MANULIFE DEBT SURVEY: ARE YOU PART OF THE MAJORITY OF CANADIANS SCARED ABOUT RETIREMENT?

Manulife debt survey:  Introduction

The Manulife debt survey 2016 published recently shows that the results continue the trend of earlier Manulife surveys.  We have written about the Manulife debt survey findings before in some of our blogs including:

Manulife debt survey:  Majority of Canadians have no savings

The findings in the current debt survey shows that Canadians are continuing to rely upon debt and not building up any savings to speak of.  The highlights from the 2016 Manulife debt survey are:

  • almost 4 in 10 homeowners were “caught short” at least once in the past 12 months in that they didn’t have enough money in their bank account to cover expenses
  • 6 in 10 homeowners lack confidence that they’ll be able to maintain their lifestyle in retirement
  • a weaker Canadian dollar had an impact on over half of homeowners’ daily lives. It affected Canadians more on the spending and consumption behaviours than saving, debt repayment and investment activities
  • 1 in 4 homeowners indicated they expect their home equity will make up over 80% of their household wealth at retirement
  • 1 in 4 homeowners in their 50s expect their home equity will make up over 80% of their household wealth at retirement

Manulife debt survey:  What does it mean for Canadians?

What this means is that on average:

  • Canadians’ wealth is composed of their equity in their homes and nothing else
  • spending habits are such that they have no savings to speak of
  • if faced with an emergency people couldn’t put their hands on a few thousand dollars of cash quickly
  • baby boomers have not saved for retirement, other than for the equity in their home;
  • millennial’s see their fate as the same as the baby boomers
  • on average, Canadians’ spending habits are such that many times they do not have enough money to live before the next payday
  • Canadians can barely make ends meet living paycheque to paycheque

Manulife debt survey:  5 simple questions to ask yourself

The dangers are obvious.  With everyone’s wealth tied up in the equity in their homes, most Canadians are cash and investment poor.  Canadians worry that they won’t be able to live their current lifestyle in retirement.  Also, without cash and investment savings, upon retirement, homeowners will have to sell their home to have the necessary cash to live on.  Ask yourself the following:

  1. Is all of my wealth tied up in the equity in my home?
  2. Am I living paycheque to paycheque?
  3. Do I barely have enough cash until next payday?
  4. If faced with an emergency, would I have to try to borrow more money because I don’t have a few thousand dollars available?
  5. Do I have too much debt?

Manulife debt survey:  Do you have no cash and too much debt?

If you have answered yes to any of these questions, there is help available for you.  If you’re like many Canadians who don’t have a plan to deal with debt repayment, you need professional advice. Contact Ira Smith Trustee & Receiver Inc. before your debt load becomes critical. The earlier you begin to deal with it, the more options you’ll have. We approach every file with the attitude that financial problems can be solved given immediate action and the right plan. Starting Over, Starting Now you can live a debt free life.

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Manulife debt survey 2016

CREDIT SCORES ONTARIO: USE YOURS TO SCORE THAT DREAM DATE!

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Credit scores Ontario:  What is it?

Credit scores Ontario is a judgment about your financial health, at a specific time. It indicates the risk you represent for lenders, compared with other consumers. There are many ways to work out credit scores. The credit-reporting agencies Equifax and TransUnion use a scale from 300 to 900.

In Canada, the magic number is probably 650.  A score above 650 will likely qualify you for a standard loan while a score under 650 will likely bring difficulty in receiving new credit.

Credit scores Ontario:  How is it calculated?

The credit score formula takes all or most of the following into account:

  • Your payment history
  • The total amount you owe
  • Length of your credit history
  • New credit accounts
  • New credit inquiries, whether approved or not
  • Types of credit in use

Credit scores Ontario:  Good credit scores do have sex appeal

A good credit score has shown that money does play a big role in the dating world; it is a reality. It’s sad but true; your income does play a big part in how attractive you seem to a potential partner. And, did you know that good credit scores have sex appeal?

Credit scores Ontario:  Like it or not, a good credit score makes you attractive

There’s an old joke that says there’s no such thing as an ugly man in a Ferrari. But, let’s be honest, if you were on an online dating site and saw a potential date who was attractive but unemployed or in what you perceived as a low paying job, would you reach out to that person?

Conversely, if you saw someone who wasn’t movie star attractive but reported a high income or listed their profession as CEO, lawyer or doctor, wouldn’t they look a lot better to you?

