November is Financial Literacy Month in Canada – to help viewers learn more about how to manage a debt problem, Blair Mantin of Sands & Associates joined Breakfast Television Vancouver for a segment highlighting “5 things about debt that you don’t — but should — know.”

Watch the clip here and read more below:

Fact: You can write-off government debt.

Owing money to the government for things like student loans, income tax debt, unpaid GST (and more) can feel overwhelming – especially since Canada Revenue Agency is a very powerful creditor.

There are only two methods of dealing with government debts in Canada:

• Filing bankruptcy will effectively wipe out your government debts; or
• Making a Consumer Proposal will allow you to negotiate a deal to repay only a portion of your government debts, while the remaining balance is written-off.

Fact: You are not responsible for your spouse’s debt.

Although many people believe otherwise, marrying your partner does not automatically make you responsible for paying off their debt.

Unless a spouse or common-law partner has specifically signed on to be responsible for their partner’s debts (such as being a co-signer), there is no obligation to pay a partner’s debt based on the marriage or cohabitation alone. A separation or divorce however could trigger some responsibility for debts.

Fact: Most people who file bankruptcy keep all their assets.

Laws in BC set a minimum level of assets that a person is entitled to keep in the event they claim personal bankruptcy:

• These laws include allowances for household furniture, your vehicle, tools of the trade and even RRSPs.
• Got a mortgage or car loan? No problem – as long as you’re maintaining those payments, most people will keep their home or vehicle too.

Fact: Your credit score will recover from bankruptcy.

If a person has never been bankrupt before, their bankruptcy will automatically be purged from their credit history six years after their bankruptcy is finished. With proper rebuilding steps new credit can be re-established within 2 or 3 years, sometimes even less.

Learn More About Life After Bankruptcy

Fact: Your credit rating is not a good indicator for financial health.

A credit score is in essence a fluctuating number, based on transactional information. It does not give a complete picture as to a person’s cash-flow. For example:

• A person who owns a home with no mortgage and pays cash for their daily expenses may have a low credit rating as there wouldn’t be enough credit information available to calculate a score;
• A person might have a high score because they are maintaining their debt payments, while “off the page” they are simply shuffling money around each month and unable to be debt-free;
• A person who has just finished a bankruptcy may have a low credit score, but they have no debt and are free to start rewriting their credit history.

Ready to tackle your debts and get a financial fresh start? We’re here to help.

Book your free, confidential consultation with a Sands & Associates debt management professional today!

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My credit rating is great, I don’t want to ruin it. So, you have a great – maybe even ‘ideal’ credit score… let’s delve a little deeper now though! Is your credit impeccable because you’re managing to pay down the principle or because there are enough debts that you can move payments around, effectively keeping things paid up to date? If those regular payments are just servicing the interest, and the length of time you’ll be paying the debt off isn’t going down it may be time to look into some debt options.

Another area to consider about a good credit score: If you approached a reputable lender to consolidate the debts, would they agree? Quite often despite good-standing credit, lenders are still able to calculate that a person is essentially maxxed out – effectively meaning that holding the good credit isn’t actually doing you any favours.

I don’t want to make my credit score worse. Perhaps you’ve had a few hiccups with your credit report, an inadvertently missed payment or an NSF charge for example so your credit has already experienced a dip; maybe some accounts have had more than a few payments missed and are now at collections – either way there is likely already some stress. Stretching your daily budget to its limit is not an ideal solution, one small unexpected item can (and usually will) derail all good payment intentions, leaving you back at square one.

Any time accounts are not paid in full it is reflected negatively on your credit report; negative information about accounts is actually held on record for 6 years! If you have accounts already in a delinquency status your credit is already being negatively affected. Oftentimes in this case a consumer proposal or bankruptcy does better serve the credit report as it will provide a fresh start date.

Bankruptcy will destroy my ability to ever get credit again. Probably the number one myth around bankruptcy or consumer proposals is that either will mean never being able to obtain credit again – it’s flat-out fiction! A first-time bankruptcy will show on a person’s credit report for 6 years from the date they are discharged (which if it’s a 9-month bankruptcy makes a total credit impact time of less than 7 years). A consumer proposal has a less severe impact on credit ratings and is purged the earlier of 6 years from the date of signing, or 3 years from the date the proposal is paid off.

During the time that the bankruptcy or consumer proposal is reflected on a credit history it does not mean that you are not allowed to obtain credit, however, most individuals will want to take steps to build their credit back up again to be eligible for more desirable interest rates and lenders. Improving your credit is not nearly as difficult as you may think – for steps on rebuilding click here to watch a short video outlining the basics.

Stress, constant shuffling of payments and seemingly endless payment terms aren’t anyone’s ideal.  While we understand the desire for a great credit rating, it’s important to bear in mind that the best opinion of your financial health and credit viability should come straight from YOU. Sometimes starting from scratch is the best way forward.

To meet with Sands & Associates for a free, confidential consultation regarding your debt options please contact us.

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