Introduction to bankruptcy and divorce from a Vaughan licensed insolvency trustee (“GTA and Vaughan bankruptcy trustee”)
As a GTA and Vaughan bankruptcy trustee, I’ve never met anyone who had something good to say about bankruptcy and divorce. At times both are a necessary evil, but it’s never fun. Although divorce has been the butt of jokes by comedians for decades, it’s no laughing matter, especially financially.
This quote may be more telling than funny:
Let’s be blunt: If you hire a divorce lawyer today, there is a good chance you will hire a bankruptcy lawyer within two or three years.
Vaughan bankruptcy trustee discusses debt issues and divorce financial solutions
When couples decide to divorce, few have any idea of what the split is really going to cost and what each party will be left with after divorce. The goal of divorce and the divorce process and result are two very different things. Here’s the reality of most Canadians’ financial situations:
The debt-to-disposable income ratio was 165.3% for the first three months of 2016 (Statistics Canada)
Households owe $1.65 in debt for every dollar of disposable income they have (Statistics Canada)
Total household debt, which includes consumer credit, and mortgage and non-mortgage loans, totalled $1.933 trillion at the end of the first quarter (Statistics Canada)
Mortgage loan balances were up 6.2% from the same quarter of the prior year (RBC)
The average Canadian owed $21,580 in non-mortgage debt during the most recent quarter (TransUnion)
Many Canadians are already teetering on the edge of financial disaster without throwing divorce into the mix. Even if you have an amicable divorce, the cost of an uncontested divorce ranges from $1,000 to $3,500, according to a 2015 Canadian Lawyer’s legal fees survey. If your divorce gets messy the fees can be astronomical. Living two separate lives costs a lot more than living together as a couple. Do you have a clear understanding of what your monthly expenses are? Do you have a budget? These are just some of the divorce financial solutions that as a Vaughan bankruptcy trustee we recommend to people that they have to know about it beforehand.
What can I do if I have too much debt – divorce or no divorce?
Whether you live in the GTA or elsewhere, take the advice of a Vaughan bankruptcy trustee and get your financial house in order before you begin divorce proceedings or you may be looking at bankruptcy and divorce or bankruptcy alternatives down the road. Contact the Ira Smith Team for advice and a solid plan to deal with serious debt issues. We will give you a free first consultation to discuss your options and we can help you get out of debt Starting Over, Starting Now.
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Is there such a thing as chapter 13 bankruptcy Canada?
In Canada, we don’t have something called chapter 13 bankruptcy Canada. A chapter 13 bankruptcy is part of the United States Bankruptcy Code. It is also called a wage earner’s plan. It allows people with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.
We don’t have chapter 13 bankruptcy Canada. The equal in Canada is a consumer proposal. It is a bankruptcy alternative used to avoid bankruptcy by a debtor who is an individual who in total (excluding any mortgages registered against his or her home) owes $250,000 or less.
How does our chapter 13 bankruptcy Canada provisions work?
A consumer proposal is making a formal offer under the Bankruptcy and Insolvency Act (Canada) (“BIA”) to creditors to settle debts under conditions other than the original terms, for less than the face value of the debts. The maximum length of time that a debtor is given to make monthly payments under a consumer proposal is 60 months.
So rather than it being called chapter 13 bankruptcy Canada, we call it a consumer proposal. If you owe more than $250,000, then an individual can use the proposal provisions used by companies. Either way, it is a creative use for people with large debts to do what is commonly referred to a “restructuring” or “reorganization”, thereby avoiding bankruptcy.
There used to be no provision available to small individual debtors in the BIA. Parliament wished to find a way to offer for these smaller consumer debtors to have a restructuring alternative. So, after consultation with the stakeholders in the Canadian insolvency world, in the 1990’s, the consumer proposal legislation was enacted. It was a way for Canada to get a chapter 13 bankruptcy Canada like provision.
Our chapter 13 bankruptcy Canada like provisions allow you to avoid bankruptcy
Now, the consumer proposal provisions for consumer debtors are used more than the consumer bankruptcy provisions of the BIA. So Canadians are now AVOIDING bankruptcy more while still obtaining the help and counseling of a licensed insolvency trustee. So as you can see, our consumer proposal provisions are just like a chapter 13 bankruptcy Canada statute.