Credit scores Ontario:  Credit score dating backed by scientific studies

Don’t take my word for it. This is all backed up by science. There are many studies on the subject including a recent one co-authored by behavioural economist Dan Ariely who in the journal Quantitative Marketing and Economics reported:

  • Men and women prefer a high-income partners over low-income partners
  • This income preference is more pronounced for women

Credit scores Ontario:  Beware – high income is only one part of it

Income only tells part of the story. Find out how they spend their money. Are they living within their means? They may have a big income but is it enough to cover the expenses of the fancy sports car, big house and exotic vacations? Big earners, celebrities and even Presidents (and President-elects!) declare bankruptcy too:

Credit scores Ontario:  what to do about too much debt

We aren’t in the dating business, but we can help you get your debt issues under control. Give the Ira Smith Team a call today so that Starting Over, Starting Now you can live a debt free life, and you may have better luck dating.

#VIDEO – CONSUMER PROPOSAL VS BANKRUPTCY: DO YOU REALLY NEED TO KNOW BEFORE YOU START HOLIDAY SPENDING?#

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Consumer proposal vs bankruptcy

Consumer proposal vs bankruptcy:  Introduction

The holiday shopping season is upon us and the first sign that you are in financial trouble is if you truly need to learn about consumer proposal vs bankruptcy BEFORE you begin your holiday shopping!  If you have already recognized that you need to know your options in dealing with your debt before you start putting holiday gift purchases on your credit card, I suspect that the New Year will become the time when you begin taking positive action to reduce your debt and gain back control over your life.

Consumer proposal is an alternative to bankruptcy. Although similar in many respects, there are some major differences. Consumer proposals are available to people only whose total debts do not exceed $250,000, not including debts secured by their principal residence. Division 1 proposals are available to both businesses and people whose debts exceed $250,000 (excluding the mortgage on their principal residence).  The focus of this vlog is consumer proposal vs. bankruptcy.

Consumer proposal vs. bankruptcy:  What are consumer proposals?

Consumer proposals are formal ways governed by the Bankruptcy and Insolvency Act (BIA) available only to people. Working with a licensed insolvency trustee acting as the consumer proposal administrator, you make a proposal to:

  • Pay your creditors a percentage of what you owe them over a     specific period not exceeding 60 months
  • Extend the time you have to pay off the debt
  • Or a mix of both

Payments are made through the trustee, and the trustee uses that    money to pay each of your creditors. The consumer proposal must be completed within 5 years from the date of filing.

Consumer proposal vs bankruptcy:  What are the advantages of a consumer proposal?

The advantages of a consumer proposal are:

  • You keep all of your assets
  • Actions against you by unsecured creditors, such as wage      garnishments will stop.
  • Unlike informal debt settlement, the consumer proposal is a     forum where all of your creditors must deal with your restructuring
  • You don’t have to declare bankruptcy

Consumer proposal vs bankruptcy:  Who qualifies for a consumer proposal?

A consumer proposal is available to people whose total debts do not exceed $250,000, not including debts secured by their principal residence.

Consumer proposal vs bankruptcy:  The bankruptcy process

Before you decide to declare bankruptcy, contact a professional to discuss all of your options. A trustee is a highly skilled, professional licensed by the federal government that can evaluate your situation and present all the options available to you. If bankruptcy is the most helpful for your particular circumstance, we can administer the bankruptcy process.

Consumer proposal vs bankruptcy:  How to file for bankruptcy?

In order to file for bankruptcy you must engage a licensed insolvency trustee, an individual licensed by Industry Canada to administer the bankruptcy process. The 10 steps below are a guide of the bankruptcy process.

Consumer proposal vs bankruptcy:  The 10 steps of the bankruptcy process

  1. Contact a licensed insolvency trustee and attend a meeting with him or her to talk about your personal situation and your options including if it is possible for you to avoid bankruptcy.
  2. Work with the trustee to complete the required forms. The     trustee will then file the bankruptcy with the Office of the Superintendent of Bankruptcy (OSB).
  3. The trustee notifies your creditors of the bankruptcy.
  4. You attend a meeting of creditors, if one is called.
  5. You attend two counselling sessions.
  6. Subject to your provincial exemptions, the trustee sells your     assets; you may also have to make surplus income payments to the trustee.
  7. In certain circumstances, you may have to attend an         examination by an officer at the OSB.
  8. The trustee prepares a report to the OSB describing your         actions during the bankruptcy.
  9. You attend the discharge hearing, if required.
  10. You get your discharge from your bankruptcy and then the trustee completes the administration, including paying a dividend to your creditors, if available.

