials and errors along the way. Once you’ve got a solid understanding, you’ll be in that much better a position to make well-informed and confident decisions about money matters that impact you and your family.

Consolidating Debt with a Consumer Proposal: Step-by-Step

• As well as these two credit counselling sessions that are done as part of completing your Consumer Proposal or bankruptcy, there is an optional self-directed online learning program available to help you get the most out of this opportunity for individual learning and support.
• The online modules offer an introduction to the topics that will be covered in depth during these private sessions, and if you’re able to become comfortable with some of these materials before your sessions, you’ll have more time for tailored resources and support with your Counsellor.

Financial Counselling Topics – Stage 2: Goals, Spending and Credit 

Your second one-on-one session with a Qualified Insolvency Counsellor is done at least 30 days after the first, and again may be done in-person, or remotely. While the first session was all about budgeting stages, strategies, and tools, this second session focuses on your future planning and providing you support to continue moving forward with (debt-free!) success.

Your Counsellor will check in with you about how you’re doing with your Consumer Proposal (or bankruptcy), your new budget, and together you’ll review several other key financial literacy topics, which include:

• Financial goal setting
  • Why, and how to set SMART (specific, measurable, achievable, relevant, time-bound) goals.
  • Specific support in creating a plan to achieve these goals.
  • Strategies to help you meet your spending and savings goals.
  • Identifying, avoiding, and mitigating potential financial risks that could get in the way of your future financial success.
• Spending habits
  • Practical ways to prioritize spending, and spending systems.
• Using and managing credit as a tool
  • Best practices for using credit well.
  • Considerations and questions to ask lenders before borrowing.
  • Breaking down and comparing the costs of borrowing.
  • Types of credit that are considered high-risk.
• Understanding credit scores and reports
  • Establishing a responsible credit history and habits.
  • How and when to check your credit history reports.
  • Steps you will want to take after your Consumer Proposal (or bankruptcy) is complete.

A lot of people worry they have no way to get out of debt – or that by working with a Licensed Insolvency Trustee they may compromise their future financial goals or ability to get credit in future, but the reality is that with options like Consumer Proposals, or even bankruptcy, most people are able to get to debt-free much sooner than if they were to continue trying to chip away at their debt on their own.

The financial fresh start of these processes allows individuals a means to take back control of their finances and make the most of their income. Without the constant nag and weight of burdensome debt, not only to personal finances, but wellbeing, there is much more space to look to the future with optimism.

Meet some of the people whose lives have been changed working with Sands & Associates

More About Debt Help Services from BC Licensed Insolvency Trustees 

Getting confidential debt advice from a qualified expert couldn’t be easier – simply reach out and contact a Licensed Insolvency Trustee local to your area. All Licensed Insolvency Trustees offer a free confidential consultation where you’ll have opportunity to better understand your situation and explore ALL your options.

Sands & Associates serves all of BC and offers our full suite of debt help services in person at local offices throughout the province, as well as over the phone or video conferencing.

• Take an hour and talk with a Licensed Insolvency Trustee; we can give you a debt-free plan that works for you and your unique situation, and, as Canada’s only appointed debt help professionals, offer you additional resources and insights you may not otherwise be aware of.
• No referral is necessary to connect with a Licensed Insolvency Trustee. If you are asked to pay any referral fee this should be a warning you are not talking with a Licensed Insolvency Trustee.

You Are Not Alone in Dealing with Debt – We Are Here to Help You 

You do not need to be behind in your debt payments to seek professional debt solutions or use a Consumer Proposal to consolidate your debt. In fact, many people we work with have never missed a payment and hold a good credit rating, but realize that at their current rate of repayment, they will be facing years or decades of debt payments.

If, however, you are dealing with a serious or urgent financial issue such as a creditor who is threatening you with legal action for a debt, or already garnishing your wages, we can work with you to quickly implement a solution that will stop these collections immediately.

Learn More About Wage Garnishment

Some questions or concerns we commonly address include (but are certainly not limited to):

• Debts are generally worrying you, or your household is being negatively impacted by debt.
• Your monthly debt payments aren’t enough to pay off your (non-mortgage) debt within five years.
• Ways to consolidate and/or cut debt.
• What options exist to deal with a specific creditor or whether a debt is collectable?
• How you can get debt relief or forgiveness by your creditors.

You don’t have to try to interpret all your rights and remedies to deal with your debt, a Licensed Insolvency Trustee is your go-to resource, and we provide safe accurate advice and information to consumers every day.

Many people feel embarrassed about their financial situation, or worried about being judged or even scolded about having difficulty managing their debt; please, know that Sands & Associates is a judgment-free zone.