The main use of the (consumer) proposal provisions of the BIA is to allow you as a debtor to keep your assets, if you can afford to in your budget, AVOID bankruptcy, and give a better alternative to your creditors than a bankruptcy would. In this way, you are allowed to be relieved of your debts, for an amount less than the total face value of all of your debts.
When is it best to use the chapter 13 bankruptcy Canada like provisions?
It is best used when you have extra income and can afford to pay back some debts if the рауmеnt plan is structured properly, but not enough income to pay back all of your debts, especially with penalties and interest!
What can I do if I have too much debt but wish to find out more about chapter 13 bankruptcy Canada?
We hope that knowing these tips will better equip you to navigate the chapter 13 bankruptcy Canada challenge. If you have too much debt, but after viewing this video wish to avoid bankruptcy but you are unable to pay your debts in full, this may be just the ѕесrеt you need to know!
Many people are under the misconception that bankruptcy options don’t apply to the rich and famous or the rich and not famous because they don’t have money problems. In fact, rich people can and do have money problems.
This issue is more prevalent than you think and we’ve written a series of blogs about it in the hopes of removing the stigma of bankruptcy.
Being rich doesn’t make you smart about money. Often times the money begets a lifestyle that’s intoxicating but unsustainable – mansions, yachts, a fleet of luxury vehicles and exotic travel.
If you are willing to admit to having financial problems at the first sign of trouble, then there are various bankruptcy options available. But if you wait until you have lost it all, and then some, then bankruptcy, or perhaps one of the bankruptcy options, will be available for you.
Trent Richardson acted quickly on his bankruptcy options when he realized he was facing financial problems
Trent Richardson, an NFL player who most recently played for the Baltimore Ravens, discovered that from January 2015 – October 2015 his family and friends spent $1.6 million of his money. This is a perfect example of someone making a small fortune and placing too much trust in others to manage his money. In reality he didn’t have a clue about his money.
Thankfully he looked at his bank statement before it was too late. He couldn’t believe the charges which included 11 Netflix and 8 Hulu accounts in addition to ordering bottle service while dropping his name at clubs. The irony is that Trent Richardson doesn’t drink. And now for the mother of all expenses – his brother Terrell was earning $100,000 a year as his personal assistant.
Although Mr. Richardson is luckier than most would be in his place because he signed a fully guaranteed deal worth $20.5 million over 4 years originally with the Cleveland Browns in July 2012, he could have, like others before him, lost it all. He did the smart thing and cut all extraneous expenses, including his $100k personal assistant. This is the best of the bankruptcy options: reigning in your spending and getting on a proper budget.
If you act quickly, we can help you choose from many bankruptcy options
Let this be a wakeup call to everyone. Regardless of how much money you have, you need to be smart about money, lest you find yourself in deep debt. And that’s where a professional trustee comes in.
Are the steps in growing a successful company similar to corporate restructuring and turnaround management techniques?
When I heard the story told by Mike Miltimore, CEO and Founder of Riversong Guitars, it struck me that the steps he took to grow his successful guitar making business in this video was almost identical to the steps we would take as corporate restructuring and turnaround management professionals.
Any business can, in its life-cycle, face issues of under performance, and financial distress. The reasons can be simple, or complex, and range from: change in market conditions, availability of financial resources, bad debts suffered or inefficient management structure. In Riversong Guitar’s case, Mike understood what was needed to grow his business successfully so that he could expect these potential issues and put plans in place before facing trouble. I am extremely impressed with Mike’s understanding of his role in management and leadership.
Our role as a corporate restructuring and turnaround management practitioner
The corporate restructuring and turnaround management practitioner’s role, is to aid the business owners, with relevant stakeholders, to formulate, and carry out, a strategy to avoid a troubled company’s situation deteriorating, over time and to place it back on the road to financial health and ultimately, more growth.
It is a collaborative process, led by the corporate restructuring and turnaround management professional.