Consumer proposal vs bankruptcy:  Move on with your life

Both a successfully completed consumer proposal and obtaining your discharge from bankruptcy lets you get back on the road to financial health, relieve the stress you face and bring you:

  • Relief from harassing calls from debt collectors;
  • Freedom by getting out from under garnishments;
  • The ability to live better than just hanging on one payday to     the next;
  • Improved credit ratings; and
  • Improved health and well-being.

Ira Smith Trustee & Receiver Inc. offers a full range of insolvency services to people facing financial crisis. Whether you need help with a proposal to your creditors to avoid bankruptcy, financial counselling or advice about bankruptcy  options, our goal is to make sure that you understand the process, your choices, and what steps will get your life back on track.

Call us for your free first consultation.  Contact Ira Smith Trustee & Receiver Inc. today.  All you have to lose is your debt!

MANAGING HEALTHCARE EXPENSES IN RETIREMENT: ARE CANADIANS PROPERLY PREPARED?

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Managing Healthcare Expenses in Retirement

Managing Healthcare Expenses in Retirement:  The Myth

We Canadians tend to wrap ourselves with our secure universal healthcare program without paying any mind to the fact that some things are not covered (and coverage varies from province to province). Some of the items not covered or only partly covered may include:

  • Prescription drugs
  • Eye glasses and contact lenses
  • Para-medical services like physiotherapy
  • Dental Care
  • Dentures

Unfortunately the older we get, the more likely it is we’ll be availing ourselves of these types of services. However, we don’t seem to be saving for these expenses.

Managing Health Care Expenses in Retirement:  What should the average Canadian be saving?

According to the Canadian Institute for Health Information costs paid out-of-pocket for healthcare expenses not covered by our provincial plans are on average:

  • $2,700 for people between the ages of 55 and 80
  • More than $5,600 a year for those 80+

The time to start managing healthcare expenses in retirement is now. By 2063 it’s estimated that 20% of Canadians will be 65 and older. And the cost of healthcare is only going to rise making managing healthcare expenses in retirement more challenging.

If you’re living paycheque to paycheque or are a senior on a fixed income, how will you come up with the money to pay for prescription drugs or para-medical expenses? Sadly there are those who are denying themselves their medical necessities because the money is just not there. Or, they’re accumulating debt month over month to try to keep up with expenses. Neither one of these options is a good solution.

Managing healthcare expenses in retirement:  What Can You Do If You Have Too Much Debt?

If you’re teetering on the brink of insolvency, Ira Smith Trustee & Receiver Inc. is here to throw you a life jacket. There is no reason to drown in debt when help is at hand. Give us a call today and meet with us for a free, no obligation consultation. We’ll evaluate your situation and come up with a solid plan so that Starting Over, Starting Now you can be on your way to debt free living.

#VIDEO-ARE BANKRUPTCY FEES TAX DEDUCTIBLE? IT DEPENDS WHO YOU ARE!#

Are bankruptcy fees tax deductible:  If you would like a free copy of our eBook:  “Cost of Claiming Bankruptcy in Canada” – please CLICK HERE

Are bankruptcy fees tax deductible:  Introduction

We are often asked the question “are bankruptcy fees tax deductible?”.  This vlog attempts to answer that question for the various types of Canadian insolvency proceedings.

I caution that we are not income tax advisors;  I am a licensed insolvency trustee.  This vlog does not attempt to and does not replace expert income tax advice.  If you have a specific situation, you should get advice from your professional income tax advisor.

Are bankruptcy fees tax deductible:  What does Canada Revenue Agency say?

Costs incurred in a bankruptcy filing can be categorized as either: (i) incurred for the purpose of gaining or producing income from a business or property or; (ii) incurred for capital or non income earning reasons. Another way of saying it is a taxpayer cannot deduct personal expenses but can deduct those categorized as business expenses.  So are bankruptcy fees tax deductible?  It depends who you are.