We believe that a money problem can happen to anyone at any time, and that everyone deserves the opportunity for help and a financial fresh start to move forward and live their best life! You owe it to yourself to get debt help, and we are here for you.

Connect with local debt experts who care – book your free, confidential debt consultation with Sands & Associates today.

The post Financial and Credit Counselling with a Qualified Insolvency Counsellor appeared first on Sands & Associates.

What Could Make a Debt ‘Good’ or ‘Bad’?

Although some people might argue that having any type of debt is bad and should be avoided, the reality is that credit is a tool and there are times when borrowing does make sense – usually this is when debt is taken on with the expectation of a significant future benefit, a way of investing for the long run. Here are a few common examples of when using credit might be considered helpful ‘good’ debt:

• Buying a Home: Since housing is a necessity and you are investing and building equity in a property that would be expected to increase in value over time, taking out a mortgage is often considered useful debt.
• Paying for Education Costs: Student loans to fund education that establishes or boosts your career is another type of potentially beneficial borrowing if you expect to get returns with increased future earnings.
• Starting Your Own Business: A loan to launch or expand your business can be a useful tool in pursuing profitable growth.

‘Bad’ debt isn’t necessarily bad, but this term usually refers to credit used either for fast consumption or for spending that provides only a brief benefit. Here are a few examples of this type of short-term benefit debt:

• Vehicle Financing: It’s difficult for most people to purchase a reliable vehicle outright, and taking advantage of credit isn’t always a bad thing, but borrowing to buy a car can have downsides:
• Vehicle values begin to depreciate immediately after purchase, so you often owe more than what the vehicle is worth for some time – especially if you don’t make a significant down payment when you buy.
• Car payments can take up a sizable amount of your household budget, and financing terms can regularly extend to over six years.
  • Be careful financing a vehicle with a co-signer. Many people fail to realize the full commitment of joint vehicle financing because the other party plans to be the primary insurer and driver.
• Consumables Bought on Credit: With high interest rates (especially on store cards), charging your credit cards for household goods and purchases you don’t have the cash for is seldom a good use of credit. These goods hardly ever have enduring value and if you don’t pay off your balance in full right away, the true cost climbs very quickly.

Ways to Deal with Credit Card Debt

Consider Your Personal Finances and Circumstances

Your personal situation and specific circumstances are also a key factor when evaluating your debt load or potential future debts. Consider the following:

Can you consistently afford the payments required to repay the debt on time, and in full? Even a useful debt can end up a ‘bad’ debt if you can’t afford the payments.

• Take a mortgage for example: This can be a huge problem if you borrow too much or experience an increased interest rate such that your regular monthly payment becomes unaffordable.
• Student loans can later be a problem if you borrowed heavily but don’t get the expected increase in earnings.
  • Always be careful not to borrow more than you need and take time to carefully research the career ladder realities of courses of study you are considering.

Why are you borrowing, and what emotions are you experiencing in relation?

• Always consider your needs VS wants and don’t emotionally justify your spending.
  • Are you using credit for a true ‘must-have’, or could this be a ‘want-to-have’ that you’re feeling emotionally caught up in?
• Avoid impulse purchases, especially if you are borrowing to acquire them.
• It can be difficult to get into a new habit of scrutinizing purchases you’re considering – don’t be pressured or swayed by advertising, whether sales or credit offers.

What’s the Best Way to Consolidate my Debt?

Pros and Cons of Using Credit – and Tips for Using Credit Well

No matter what debt you are taking on there can be pros and cons, many of which will be strongly influenced by how you use your credit. Some pros of credit may be:

• Not needing to wait to save up cash needed for major goals (like education or buying a home)
• Earning perks and rewards on day-to-day purchases you were going to make anyways
• Building a positive credit history that can help with future borrowing at ‘best rates’

Having credit as a resource to help with unexpected expenses may be a ‘pro’ but understand this can quickly turn into a ‘con’ if you struggle to pay the debt off – especially since the impacts of an emergency can disrupt your finances for some time. Other common cons to credit may include:

• It costs money to borrow because you pay interest. For example: Credit card interest increases the true cost of purchases if you don’t pay the charge off in full right away.
• Debt repayment takes money away from yourself now and in future, leaving you less for other needs and goals.

Good Habits for Using Your Credit

It’s a good idea to hit pause and take time to get grounded before moving forward with purchases made on credit. Detach from the excitement and feel-good rush of buying; check in with the realities of your budget and financial goals. Realizing that new debt repayment will set your finances back in other areas can be sobering. Using credit to your best advantage, you might also consider habits such as:

• Keeping borrowing limits low to avoid the temptation of using more than you need (or can afford).
• Not using credit for transactions that don’t have an interest-free grace period, such as cash advances or lottery ticket purchases.
• Always paying more than the minimum monthly payments required on your credit cards.