The 3 phases of a corporation in need of corporate restructuring and turnaround management
There are three clear phases in the corporation in need of corporate restructuring and turnaround management, which in hindsight become clear:
Phase one – Invisibility Phase – The issues facing the business, are only visible from within the business.
Phase two – Translucent Phase – The issues begin to become visible to the outside.
Phase three – Total visibility – The issues are known, and are transparent to the outside business world.
Why reach out to a corporate restructuring and turnaround management professional?
Action and transformation methods need to be taken and implemented, before phase three occurs, because if a business is facing financial distress, more and more unwanted interventions from “creditors”, together with their professionals will take place. The ability to carry out corporate restructuring methods, and the scope to discuss problems without recourse to insolvency legislation, will reduce.
When business owners, or influential stakeholders introduce a corporate restructuring and turnaround management practitioner, this is their recognition for the need for change, and importantly that the business itself, does not have the skills or experience, to bring about required corrective change. Mike understood that he did not have the entire skill set to create the proper plans and infrastructure and carry out them, so he too reached out to professionals to help him. This is another way that Mike in growing his healthy company used the same techniques needed in a corporate restructuring and turnaround assignment.
The factors needed to grow a successful company are the same ones used by the corporate restructuring and turnaround management professional
Mike identified various factors, just like we do in corporate restructuring and turnaround management. Some of the issues that Mike faced in growing his healthy company, which we also face in corporate restructuring and turnaround management engagements are:
leadership needs in an evolving corporation;
project management; and
A classic turnaround involves:
Understanding the depth of the problems being experienced – severity or otherwise, stabilizing the place, providing a route map to recovery – be that business transformation or corporate renewal.
Implementation and monitoring, what is always underestimated in turnaround situations, is the need for business owners, to invest the required emotional capital involved, and a willingness to accept change.
You need to choose the correct corporate restructuring and turnaround management professional
For a successful turnaround to succeed, the correct turnaround professional needs to be chosen. “Best fit”, in terms of relevant experience, and a track record of success, is essential. In a nutshell, that is corporate restructuring and turnaround management. The exact restructuring methods used is determined by the nature of each situation. The turnaround methods used will also depend on whether the issues are only internal, or if there are external issues as well requiring more serious steps, such as corporate debt restructuring.
Follow Mike Miltimore’s lead. Recognize that you the skill set that has allowed your company to grow so far are not the same as those needed to fix it. Mike Miltimore knew that he needed outside help for the skills to grow his healthy company that he did not have in-house. The same is true in fixing financially sick companies.
So, if your company has too much debt and a history of losses, you need to fix it now so that your company can continue to prosper and allow the many families and stakeholders that relay on the company’s continued existence for their livelihoods. The most important thing is to get into place a proper corporate restructuring and turnaround management plan.
You should book a meeting with an experienced licensed insolvency trustee first. (The first consultation is free.) Ira Smith Trustee & Receiver Inc. brings a cumulative 50+ years of experience dealing with diverse issues, people and complex files and we deliver the highest quality of professional service.
Contact us today and Starting Over, Starting Now your company can be well on its way to overcoming its financial difficulties and continue to prosper.
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We’ve been warning you about the evil ways of the bad credit payday loans industry, and now a class action lawsuit in Ontario has begun. The payday loan industry should not be allowed to run. We’ve written about these unscrupulous payday loan companies at length and in-depth to serve as a warning.
How big is Canada’s bad credit payday loans industry?
Canada’s payday lending market is worth more than $2.5 billion.
How many Canadian use bad credit payday loans companies?
The latest estimate is that 7% – 10% of Canadians use payday loans. In fact payday loan companies made 1.3 million loans in 2013.
What’s the good news for victims of bad credit payday loans companies Cash Store or Instaloans?
I was astounded to learn that 100,000 Ontarians borrowed from Cash Store (no longer in existence) or Instaloans. Anyone in Ontario who took out payday loans or lines of credit (which were payday loans in disguise) from Cash Store or Instaloans after September 1, 2011 can take part in a $10 million class action law suit to recover some of the illegal fees and interest charged.
How can I get in on the class action law suit against Cash Store or Instaloans?