Are bankruptcy fees tax deductible:  Personal bankruptcy and (consumer) proposal restructuring

If you are the individual person who has too much debt and either restructures under one of the proposal provisions to avoid bankruptcy, or goes bankrupt, then your real obligation is not to pay professional fees.  Rather, you are making payments to the licensed insolvency trustee in a restructuring to settle all of your debts or you have given up your non-exempt assets and may also be paying part of your monthly income as surplus income to your licensed insolvency trustee.

Under either scenario, the licensed insolvency trustee obtains their fee under the Bankruptcy and Insolvency Act (BIA).  You as the individual debtor are not paying bankruptcy expenses to earn income.  Therefore you are not entitled to any tax deduction for the amounts and property given to the licensed insolvency trustee.

Are bankruptcy fees tax deductible:  Corporate restructuring

Corporations attempt to restructure under either the proposal provisions of the BIA or the restructuring provisions of the Companies’ Creditors Arrangement Act (CCAA) for the purpose of avoiding bankruptcy and the end of its business.  The purpose of the restructuring attempt is to stay an active corporation, preserving jobs, continuing to  earn income and pay income tax.  In this case, professional fees paid to legal and financial advisors would be tax deductible for the company restructuring.

As this vlog is only to answer the questions are professional fees tax deductible, I am not addressing the issue of the income tax treatment of the corporate debt forgiven in a successful restructuring.  That is where I turn to professional tax advisors for the answer.

Are bankruptcy fees tax deductible:  Corporate bankruptcy

In a corporate bankruptcy, the bankruptcy corporation’s assets would be taken over by the licensed insolvency trustee handling the bankruptcy, subject to the interests of the secured creditor(s) and trust claimants, if any.  Therefore, there are no fees paid by the bankrupt corporation for the purpose of earning income.  Hence, there is no tax deduction for professional fees to be taken on the bankrupt corporation’s final income tax return.

Are bankruptcy fees tax deductible:  Receivership and secured creditors

Receivership is a remedy for secured creditors to enforce security. The secured creditor whose loan is in default, when in a place to enforce its security, appoints a receiver to take possession of the assets, formulate a plan to maximize the sale value, sell the assets and remit the proceeds to the appointing secured creditor, up to the amount outstanding under the security.  The company in receivership does not incur professional fees, but the secured creditor does;  to both legal counsel and to the receiver.  Those professional fees incurred in the normal business of the lender are therefore tax deductible.

I will leave the topic of the income tax consequences for a secured creditor who suffers a shortfall on when realizing upon assets covered by its security to the professional tax advisors.

Are bankruptcy fees tax deductible:  Purchaser of assets

Many times in a corporate restructuring, the restructuring plan calls for the sale of assets.  In both a bankruptcy and receivership, the assets will be sold.  The purchaser of assets will in such cases be a corporation.  That purchaser corporation will need insolvency and income tax professional advisors in structuring and paying for the asset purchase.  Those professional fees are tax deductible to the purchaser.

Are bankruptcy fees tax deductible:  Unsecured creditors

In any of the insolvency processes discussed in this vlog, there will certainly be many unsecured creditors.  The major unsecured creditors, especially in corporate insolvency proceedings will want to consult with the professional advisors as to their rights and remedies when faced with an insolvent debtor.

Sometimes unsecured creditors make application to Court to have a Bankruptcy Order made against a debtor.  Both legal and trustee advice is necessary.

In either case, the professional fees are paid in the normal course of business and will be tax deductible.

Are bankruptcy fees tax deductible:  Do you need insolvency advice?

If you need insolvency advice, either because you or your company have too much debt, or one of your major customers are experiencing financial problems, the professional fees may very well be tax deductible.  The Ira Smith Team acts on behalf of both debtors and creditors.  We have successfully restructured many people and corporations, thereby allowing them to avoid bankruptcy.  We have also acted on behalf of both secured and unsecured creditors both in an advisory role and an enforcement role.

Contact a debt expert – a professional trustee – who can help get you on solid financial footing Starting Over, Starting Now. Ira Smith Trustee & Receiver Inc. can help keep you from financial ruin with immediate action and the right plan. Call us today for a free, no obligation consultation.

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HOW TO GET ON A CASH FLOW BANK ROLL TODAY

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HOW TO GET ON A CASH FLOW BANK ROLL TODAY

Cash flow bank roll:  Introduction

By the nature of our work, we deal daily with people and companies that have not built up a sufficient or any cash flow bank roll.