It’s also essential to ensure your budget is well-balanced and that you have a solid plan for paying off your debt. Without either of these you’re likely to struggle with virtually any type of debt, even the ‘good’ ones.

7 Signs You Should Deal with Your Personal Debt – Now

Where Can I Get Help With my Debt, or Advice on my Debt Situation?

Licensed Insolvency Trustees are the professionals in Canada who are fully government-qualified, empowered and endorsed to help people with debt. We can assist people with many different debt needs and circumstances, including (but not limited to):

• General information on all your formal and informal options to deal with debt
• Addressing urgent situations or creditor conflict (i.e. Wage garnishment, legal action, etc.)
• How you can restructure or consolidate debt to make payments lower
• You’re interested in some form of debt forgiveness or debt relief

Sands & Associates’ Licensed Insolvency Trustees work with people across BC, and we offer our services in-person from local offices throughout the province, as well as online or over the phone, so you don’t even have to leave the comfort of home to get support.

There is no cost to get confidential debt advice and insights about your situation; we believe everyone should have confidence in their personal financial planning and how they are managing their money.

Preparing for Your First Meeting with Sands & Associates? Learn More

You Owe it to Yourself to Get Debt Help

A lot of people who are struggling to manage their debt feel guilty about the debts they accumulated, and often have a lot of embarrassment and shame around being unable to pay them off.

The idea of discussing your situation with someone who is essentially a stranger, professional or not, can be uncomfortable – and taking the first step of reaching out for help is often the hardest part.

Having a debt problem does not make you a bad person. Financial challenges are not a reflection of your self worth. You deserve to live with dignity and without overwhelming stress.

You do not have to struggle alone with your debt. We understand that despite your best efforts and intentions it is not always possible to repay your debts as planned, and there are options to help you deal with your debt in a way that is manageable and affordable so you can move forward with your life.

Connect confidentially with a friendly local expert – your debt-free future could be closer than you think! Book your free, non-judgmental consultation with Sands & Associates today and get a debt-free plan that’s right for you.

The post What’s the Difference Between Good Debt and Bad Debt? appeared first on Sands & Associates.

Getting a Credit Card – What to Check

One of the best means to ensure credit you have is used in the best way for you, is to understand how the credit works. Especially when it comes to credit cards many people get caught up in the potential rewards and convenience, forgetting about what can become problematic.

From the get-go, when you’re looking for a credit card (and virtually any other type of banking or borrowing product) aim to be a savvy and well-informed consumer by spending some time researching and comparing what’s on offer so you have an idea as to what is right for you and your needs.

The Financial Consumer Agency of Canada’s online credit card comparison tool can be a helpful place to start. Here you can view and compare different credit cards, features, fees and more.

Look closely at the terms and conditions of credit cards before making any commitments. Some key details to check into include:

• Interest rates (be certain to understand what may be only a temporary introductory rate!)
• Fees (annual or otherwise)
• Transaction and ATM fees, as well as foreign exchange fees
• Rewards and bonuses

Secured and Prepaid Credit Cards

If you’re looking for the convenience of a credit card but prefer not to borrow, you may want to consider a secured credit card, or a prepaid card as alternatives to standard credit cards.

Prepaid Credit Cards: Prepaid credit cards are sometimes called ‘reloadable’ or ‘pay as you go’ credit cards, and you can often purchase them at standard retail locations like grocery stores or pharmacies.

• You’ll load the card with your own money and as you use the card the dollar amount of your purchases is deducted from the balance.
• The card stops working when you’ve spent the total and you can then reload it with more money.
• You can get and use a prepaid card even if you have a low credit score, and they aren’t reported on your credit history.

If you’re aiming for a product that can help build up your credit history, you might opt for a secured credit card instead.

Secured Credit Cards: Secured credit cards are like a standard credit card in that you can borrow and then pay later, but the key difference is that you put down an initial deposit with the bank / lender.

• Your deposit often determines the amount of credit you’ll have available, but in some cases, you’ll be granted a higher credit limit than the deposit on hand.
  • It’s important to understand that your deposit doesn’t count as a payment on your balance.
• Several lenders in Canada offer secured credit cards that report secured credit card information to credit bureaus, although not all will. Be sure to clarify this if it is a deciding factor for you.

