Fresh start on your finances

A Fresh Start on Your Finances

  • By Jillian Taylor-Mancusi, LIT

If you’ve ever wished you could have a do-over when it comes to money matters, there is good news: a financial fresh start is possible. When debts become unmanageable, a Consumer Proposal or Bankruptcy can provide you with the clean slate to get back on track and give you that fresh start on your finances that you are looking for.

Get a Fresh Start with a Consumer Proposal

A Consumer Proposal is one of the options which the Bankruptcy and Insolvency Act of Canada (BIA) makes available to Canadians who are struggling with a debt load they can no longer afford. With the help of a Licensed Insolvency Trustee, you can make a proposal to your creditors that:

  • Reduces the balance you must payback. You can pay back only a portion of what you owe, but still have the entire debt eliminated through the Consumer Proposal.
  • Lengthens the amount of time you have to pay back your debt. A Consumer Proposal can run up to five years.
  • Stops the accumulation of further interest charges. Interest can no longer be charged once the Consumer Proposal is filed. Note that if, for some reason, you fail to complete the Proposal, interest can be added back into the debt.
  • Stops all collection practices against you, including garnishment of your income or your bank accounts. Only a formal Consumer Proposal has this legal protection. More informal proposals developed outside the BIA do not carry this protection.

To qualify, you must have a stable income and be fairly confident that you will continue to have that income during the course of the proposal. The law requires you to work with a Licensed Insolvency Trustee, the only financial experts that are licensed to manage Consumer Proposals and Bankruptcies. They are also the most experienced and best trained of all debt consultants, undergoing a rigorous training program and ongoing federal audits. This is not true of more informal credit counselling agencies who essentially have no licensing or training requirements.

A Consumer Proposal has an effect on your credit rating. All of the major credit reporting agencies will include your proposal on your credit history for three years after you complete your proposal. For example, if you had a 5-year proposal, the credit bureaus would have it listed as an R9 for the 5 years of the proposal, and as an R7 for the 3 years following the completion of the proposal.

A Consumer Proposal helps you pay off your creditors, putting you on the fast track to a fresh start.

Bankruptcy Offers a Clean Slate

Sometimes the amount of debt, the nature of the debt, or the life situation of the debtor make filing a Consumer Proposal inadvisable. In that case, Bankruptcy is another legal option for resolving debt problems. It too wipes away your debts and allows you a chance to start over. Bankruptcy is generally a quicker solution, and should cost less than a proposal since a Consumer Proposal must pay the creditors more than they would receive in a Bankruptcy.

Like a Consumer Proposal, creditors cannot attempt to collect on your debt or pursue any legal action against you when you are bankrupt. Only Licensed Insolvency Trustees can administer Bankruptcies in Canada.

When you file an Assignment in Bankruptcy you sign over your non-exempt assets to the Licensed Insolvency Trustee, for the benefit of your creditors. The key here is the term “non-exempt.” Most provinces have legislation that makes many of your assets exempt from your creditors, and thus exempt from being signed over. In Manitoba, household furnishings, personal effects, tools of the trade (including a vehicle to get to and from work) any registered pensions or RRSP’s, as well as some equity in your home are all considered exempt.

If you have assets that are not exempt, such as a pleasure boat or a summer home, the trustee is required to realize on those assets for the benefit of your creditors. Proceeds from any non-exempt assets are used to pay down the debt owed to your creditors. When you meet with your trustee, they will go over your situation with you in detail and be able to tell you whether any of your possessions are not exempt, and will need to be turned over to the Trustee.

Like a Consumer Proposal, there are monthly payments required during Bankruptcy. The amount is determined by guidelines published annually by the federal government. Those guidelines determine how much income a family of a given size requires, and if your income is more than the guideline amount, the extra is considered “excess”. Half of your excess income must be paid to the trustee for the benefit of your creditors, for the duration of the Bankruptcy.

If you’re filing a first-time Bankruptcy and you are not required to make surplus income payments, you can be automatically discharged after nine months. If you are required to make surplus income payments or if this is your second Bankruptcy, you can be discharged in 21 to 36 months.

The Sooner You Seek Help the More Options You Have

Late payments, collection calls, and legal action are all symptoms of a serious debt problem. But there are plenty of options to help you, especially if you seek help early on. A Consumer Proposal or Bankruptcy are just two options. The sooner you get help, the more likely that we will be able to help you identify possible non-legislative options as well that could help you regain your financial footing and provide you with a fresh start. Give LCTaylor a call today.

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Jillian Taylor-Mancusi, LIT

Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a Read More Jillian has worked in the insolvency field since 1992. She is a graduate of the University of Manitoba. She received her Insolvency Counselor’s Qualification Certificate from Ryerson Polytechnic University in 1998, and in 2007 she attained her license as a Licensed Insolvency Trustee. Jillian is a member of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP). She is Past President of the Manitoba Association of Insolvency and Restructuring Professionals (MAIRP). Jillian has held positions on the Armstrong Point Association, Executive of her local EDA Riding Association, Manitoba Highland Dance Association, and the Continuing Education Committee of CAIRP. Previously, Jillian was the Treasurer for the Parent Association at her daughter’s school. Currently, Jillian serves as the Chair for Dressage Winnipeg. Close

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