Do you ever feel like you have a hole in your wallet? Does your company keep needing to borrow more and more?  Where did the money go? Understanding and managing your cash flow, both in your personal life and for your company, can answer these questions for you. Cash flow is another one of those financial terms like Balloon Payments, APY – Annual Percentage Yield and Expense Ratios that are often misunderstood.

Cash flow bank roll:  What is cash flow?

Cash flow is the money that moves (or flows) in and out of your account. Cash inflow can include anything that brings in money – salary, sale of assets like a house or car, interest from savings accounts, dividends from investments and the like. For your company, it is the sale of the goods or services that it supplies.

Cash outflow represents all expenses – mortgage payments, rent, utilities, car expenses, Smartphone, Internet, groceries, entertainment, transportation, (and for your company wages paid and other corporate expenses).

Cash flow bank roll:  How can you calculate cash flow?

Cash flow can be calculated by a simple equation:

Total Income – Total Expenses = Net Cash Flow[1]

This equation will tell you if your cash flow is positive, negative or neutral.

Cash flow bank roll:  Types of cash flow

Positive cash flow tells you that you have more money flowing in than flowing out. This is generally an indicator that you are living within your means.  This is what produces the cash flow bank roll!

Negative cash flow tells you that you have more money flowing out than flowing in. This is a good indicator that you are living beyond your means and are accumulating debt – never a good sign and definitely no cash flow bank roll for you.

Neutral cash flow is more of a theory than a reality. It’s pretty impossible to have exactly the same amount of money flowing in as flowing out.  This will produce the cash you or your business needs, but won’t make a cash flow bank roll for you.

Cash flow bank roll:  Where did the money go?

Cash flow can tell you how much is coming in and going out but to decide where the money’s going you need to keep a detailed budget. This is something we strenuously recommend for everyone. A budget is a key element for maintaining financial health.

If you feel like you have a hole in your wallet or your company keeps needing to borrow more and more and are in a negative cash flow situation, give the Ira Smith Team a call immediately. With immediate action and a solid financial plan for managing your debt problems you’ll be on your way to financial health Starting Over, Starting Now.

NOTE:  [1] Income and expenses have to be adjusted for non-cash items such as depreciation, amortization and items either sold or bought on credit.  When you receive or pay out the cash, it then hits your cash flow formula.

#VIDEO – DEBT INTO RETIREMENT: DO YOU NEED RETIREMENT SOLUTIONS?#

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We hope you enjoyed our video – DEBT INTO RETIREMENT: DO YOU NEED RETIREMENT SOLUTIONS? If you would like a free copy of our eBook “Cost of Claiming Bankruptcy In Canada”, please subscribe, or confirm your existing subscription, to our blog by  CLICKING HERE

The trend of debt into retirement

The biggest trend in debt into retirement among baby boomers is having a home mortgage in retirement. Financial advisers warn that this new trend could have serious lifestyle consequences for seniors. We have written on the topic of seniors in debt before:

Have seniors previously taken debt into retirement?

The baby boomers are the first generation carrying a mortgage into retirement; that’s never happened before.  Think about it. Our parents typically bought one house they lived in their whole lives. They paid it off and it was a priority to pay off the house.

Today, because of low rates and the wish to use the home as much for financial gain as for shelter, people typically move up two or more times.  The previous generation viewed their home as mainly shelter, and looked at paying off the mortgage as forced savings.  With the mortgage gone, our parents then continued saving for a “rainy day”.  Memories of the great depression were vivid and alive in their parents’ minds, who passed on the behaviour and mentality that saving was important.

Has the world changed causing seniors taking debt into retirement?

Today, the stock market crash of the late 1980’s is but a distant memory, let alone the feeling of depression.  The post-World War II growth years, followed by boom and recession times of the 1970’s through the 1990’s, doesn’t really exist anymore.  Rather, in our global economy, growth is slower, so a slowdown in the economy is also muted.  The need to save as a philosophy has also taken a back seat, and given the price of homes and the size of the related mortgages, savings today in a growing family is also a near impossibility.

Risks from taking debt into retirement

Two of the risks of having debt into retirement are:

  1. Delayed retirement plans as the baby boomers must keep working to have enough income to service and repay that debt.
  2. If you become injured or sick and cannot work, there won’t be the income to service and repay the debt.