More on Managing Credit Scores

Smart Credit Card Use – Do’s and Don’ts

With standard credit cards always be aware that purchases will incur interest if you don’t pay the balance in full when the bill arrives. The snowball effect of compounding interest can make the true cost of even modest charges very expensive. Here are some easy do’s and don’ts to use your credit card well:

Don’t Use Your Credit Card if You Don’t Have the Cash

There are of course reasons for using credit instead of cash; sometimes carrying a credit card is safer than cash, and you might be more likely to turn to a credit card for things like recurring payments and online purchases. Avoid a potential pile-up of interest costs though by not making credit card charges before you have the funds available for the purchases.

• If you’re using a credit card for day-to-day purchases get in the habit of paying the balance when you get home.
• Particularly with a budget that doesn’t leave much money between paydays, it’s easy to end up over budget because money you’ve earmarked for a credit card payment needs to be spent elsewhere in the meantime.

Also, if you’re trying to keep a close watch on your spending, you may find you pause a bit longer or even re-think some purchases when you’re dealing with cash over credit.

Do Use Cash for Transactions That Are Cash-Like

Not all credit card purchases are subject to an interest-free grace period, so it’s best to use actual cash (or debit) for transactions considered ‘cash-like’ such as:

• Cash advances and credit card cheques
• Wire-transfers or money orders
• Lottery ticket or other gaming transactions

Not only can you be charged interest from the date of these cash-like transactions until they’re paid off in full, but the interest rate at which you’re charged for these is often higher than for regular purchases.

More on Understanding Interest Rates

Don’t Be Swayed by Card Rewards

It’s easy to justify making purchases with credit over cash when you have the added benefit of getting rewards, points or bonuses – but using a credit card that earns points or even cash rewards might not be a good plan if you don’t have the funds to pay off purchases right away before they accumulate interest.

• Reward program values are often near 1% of what you spend, and your interest costs are generally far higher if you carry a balance for even a single month.

Pay attention to your habits and any emotions as you make purchases. Is the lure of rewards tempting you to overspend, impulse spend, or sway you on purchases you don’t really need or want?

Do’s and Don’ts for Dealing with Credit Card Debt

If you’re struggling to manage credit card bills or pay off credit card debts know that you are not alone. Sands & Associates’ Licensed Insolvency Trustees help clients struggling with credit card debt every day, and in recent Consumer Debt Studies credit card debt has been called out five times more than other types of problem debt by insolvent BC consumers. Here are some tips to help you regain control of your credit card debt:

Do Be Aware and Proactive Dealing with Credit Card Debt

Treat all your card accounts as important, keeping track of account balances, purchases and payments.

• Don’t skip any payments, nor make payments late.
  • This goes for all accounts, including things like cellphone and internet plan bills. Even though these types of bills may not all benefit your credit score, they can negatively impact your credit history if unpaid.
  • A missed credit card payment can result in your interest rate being drastically increased.
• Talk to your lender ASAP if you think you won’t be able to make a payment as required. Especially where it’s a one-time situation, you may be extended a deferral or other courtesy.

Don’t Get Caught in Unknown Credit Card Fees

Lenders will not usually inform you if you’re about to incur additional fees, the onus is on you the borrower to be knowledgeable from the beginning – and to stay on top of changing account terms. Common fees that can catch you unaware and add up to big cost may include, but not be limited to:

• Balance protection insurance
• Being charged a fee each time you take a cash-advance
• Over-limit fees for exceeding your credit card’s credit limit
• Currency conversion costs for using your credit card out of the country

Do Always Pay More than Your Minimum Monthly Credit Card Payment

If you can’t pay your balance off in full then understand that to pay off your credit card debt within a reasonable amount of time you will have to stay well ahead of the compounding interest. If you’re only making minimum monthly credit card payments, it’s almost certain you’ll be trapped long-term in credit card debt. For example:

• If you only paid the minimum monthly payments on a credit card with a $5,000 balance and 18% annual interest rate, it would take almost 19 years to pay off and result in almost $4,800 of interest charges. It would take close to $9,800 and near two decades to pay off the original $5,000 debt.
  • See more using Financial Consumer Agency of Canada’s credit card payment calculator.

If you’re having trouble paying more than your minimum monthly credit card payments this can be a sign of financial troubles ahead. Another debt warning sign common in this situation would be if you are trying to pay off your debt but haven’t been able to stop using credit for regular living expenses.

More on The Minimum Payment Trap

Don’t Get Stuck in Credit Score Concerns

Be cautious about taking on too many credit cards (or other credit products) or ones with too high a limit in an attempt to benefit your credit score. Having some diversity in credit products can favourably impact your credit score, but this needs to be balanced with considerations such as:

• Your risk of using more credit than you can afford to pay back
• Account balances getting too high to look good “on paper”
• At some point having too much credit can negatively impact your score

Debt is expensive – and it’s never a good idea to take on more than you can afford to pay back. Even keeping borrowing to modest levels there are many situations or events out of our control that can make it difficult, if not impossible to pay back debt as intended.