Jon Foreman, partner at Harrison Pensa LLP, is representing class action members. They have set up a website called takeyourcashback.com and there is a form which must be completed by the Claims Filing Deadline, October 31, 2016.
How much money will I get back?
It’s not certain. If your claim is approved you’ll be eligible to receive at least $50. However, if you took out multiple loans you could receive more. The final amounts will depend on how many claims are submitted.
The question we are most asked is, “How do I improve my credit score?”. The next question is, “Is there a Canadian credit score calculator and how does it work?”. Our answer is always in explaining how the Canadian credit score calculator comes up with your credit score and what each part of the calculation is. Once you understand the calculation, it is much easier to improve your credit score.
While it seems obvious that the credit decision-making process uses your credit report and credit score in making the decisions about loans, there are other less obvious uses for your credit history. Others might use your credit information to make decisions about other financial services and products. Poor credit could lead to you paying hundreds, or even thousands, of dollars more over your lifetime.
Canadian credit score calculator – what is the calculation?
The two credit reporting agencies, Equifax Canada Co. (“Equifax”) and Trans Union of Canada, Inc. (“Trans Union”) use complicated computer algorithms to calculate your credit score. The most common credit scores calculators use either the FICO method, from Fair Isaac Corporation, or your Beacon score, which is a calculation that Equifax uses. A FICO or Beacon credit score can range anywhere from 300 to 850. the 5 elements that go into the calculation are:
Length of credit history
Types of credit
This table shows the weighting of the five categories, as well as the total possible points available in each category:
Length of credit history
Types of credit
The most important of the five categories is your payment history, meaning how well you pay your debts. There is a heavier emphasis on recent payments as opposed to older ones. Things like bankruptcy, foreclosure, accounts sent to collection agencies, and repetitive late payments are all considered negative events and will lower this part of your score.
Amounts owed is how much you owe on your credit cards and loans, in other words, your outstanding debt balance. Also considered is your total credit limit, along with the part of your credit limit that you have used.
Length of credit history
The length of your credit history plays a role in calculating your credit score as well. The longer you have had a credit history, the better your score in this category will be.
New credit, or more specifically new credit applications, plays a role in calculating your credit score. As the number of recently opened credit accounts goes up, your score in this category will go down.
Types of credit
The last factor used to calculate your credit score is the different types of credit you have. Usually the more the better, except for consumer finance accounts. Consumer finance companies typically grant loans to people with poor credit histories so having these types of accounts defines you as “risky”, thus lowering your score in this category.
Canadian credit score calculator – what does my calculation mean?
Here are the possible Canadian credit score calculator ranges, and what they mean:
700-850 A “very good” or “excellent” credit score. You should not have a problem getting a loan from a lender.
680-699 A “good” credit score. Though not considered very good or excellent, most lenders will not have a problem giving you a loan.
620-679 An “acceptable” credit score. Lenders will most likely need you to give supporting information about your income, time in your current home, bank statements, time with current employer, etc.
580-619 An “okay” credit score. 620 is the prime rate cut-off point, so you can expect to pay a higher interest rate with any lender who is willing to give you a loan.
500-579 A “bad” credit score. You may still be able to get a loan with a score like this, but you will most definitely be paying a higher interest rate.
350-499 A “very bad” credit score. You can still get a loan with this low of a credit score, but you may be better off turning it down and cleaning up your credit score over the next several years. Otherwise, the interest on the loan may be too difficult to handle.
As your credit score decreases, the ability for you to get credit, or get it on the most ideal terms, decreases greatly. Therefore, people with lower credit scores have to pay more in fees and interest rate for loan products. The higher your credit score, the more money you will save by being given the best rates and credit deals.
Canadian credit score calculator – how does my credit score stack up?
“The general score that you’re aiming for is 700,” says Michael Lofquist, marketing and communications manager at Equifax. However, the average Canadian credit score is about 650 according to First Foundation Residential Mortgages.
So if you have a credit score higher than 650, then you know that you are better than the average Canada.
Canadian credit score calculator – what can I do if I have too much debt and too low a credit score?