Solutions for taking debt into retirement

So, baby boomers much find ways to mitigate the cost of debt into retirement and being able to repay that debt in a reasonable time period.  Some of the more common ways are:

  1. Prior to retirement and after spending the large costs of children and family, while you are still experiencing higher earning years, is to shorten the amortization period of mortgages so that more money goes towards principal.
  2. You can increase the frequency of your mortgage and other debt payments from once a month to once every two weeks, thereby reducing principal faster.
  3. Refinance debt with higher interest rates, such as credit card debt, with mortgage or line of credit financing and then use strategies such as the two listed above to repay that debt.
  4. Adjust your budget so that you are not spending more than you earn, and allow the necessary part of your after-tax income pay off your debt.

What to do if you fear taking too much debt into retirement

To have a free checkup on your debt in retirement, and to look at ways of solving it while avoiding bankruptcy, contact Ira Smith Trustee & Receiver Inc. today.  Our team of professional trustees can help you manage your financial crisis and get you back on your feet Starting Over, Starting Now.

ARE YOU FACING PERSONAL FINANCIAL RUIN?

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Personal financial ruin:  Introduction

Thousands of Canadians are facing personal financial ruin.  We recently published a vlog #VIDEO-MORE CANADIAN WORKERS LIVING PAYCHEQUE TO PAYCHEQUE AGONY: SCARY NEW SURVEY RESULTS# based on the recent survey by the Canadian Payroll Association. You may not think that $200 sounds like a lot of money but the information shows that 56% of those polled would be close to negative cash flow if they took on another $200 in monthly debt payments.

This is alarming enough on its own, but just six months ago it was 48% who couldn’t take on more debt burden.  What this also means is that if those same people had an emergency where they had to come up with another $200, they couldn’t.

The potential for personal financial ruin is increasing

That’s an 8% increase in six months. According to the Canadian Payroll Association, 48% of Canadians couldn’t make ends meets if they missed just one paycheque. And Statistics Canada reports that household debt as a ratio of disposable income rose to 167.6% in the second quarter from 165.2% in the first quarter. These are statistics that we just can’t ignore.

Interest rates will increase one day and will cause personal financial ruin

The number of Canadians teetering on the edge of insolvency is staggering. Credit rating agency TransUnion released the results of their latest survey.

  • 718,000 Canadians can’t even absorb a 25-basis point increase in interest rates without being in a negative cash flow situation
  • One percentage point would drive 917,000 over the edge

Canadians who believe that low-interest rates are here to stay are playing with fire. Historically interest rates have gone up and down, and they will at some point begin to rise. Using credit, even cheap credit, to cover monthly expenses is not a good financial plan; it’s a recipe for disaster. What’s going to happen if there’s a 1% increase? According to TransUnion that’s all it would take for 917,000 Canadians to be facing bankruptcy.

Contact us and prevent your personal financial ruin

The time to change your attitude about low-interest rates and using credit to pay your monthly expenses is NOW! Don’t risk losing it all and putting your family into personal financial ruin.

Contact a debt expert – a professional trustee – who can help get you off the credit merry-go-round and back on solid financial footing Starting Over, Starting Now. Ira Smith Trustee & Receiver Inc. can help keep you from financial ruin with immediate action and the right plan. Call us today for a free, no obligation consultation.

If you would like a free copy of our eBook “Cost of Claiming Bankruptcy In Canada”, please subscribe, or confirm your existing subscription, to our blog by  CLICKING HERE

#VIDEO – COST OF FILING FOR BANKRUPTCY: WHAT IS THE TRUE COST?#

If you enjoyed this cost of filing for bankruptcy video and would like a copy of our free e-Book “Cost of Claiming Bankruptcy in Canada” please subscribe to Brandon’s blog by clicking on this link – CLICK HERE

Cost of filing for bankruptcy:  Introduction

The cost of filing for bankruptcy is something you will need to consider when you are considering claiming bankruptcy. How much it will cost to go bankrupt depends on a number of factors, including:

  1. your monthly income;
  2. what assets you own;
  3. the size of your family; and
  4. whether you have been bankrupt before.

We strongly recommend that you contact a Licensed Insolvency Trustee to arrange for a free first consultation; they will check your situation and calculate the cost of bankruptcy for you in your situation.