Do Seek Debt Advice from a Licensed Insolvency Trustee

It can be difficult to reach out to a professional; many people want to pay off their debt independently, or simply feel too embarrassed to ask for help, but please know that you are not alone – and that you have options. Resources and supportive solutions to consolidate, cut and restructure debt are available for individuals and businesses.

Licensed Insolvency Trustees are Canada’s qualified debt management professionals who can help you evaluate your situation without judgment and get you solutions to deal with your debt that suit your unique needs.

• Connect confidentially for a free one-on-one consultation to discuss your situation and determine all your options.
• From there you’ll be able to make informed decisions and plan how you want to move forward, past the challenges of credit card and other debt.

No judgment, no cost, no pressure to commit to any process. Just expert advice and friendly support. Book your confidential debt consultation with Sands & Associates today – virtual and in-person services are available for residents across BC.

The post Do’s and Don’ts for Credit Cards and Managing Your Credit Card Debt appeared first on Sands & Associates.

Read on to learn more about why prioritizing a debt management plan is important for both financial benefits and for our overall personal wellbeing, and some expert tips on how you can get out of debt faster.

4 Reasons to Get Out of Debt Now

Whether you need inspiration for action, or motivation to keep going – here are some key reasons why focusing on addressing debt should be a high-priority goal for almost everyone:

1. Debt is Expensive

Any time you carry a balance on credit there’s going to be a cost, and when you factor in interest charges, financing fees and more, debt can become outright unaffordable (especially in the long-term).

What’s more, when you owe money it can feel as though your creditors are in charge of your financial wellbeing since you can be impacted by interest rate hikes, policy changes, or even have your rates bumped-up if you miss a payment.

Debt gets particularly expensive if you’re carrying balances from:

• Credit cards
  • Be especially aware of the added expense of using cash advances and/or enrolling in balance protection insurance.
• Payday loans
  • A 2-week payday loan can equate an annual percentage (interest) rate of almost 400%!
• Canada Revenue Agency debt
  • Daily compounding interest plus penalties can add up fast on things like outstanding tax debt.

Learn About Solutions to Deal with Government Debt

2. Maximize your Income

Borrowing means taking money away from your future self, and carrying debt prevents you making the most of your income. Think of all the different uses you could have for your money that is unfortunately going to pay even a few hundred dollars’ credit card balance each month.

Unpaid balances (especially on credit cards) can lead to everything from tight budgets to seriously strained challenges in meeting costs of living, and the claim on your future earnings might stop you from moving towards other goals that would require that cash commitment (like investing in retraining or education or saving for a home or retirement).

3. Improve your Credit Score

Although many debt experts caution that your credit score shouldn’t be your major focus, if you have a future financial goal such as getting a mortgage in the next few years, it is worth noting the benefit of being debt-free as it relates to your medium-term financial plans.

Clearing your debt can make it easier to borrow for important things you want – and can enable you to do so at “best” interest rates and terms. Being debt-free helps by:

• Freeing up your ‘credit utilization’ ratio (essentially the proportion of your credit limit you are regularly using – lower is better).
• Giving you the time and ability to boost savings.
  • Although savings aren’t reflected in your credit score, having sizable savings can certainly improve a lender’s consideration when you apply for credit.

Remember, your credit history is regularly updated and scores are simply calculations at a moment in time that can change dramatically in a relatively short period. Credit scoring is not an exact science nor reliable as a measure of financial health – and sometimes what can lower your score temporarily is a beneficial strategy in the long term.

Why are Credit Ratings the Wrong Indicator of Financial Health? Learn More

4. Stop Debt-Stress

Whether you’ve experienced a cash-crunch moment or regularly have finances on your mind, being in debt can create a near-constant undertow of anxiety and/or worry; money matters can impact us tremendously, financially, emotionally, even physically. Getting to debt-free can help us to:

• Stop constantly thinking about debt, improving peace of mind and even our overall health and relationships with others.
• Allow us space to enjoy and get more of the things we want (whether to do or to have), without accompanying guilt.
• End debt-stress and the mental nag of monthly payments.

When Isn’t Paying Off Debt a Priority?

There are of course exceptions to every rule, and there may be a (very) few instances where a person would want to continue making their debt payments but focus some of their extra cash into other areas, even temporarily.

This strategy may be the case in scenarios such as where:

• Your debt is essentially down to just your mortgage and you need to focus on retirement funds.
• Where the interest rate on your debt is very low and you have no emergency savings.