Please, please, please, do not fall prey to the “guaranteed bad credit loan” industry. So, if you have too much debt that is causing you too much stress because you cannot repay it, don’t worry about your credit score. The most important thing is to get into a place where you can manage your debt and regain y our health and control of your life.
You should book a meeting with an experienced licensed insolvency trustee first. (The first consultation is free.) Ira Smith Trustee & Receiver Inc. brings a cumulative 50+ years of experience dealing with diverse issues and complex files and we deliver the highest quality of professional service.
Contact us today and Starting Over, Starting Now you’ll be well on your way to overcoming your financial difficulties. Ultimately your credit score will thank you for having fixed the problem once and for all.
THIS VLOG WAS INSPIRED IN PART BY OUR eBOOK – PERSONAL BANKRUPTCY CANADA: Not because you are a dummy, because you need to get your life back on track
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Amazon Prime getting into the US student loan business but not student debt counselling
As you will see from this blog, there is a huge need for student debt counselling, as new entrants into the student loan business are enticing students with new offers. The financial services industry in the United States is changing rapidly with many non-traditional companies getting into the game. The latest is Amazon Prime. They’re now offering discounted student loans to Amazon Prime Student customers through a partnership with Wells Fargo.
Although this type of program is now only available in the U.S., and while we typically discuss things that affect Canadians, we felt that anything that could cut the cost of a student loan was worth reporting. However, keep in mind that this does nothing for student debt counselling so that students are better able to handle debt. It is merely a financial opportunity with little risk as further described below.
Our previous student debt counselling and student loans blogs and vlogs
Student loan debt is such a serious issue that we’ve written a series of blogs and vlogs on the subject.
According to the Canadian Federation of Students (CFS), the impact of Canada student loan debt is that today’s students are the most indebted generation in Canadian history. They can certainly use student debt counselling.
The average student graduates with over $28,000 of debt. Tuition fees and living costs continue to rise, and there’s no solution in sight. The CFS has been lobbying the federal government for students, to no avail. And it’s not better south of the border where tuitions and the student loan debt is proportionally greater.
Perhaps CFS should also lobby the provincial governments to include student debt counselling as a mandatory grade 12 subject in high school!
Is Student Debt Counselling Being Offered to Amazon Prime Student customers?
Through the partnership, Wells Fargo is not offering any student debt counselling, but is offering student loans Amazon Prime Student Customers (not students whose parents have a Prime membership of their own):
A 0.50% interest rate discount
This can be added on top of a 0.25% interest rate reduction for enrolling in an automatic monthly loan repayment plan
In addition, any interest rate discount tied to another Wells Fargo global promotion
Students can apply for a new student loan or refinance existing student loans.
Why would Amazon Prime want to get into the student loan business
Of course this partnership benefits Amazon and Wells Fargo financially. However, it does not give any education to college students through student debt counselling. Amazon Prime will no doubt have many more sign ups and Wells Fargo will have access to many more potential borrowers. But the bottom line is that the student will benefit by having access to discounted student loans. Hopefully someone in Canada will also find a way to help lighten the student loan debt load.
However, there is even a greater reason. In Canada, a bankruptcy discharge will only end student loans if you’ve ceased to be a full or part-time student for more than seven years and either declare personal bankruptcy or make a debt proposal to your creditors, most likely through a consumer proposal.The only other option is to attempt to seek from the Court relief because of undue hardship, but this is very difficult, if not impossible.
If you think it is difficult under Canadian law to end student loans, it really is impossible under the US Bankruptcy Code. The leading case in the US, which subsequent decisions have followed, is, Marie Brunner v. New York State Higher Education Services Corp. (October 14, 1987, #41, Docket 87-5013). This case set a precedent for defining the concept “undue hardship” in bankruptcy discharges of student loans.
Suffice to say that if a bankrupt in the US is seeking a discharge of all of his or her debts, including student loan debt, the mere fact that they can afford to hire and pay an attorney can be used as evidence that if they have funds to pay legal counsel, then there is no undue hardship for them to agree to a repayment plan on account of the student loan debt after they get their discharge from bankruptcy and their non-student loan debts.