Cost of filing for bankruptcy:  Your base cost

In most cases you will have to contribute to your bankruptcy estate each month to cover various filing fees and other administrative costs. The minimum period for a bankruptcy is nine months, so you will be making these payments for at least a nine month period.  This is the base cost of filing for bankruptcy.

Cost of filing for bankruptcy:  Surplus income

You are required to pay part of your surplus income into your estate each month. Surplus income is defined by the government, and if you and your family earn over a certain amount each month, you pay part of your earnings over that limit. The limit is essentially the poverty line.

The surplus income calculation for the cost of filing for bankruptcy is reasonably complicated, so we suggest you bring your recent pay stubs to your meeting with your trustee so that they can estimate the amount of surplus income payments you will make while bankrupt. If you have surplus income, your bankruptcy will be extended for an extra year.

If you would like a preliminary idea of what your surplus income payments would be, review our blog What Can I Deduct For Surplus Income In Bankruptcy?

Cost of filing for bankruptcy:  Non-exempt assets

Another cost of filing for bankruptcy is that you will lose all of your non-exempt assets.

Cost of filing for bankruptcy:  Tax refunds

You will lose any tax refunds and HST credits you would otherwise receive during the bankruptcy period.  This is a further cost of filing for bankruptcy.

Cost of filing for bankruptcy:  Windfalls

Finally, you will lose any windfalls you receive or become entitled to during the bankruptcy period. For example, if you inherit money while bankrupt, or win the lottery, that money must be surrendered to the trustee.

The minimum bankruptcy period in Canada is nine months, but if you have surplus income, or if you were before bankrupt, your bankruptcy will last longer before you are able to apply for your discharge from bankruptcy.

Cost of filing for bankruptcy:  What should you do with too much debt?

The amount you will pay while bankrupt will depend on your monthly take home pay, your family size, and your assets. Given this information, you may first wish to attempt to avoid bankruptcy by looking at one of the bankruptcy alternatives.

To show how much it will cost to go bankrupt in Ontario, and to look at ways of avoiding bankruptcy, contact Ira Smith Trustee & Receiver Inc. today.  Our team of professional trustees can help you manage your financial crisis and get you back on your feet Starting Over, Starting Now.

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NEW MORTGAGE RULES NOVEMBER 2016: HALLOWEEN GHOSTS AND GOBLINS FOR BORROWERS?

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New mortgage rules November 2016

New mortgage rules November 2016:  Introduction

New mortgage rules November 2016 come into effect.  We recently discussed Canada’s alarming consumer debt and the housing boom. The government stepped in to prevent Canadians from assuming bigger mortgages than they could afford. One of the measures recently put into effect was a mortgage rate stress test for approving high-ratio mortgages.

New mortgage rules November 2016:  Mortgage rate stress test

This stress test is now applied to all insured mortgages to prevent defaults in the future should the mortgage rates rise. Buyers applying for an insured mortgage now have to show they can afford to pay it back at the Bank of Canada’s five-year fixed rate of 4.64%. This means that some Canadians who could have qualified for a mortgage before the stress test will no longer qualify.

New mortgage rules November 2016:  Can Canadians avoid the mortgage rate stress test by borrowing in the shadow lending market?

Some mortgage brokers who are clearly disgruntled at the thought of the Canadian mortgage rules forcing them to lose business have worked out a way to bypass the stress test and beat the system by sending their clients to private lenders – also called the shadow lending market or subprime lenders. Buyers borrow money from private lenders so that they can make a 20% down payment which qualifies them to take out an uninsured mortgage, therefore there is no stress test required.

New mortgage rules November 2016:  Is it a good idea to borrow from private lenders?

Typically, private second mortgages in Toronto charge a minimum interest rate of 7% – 10%. For people who really want to be home owners it may seem like a good idea, but they’re going to be left with a very high mortgage payment; perhaps higher than they can afford to pay in the long run.

The new mortgage rules November 2016 and programs like the mortgage rate stress test are enacted to protect Canadians, not punish them. Thinking that you can beat the system doesn’t make sound financial sense.

New mortgage rules November 2016:  Do you have too much debt?

Have you assumed a mortgage that you can’t afford to pay?  Are your mortgage payments stopping you from paying your other debts? Don’t let these ghosts and goblins scare you.

Contact Ira Smith Trustee & Receiver Inc. today. Our team of professional trustees can help you manage your financial crisis and get you back on your feet Starting Over, Starting Now.