Save Money or Pay Down Debt?

Having savings is important – and at minimum we recommend consumers should generally aim to at least have a modest emergency fund set aside. Without even a small cushion of savings many people end up relying on credit to cover unexpected costs that inevitably come up.

• Start small – if you can – even having $1,000 in savings can make a difference in a cash-crunch (car repair, dental emergency, unexpected day off work, etc).

Unfortunately, having a surplus cash-flow that allows you to even temporarily set money aside to accumulate savings can be almost (if not completely) out of reach for some people. If you’re in a situation where your debt payments are leaving you straining to meet your costs of living, or unlikely to pay off your debt in the next 5 years, seek a Licensed Insolvency Trustee to get some debt advice and learn about your options for debt management.

For example: If you can afford to repay part of your debt, a Consumer Proposal can be a great way to substantially cut your monthly debt payments, freeing up room in your budget for savings and more.

Try the “Rule of 60” math:

• Divide your total non-mortgage debts by 60 – does the number look like a monthly payment you could consistently afford to pay so that you can have all your debt paid off in 5 years?

Compare the Monthly Payments of 4 Common Debt Options

A Common Debt Payment Trap to Avoid

Many people end up essentially trapped in a debt cycle of borrowing, paying, then re-borrowing.

It may not be obvious, but sometimes simply keeping up with your debt payments won’t be enough to successfully pay off debt or keep a debt problem at bay. One common area of concern we often see people stalled in is “the minimum payment trap”.

• Getting comfortable with making just your minimum monthly payments, especially on credit card debt, is risky and many people can get stuck in decades-long debt repayment cycles, not really making meaningful progress towards being debt-free.
• Your minimum payments on a credit card could be contributing very little per month to reducing your debt load, with the rest of your payment going to (ongoing) interest charges and fees.
  • Be aware that new interest charges can easily outpace your payments and even push balances past your credit limit – from there finances can unravel quickly.
  • Check your credit card statement to see how long it would take you to pay off your balance only making minimum monthly payments.

Over 3 in 5 Sands & Associates clients surveyed said “overwhelming stress” was how they eventually knew their debts were a problem. “Only making minimum payments” and “Accumulating more debt” were two other top-reported signs of a debt problem. – 2020 BC Consumer Debt Study

Strategies and Solutions to Get Out of Debt

If you have an income-to-debt ratio that is favourable (ie. higher income with lower debt levels), you may consider one of these first two payment strategies to help you pay down your debt:

• Focus on Highest Interest Debts First – The idea with this strategy is to save money by reducing interest charges where possible.
  • List all your debts, with the highest interest debt at the top.
  • Make all your monthly payment requirements across all your accounts but focus extra money you’ve identified in your budget towards the debt at the top of your list.
  • Once it’s paid off, move your extra payments on to the next one.
• Focus on Smallest Balance Debts First – If you do well being motivated with adding up all the small victories, this might be a different debt strategy to consider.
  • List all your debts, with the smallest balances at the top.
  • Again, make all your payments but focus extra funds on the smallest balance debt first.
  • Once it’s paid off, keep the ball rolling…

For those who want or need to take a more proactive approach to debt management – consider consolidating with a Consumer Proposal so you can:

• Consolidate virtually all types of debt without borrowing
• Save money by cutting debt by up to 50-80%
• Get breathing room from creditors and protect your assets and income
• Simplify your finances AND generally have the lowest monthly payments possible
• Have a definite date of being “debt-free”

How Much Debt Will a Consumer Proposal Eliminate? Learn More

As debt management professionals we are all too aware that unfortunately some strategies and actions can end up creating additional challenges, and often simply drag out the overall stress of the situation.

Many people pursue various debt strategies on their own such as:

• Borrowing from friends or family
• Applying to extend credit limits or get consolidation loans
• Using assets to pay down debt

It’s important for Canadians to know there is no cost to connect with a Licensed Insolvency Trustee for a confidential debt consultation so you can make an informed choice about how to deal with your debt.

• We can help you regardless of your credit score, and consultations to talk about your situation, answer all your questions, and assess your options are always free. We’re here to help you find your best solution to get on track, meet your goals and become debt-free for good.
• Sands & Associates can even work with you over the phone or via video conference, so you can get support from a qualified professional without leaving the comfort of home.

Whether you’re facing a difficult situation with your debt, want to explore options to cut debt, or pay off your debt with a guided debt-free plan – connect with a Licensed Insolvency Trustee to have a confidential debt consultation and get unbiased professional advice about all your options.

Got an hour? It could take less time than to get a debt-free plan that changes your life. Connect with a caring Sands & Associates debt expert today – book your free, non-judgmental debt consultation.