Since the debt will in almost every case always be owing and payable, it is a safe bet for Amazon Prime.
Are you in need of student debt counselling or credit counselling?
No matter the cause of your serious debt issues, The Ira Smith Team is here to help. Debt is not insurmountable; there are always options. With proper counselling, immediate action and a solid plan, we can help get your life back on track Starting Over, Starting Now. Our trustees are also certified in credit counselling. Give us a call today.
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Non-profit credit counselors are the good guys in the debt relief industry, which is otherwise full of players that are bursting with lies, scams and sketchy practices.
We have done the consumer proposal or bankruptcy of many people who first paid upwards of $2,500 to for profit “counselors” who ultimately did no more than pass the people on to a licensed insolvency trustee. They could have received a better service just going straight to a trustee for a free consultation.
Contrary to popular belief, a licensed insolvency trustee by law must first evaluate to see if the person can AVOID bankruptcy. So as you can see, not all debt management programs and companies are equal.
Do debt management programs work for everyone?
Debt management credit counselors need to acknowledge that their signature offering — the debt management plan — doesn’t work for everyone.
Debt management programs are promoted as the best bankruptcy alternative and an affordable way to pay back credit card debt. Borrowers make payments to the counseling agency, which then pays the creditors. Thanks to standing agreements that counselors have with credit card companies, the plans typically cut the interest rates, fees and payments that borrowers need to make. Full repayment of the debt often takes four to five years.
If borrowers make all the payments and repay the principal completely, debt management programs have much less impact on their credit scores than other types of debt relief.
Debt management programs were rampant in the United States
During the financial crisis in 2007-2009, debt management programs could be found on infomercials day and night. There were so many shady characters in the industry, the States ultimately had to enact laws to reign the shady operators in.
Needless to say, the shady operators did not give any worthwhile service for the fees they charged. But even the legitimate and well-meaning credit counselors mistakenly believed that their debt management programs were good for everyone. What I have found in my experience as a licensed insolvency trustee, is that no two people’s situations are the same, and one size does not fit all.
The story of Francine Bostick
Francine Bostick, a woman who lives in Kansas and paid off more than $120,000 in credit card debt in 2012, says she emerged with credit scores good enough to buy her first-ever new car. “It was exciting and made me a little nervous when they did the credit check,” says Mrs. Bostick, 66. “We got 0 percent interest for the life of the loan.”
This sounds great, but, yet Mrs. Bostick is also an example of what may be wrong with credit counseling because:
Her husband Jim Bostick had Alzheimer’s disease and she was his caregiver
Francine worked 12-hour days to earn the money to make debt payments while also caring for her increasingly incapacitated husband, who died in May
She had to do this when others her age were retiring
She never got to spend quality time with Jim before his death
If she lived in Toronto or Vaughan, what would I have advised?
Francine had never been bankrupt before and she did not have any significant assets. She and Jim rented – they did not own a home. In Francine’s case, she would not have had to make any surplus income payments in a bankruptcy. Although a consumer proposal is a great alternative to bankruptcy, Francine could not afford to complete one by only working one job in an 8-hour day, but she and Jim would be able to live on those earnings and their pensions.
In this case, I would have advised Francine that bankruptcy was a better alternative because:
Francine could have spent more time with her dying husband – that she can never get back now
She would received an automatic discharge after 9 months, and not worked so hard for several years
Just like in bankruptcy, she had no access to credit while in her debt repayment program
She could have begun rebuilding her credit faster after the bankruptcy
There is little leeway for missing a payment in debt management programs – many times if you miss 1 payment the entire program ends
Some people find that they simply can’t afford the payments on debt management programs, while others drop out because of setbacks such as job loss, unexpected expenses or illness
If you cannot fully complete the debt management programs, creditors can resume collection efforts, and borrowers also have flushed thousands of dollars down the drain and might not have enough money left to live on
What should you do if you have too much debt and are considering one of the debt management programs?
So, those thinking about debt management programs should book an appointment with an experienced licensed insolvency trustee first. (The first consultation is free.) That way, they will be able to understand the choice they make.