The post Is Being Debt-Free Your Top Financial Priority? It (Almost Always) Should Be appeared first on Sands & Associates.

Whether you are considering filing bankruptcy, already underway with filing, or just finishing bankruptcy – we know you have questions about “life after bankruptcy”. We’ve outlined information about what happens once bankruptcy is over, and some tips for success after bankruptcy: 

Bankruptcy Discharge Process

Receiving a discharge from bankruptcy means that you have completed the duties required in your bankruptcy and no longer bear any liability for the debts you owed prior to filing. Your Licensed Insolvency Trustee will also be discharged from the bankruptcy process once all of their duties are fulfilled. These include:

• Ensuring applicable income tax returns have been properly filed and assessed
• Reviewing all creditor claims
• Compiling a final accounting of all moneys in the bankruptcy estate
• Distributing money (called dividends) to eligible creditors

The “final accounting” in a bankruptcy filing is called a Statement of Receipts and Disbursements. Before any money is distributed, the Statement is reviewed and approved by the Office of the Superintendent of Bankruptcy – this helps to ensure full transparency.

It can take some time for your bankruptcy estate to be officially closed – but don’t worry, if you have received your bankruptcy discharge your role in the bankruptcy is done!

Real Stories: Meet some of the people whose lives have been changed working with Sands & Associates.

Key Bankruptcy Documents to Keep

You can expect to receive several sets of documents throughout your bankruptcy, some key bankruptcy documents to keep for your records are:

Notice of Bankruptcy: This is the first document you will receive as part of your bankruptcy. In addition to noting the official date of your bankruptcy it will also contain a list of your creditors.

Discharge Certificate (or Order): Starting a bankruptcy means that you no longer need to make payments to your creditors, and being discharged (released) from bankruptcy means that you are officially free from the responsibility of repaying your debt. Your Discharge Certificate (or Order) is the document that declares you have achieved a financial fresh start! 

Statement of Receipts and Disbursements: This is normally the last document your Trustee will send you. It will contain information about key administrative tasks completed and a final list of creditors that were dealt with under your bankruptcy.

Be sure to update your contact information with your Licensed Insolvency Trustee if your mailing or email address changes before you receive your Statement of Receipts and Disbursements.  

What if I lose my bankruptcy documents?

If you have misplaced a document related to your bankruptcy there are a few ways you can get a copy for your records:

• Contact your Trustee directly
• Contact the Office of the Superintendent of Bankruptcy

Credit History and Score after Bankruptcy

A common concern for people evaluating debt consolidation and other debt management options is that they will not be able to rebuild their credit in future if they file bankruptcy, or that they will need to wait for seven years to apply for new credit – this is false. Bankruptcy is not a permanent mark on your credit history, and your credit score can change dramatically in just two to three years after your discharge.

Most people are discharged from bankruptcy after nine months, and the bankruptcy will show on their credit history report for six years after the date of their discharge.

• You can begin building your credit up and apply for credit at any point – you do not need to wait until the six-year window has passed to start reestablishing and improving your credit history and score.
• It is quite common to be granted credit such as a new mortgage or vehicle financing within two-to-three years of exiting bankruptcy, and as little as one year after bankruptcy it is often possible to obtain a standard credit card at ‘best rates’.

Following these credit rebuilding steps is crucial in order to build your credit score, and ultimately get new credit after bankruptcy:

• Get a copy of both your credit reports and check them for errors
  • If you find errors take the time to get them fixed (more on that below)
• Pay ALL your bills on time, every time – even small bills like cellphones count
• Establish new credit and use it well
  • Secured credit cards that report to credit bureaus are a good place to start. Some popular choices include options through lenders like Home Trust, Capital One, People’s Trust

You can learn more about steps you can take to rebuild your credit following a personal bankruptcy in this short video and read more about Rebuilding Credit After Bankruptcy here.

The Office of the Superintendent of Bankruptcy sends information about discharged (completed) bankruptcies to credit bureaus weekly, so these credit histories are supposed to be updated automatically, but it is common to find errors on your credit history following a bankruptcy. One of the most common errors is to find that a creditor is reporting you still owe them money, even though the debt was discharged (released) in the bankruptcy.

How can I fix errors on my credit reports?

It can feel very frustrating to find mistakes or errors on your credit history reports when you’re ready to move on with your life. The good news is that you can take control of the situation and get them fixed!

• Use the Credit Investigation Request Forms here to request corrections from both Equifax and TransUnion.
• You will need to fill out the form, attach relevant documents if possible and mail the form to the address at the top of the report where you found the error.

Because Licensed Insolvency Trustee are not lenders, we unfortunately cannot update your credit records in any capacity.

Getting Credit After Bankruptcy

When establishing new credit it’s important to understand all the terms and conditions of borrowing. If you don’t yet qualify for ‘best rates’ ask yourself if the item you may be purchasing on credit is something you really need, or if it can wait until it will cost you less to borrow.

Most people keep all their assets throughout a bankruptcy and generally speaking you are free to sell, dispose of or transfer assets you may have retained – there is also no legal reason why you would be unable to acquire new assets such as a home or vehicle. Although many people will wait until their bankruptcy is complete to take on new credit, this isn’t always the case.

How long after bankruptcy can I get a mortgage?

Mainstream mortgage lenders may be able to grant you a new mortgage if it has been two years since you were discharged from bankruptcy. Subprime lenders may grant mortgages within less than two years.

Renewing your mortgage during bankruptcy is normally approved, provided that your mortgage payments are up to date and your mortgage account in good standing.

How long after bankruptcy can I get a car loan?

Standard lenders may grant you a vehicle loan or lease within a year or two of your discharge, there are also specialized lenders who will even give vehicle financing before discharge.

How long after bankruptcy can I get a credit card?

It isn’t uncommon for people to set up a secured card while they are still in the bankruptcy process. Standard unsecured credit cards at best rates may be available within one year of your discharge.

Remember that your credit history and score are not the only factors lenders look at – your income and savings can also be key! 

Filing Income Tax Returns

In a bankruptcy your Licensed Insolvency Trustee will file two income tax returns for the year your bankruptcy began, these are called pre- and post-bankruptcy income tax returns. If you had outstanding returns at the start of your bankruptcy these may also be caught up and filed as part of your bankruptcy.

You will need to file your tax returns as usual in the years after your bankruptcy filing and pay any balances due. Any balance owing to the Canada Revenue Agency that may arise after the date of your bankruptcy will be your responsibility to pay.

If tax filings and bookkeeping remain a challenge you may wish to seek assistance from a reputable bookkeeper or accountant for assistance to ensure no unpleasant tax debt surprises in the future.

If you’re researching bankruptcy it’s important to remember that this process provides a fresh start in a relatively short amount of time, for most Canadians it’s only 9 months until they are released from bankruptcy – many people spend more time contemplating (or postponing) filing bankruptcy than that.

What would your life look like without debt? Find out about bankruptcy and bankruptcy alternatives – book your confidential free debt consultation today.

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Easy come, easy go:  Your credit score is calculated using information contained in your credit report.  Essentially a credit score is a moment in time and can change depending on your actions.  You’ll gain points for ‘favourable’ actions, and lose points for actions demonstrating difficulties, such as maxed-out credit.  Lenders have their own unique policies and rules that will determine how your credit score affects your credit application.

It’s important to remember that your score is NOT permanent and can change drastically in as little as two years!

Income and assets affect borrowing power:  Gauging your financial health by your credit score alone is a poor measure at best.  Having a “perfect” credit score doesn’t automatically mean continued access to new credit.  If your credit score is at an ideal level for borrowers, but your income or family situation has varied (ie. pay cut, divorce) then you may not be extended further credit on reasonable terms when you most need it.

Postponing seeking professional debt assistance because of the fear that it will damage your credit rating is common, but ask yourself:  “Could I actually borrow enough to consolidate all my debts if I needed to?”  For many, the answer is no – meaning that in the grand scheme of things, that credit score isn’t actually doing much (if anything) for you.

Credit Score VS. Budget:  Making regular minimum monthly payments on debts will help to keep your overall credit score to stay high – but that doesn’t really reflect your ability to pay the debt off and become debt-free.

Consider the following scenarios:  Person A has what they would consider an ideal credit score, and it’s taken them a long time to achieve that, unfortunately due to some circumstantial changes they’re unable to manage their debt effectively and pay it down in a reasonable amount of time.  Their credit score probably doesn’t provide much comfort.  Conversely, immediately following a bankruptcy, Person B’s credit score will be poor – but now they’re debt-free and can start to rebuild because of the “reset” the bankruptcy has provided.

The main thing your credit score can’t tell you, is how you’re actually doing financially on a day-to-day basis.  If you can’t see being debt-free in the next two years, your budget won’t allow for you to make more than minimum payments on your debts, or you’re consistently relying on credit to meet your living costs (or even borrowing from one account to pay the other) – those are clear indicators that it’s time to seek a professional plan to deal with your debt.

Ready to talk?  We’ve been helping BC residents become debt-free since 1990!  Contact us today to book a free, confidential consultation in one of our local offices.

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