We have handled many insolvency cases of people and companies where an investment fund with negative returns, combined with a highly leveraged balance sheet, was a major reason for financial problems. This week we’re continuing our series on confusing financial terms that can cost you more than you bargained for. As trustees we see people in financial distress from a variety of reasons, but there seems to be a commonality – most people find financial lingo confusing.
This confusion magnifies when it relates to an investment fund they have bought, but don’t really understand. We have handled many cases where people having read articles about the tax and investment benefits of leverage, borrowing for investment purposes, do so by borrowing against the family home to invest in financial products they don’t understand!
Sometimes, if they have invested too heavily, not only is their investment at risk, but so is their family home! This series of blogs should clarify many confusing financial terms and with this knowledge help you to make more informed financial decisions. We’ve previously discussed Balloon Payments and APY – Annual Percentage Yield. Our current topic is expense ratios.
What is an investment fund expense ratio?
An expense ratio is a percentage of your investment fund or ETF that’s charged annually to cover its operating costs. These operating costs may include administrative charges, management fees, custody costs, legal expenses, marketing and transfer agent fees among others.
How can I find out what the expense ratio is on an investment fund that I’m interested in investing in?
Every investment fund has a prospectus (a legal document providing details about an investment offering for sale to the public) containing the expense ratio. The prospectus is sent to shareholders every year and shared with potential investors. And, since we live in the information age, a fund’s expense ratio can also be found on financial websites and in newspapers (both online and in print).
How can an expense ratio negatively impact my investment funds?
The expense ratio directly reduces an investment fund’s returns to its shareholders, which reduces the value of your investment. The lower your costs are the greater your investment’s return will be. Every dollar you pay in operating costs is one dollar less that’s earning money for you. Even small differences in fees can impact on your investment over time.
What if my investment fund heads south and I can no longer service my debts?
The reason is simple. The Ontario economy is not dependent on higher oil prices for its strength.
When I think of subprime lending, I think of the meltdown in the US economy in 2007 and 2008, and all the people who lost their homes. As can be seen in this year’s Presidential election, there is a lot of unhappiness in the US about many things, including jobs, wages and the economy. Globally everyone is looking for change; Canada’s Liberal party under Justin Trudeau and their sweep to power and the recent Brexit vote, are merely two recent examples of the global wish for change.
Recent TransUnion data on subprime Canada lending
Recent data shows that subprime Canada lending, is not having an effect on the Canadian economy and certainly is not hurting the hot GTA real estate market or Ontario. The data points out some interesting trends:
subprime Canada lending is becoming a bigger part of Canada’s economy
the average amount owed on Canadian credit cards rose by 1.8 per cent over the past year, but among subprime borrowers, it rose 5.7 per cent in a year
among less risky borrowers with good credit ratings, credit card balances have been declining, by 1.5 to 4.7 per cent over the past year
“Average balances haven’t moved much, if you consider all Canadians together,” TransUnion director of research and analysis Jason Wang said in a statement.
“But once we segment by risk tiers, we find a gradual shift where subprime consumers are increasing their share of the debt load relative to the low-risk population.”
The TransUnion research included the following types of subprime lenders and subprime lending:
subprime mortgage lenders
subprime personal loans
subprime auto lenders
subprime credit cards
Subprime Canada delinquency rates
There are also regional differences in delinquency rates. The TransUnion data shows that delinquencies shot up in Alberta by almost 12 per cent, but declined in Ontario (and BC, who also has a hot Vancouver real estate market). Despite the growth in subprime Canada lending, TransUnion found that Canada has a generally healthy and well-functioning consumer credit marketplace, at least outside oil-exporting regions.
So what does this subprime Canada lending data mean
When you combine the catapulting delinquency and insolvency rates in the oil patch, and see that higher credit score people outside of the oil patch are reducing debt and their delinquency rates, it points out the regional disparities. It shows how the oil patch economy is suffering due to low oil prices. It shows me that sustained low oil prices will only keep the hurt going in the provinces that are dependent on higher oil prices for jobs and consumer spending.
What should you do if you have too much debt and can’t borrow more even in subprime Canada?