Are You Experiencing Financial Difficulty in Manitoba?

  • By Jillian Taylor-Mancusi

Most of us experience financial difficulty at one point or another. When money problems are serious or prolonged, they might start to spin out of our control.  How do you know when it’s time to get help? And where can you turn if you’re having financial difficulty? In Manitoba, there are several good options that can help you through financial problems.

When is it time to get help?

Many people are hesitant to ask for help when it comes to finances. If you wait too long to get help, your options become limited. It can also have a greater effect on your credit score. The following are some warning signs that it’s time to seek professional help for your financial difficulty:

  • You recently lost your job or experienced a cut in pay
  • Your monthly expenses are more than what you make in a month
  • You have accounts in collections and can’t afford to bring them current
  • Your home is in danger of foreclosure or is in foreclosure
  • Your credit cards are at their limit
  • You’ve tried to open new credit cards to pay your bills
  • You’ve turned to payday or title loans to cover your expenses

One or more of these signs could spell financial trouble. Getting help soon can help you avoid more serious problems, like wage garnishment, or foreclosure.

Where to get help

So where can you go for help with your financial problems? Here are some of the best options:

1. Try negotiating.

If your debt problem is small, and involves only one or two creditors, negotiating on your own might be worth a try. You’d be surprised that some creditors can be agreeable to negotiating interest rates or payment terms.  Ultimately, creditors simply want to get paid what they’re owed.

2. Consolidation loans.

If you have multiple credit cards, lines of credit or loans, a consolidation loan can help you save money each month and reduce the number of payments you make. The consolidation loan is used to pay off all of your unsecured debt. Then, instead of making multiple high-interest payments, you make just one monthly payment. This is only beneficial if you can secure a lower interest rate and if you have a steady income that allows you to make monthly payments. It only works long term if you avoid incurring new debt until the consolidation loan is paid off.

Contact a Licensed Insolvency Trustee

3. Consult a Licensed Insolvency Trustee (LIT).

Licensed Insolvency Trustees are the most experienced financial experts available to help with financial difficulties. They also have the widest range of possible solutions for you to consider. An LIT will meet with you, at no charge, to review your situation and help you identify your options.

If you go early enough to an LIT for advice, there are usually multiple solutions available, including the two listed above. Your LIT will be able to give you valuable pointers on how to proceed with negotiations or a consolidation loan. Or, if all you need is help with budgeting and financial management, your LIT will be able to steer you in the right direction there as well.

However, the best reason to visit a LIT is that they have available two debt solutions that no other kind of financial advisor has. Only Licensed Insolvency Trustees can deal with Consumer Proposals or Bankruptcies — the two most powerful tools available in Canada to solve a financial difficulty. Here’s how those tools work:

  • Consumer proposal. This is a legal agreement with your creditors, facilitated by your Licensed Insolvency Trustee.  A Consumer Proposal allows you to settle your debt for less than you owe. It works for people who have a secure long-term source of income, and who can afford to pay something on their debt.  Your LIT will go over your situation with you and help you to determine what amount you can reasonably pay to your creditors, based on your employment situation, family size, etc. Payments need to be affordable, but still acceptable to your creditors, and the proposal cannot last more than five years.

Once you have determined what you can afford to pay, the Trustee draws up a proposal that goes to your creditors. The creditors then have an opportunity to vote for or against the proposal. Once the proposal is accepted, it is binding on all your unsecured creditors. You will make one monthly payment to your Trustee, who in turn, distributes the funds to your creditors. When the agreed-upon balance is paid off within the proposed period of time, the Proposal is complete, and any remaining debt is eliminated.  Here are the best points about a Consumer Proposal:

    1. By paying a portion of your debt, through the Proposal, for a defined period of time, you eliminate all your unsecured debt.
    2. A Stay of Proceedings is issued when you file your Proposal, and creditors cannot continue collection practices, including wage garnishments.
    3. You can continue payments on secured debts, like a car loan or mortgage.
    4. You do not sign over any assets as part of the process.
    5. You will attend two financial counselling sessions designed to help you identify the cause of your financial difficulty and to help you prepare for a more secure financial future.
  • Bankruptcy.  For people who do not have a long term, secure source of employment, or who need to get out of debt quickly, an Assignment in Bankruptcy might be a better solution to solve their financial difficulty. Essentially, what you are doing in a Bankruptcy, is you are signing over those things that you own, have a right to or an interest in, but are not exempt from seizure by your creditors, to the LIT for the benefit of your creditors. In return, your debt is wiped out. It is important to note that most of your assets will be exempt from this. Each province has legislation that lists what is exempt.  In Manitoba, for example, personal effects, household furnishings, tools of your trade (including a vehicle if used to get to and from work), registered pensions and RRSPs, some equity in your home, and some cash on hand are all exempted. Farmers have further exemptions. If you have a non-exempt asset, it may be sold and the funds paid to your LIT for the benefit of your creditors.

If this is a first-time bankruptcy, and if you do not have more income than the government has determined is needed for a family of your size, you will be automatically discharged from bankruptcy in 9 months. If you have what is called “excess income”, 50% of the excess gets paid to the Trustee for the benefit of the creditors. In that case, the discharge would be in 21 months.

During the bankruptcy, you are required to submit monthly income and expense statements, provide the Trustee with the information they need to file your tax returns, and keep the Trustee informed of your address.

Here are the best points about a Bankruptcy:

    1. 100% of your unsecured debt is eliminated.
    2. A Stay of Proceedings is issued when you file your Proposal, and creditors cannot continue collection practices, including wage garnishments.
    3. It provides an opportunity, if you wish, to walk away from unmanageable secured debt — the car loan that is far greater than the value of the car, or the mortgage that you simply can’t afford any longer.
    4. A Bankruptcy is likely to be completed much sooner than a Consumer Proposal, allowing you to move on, free of debt, sooner.
    5. A Bankruptcy will very likely cost less than a Consumer Proposal.
    6. You will attend two financial counselling sessions designed to help you identify the cause of your financial difficulty and to help you prepare for a more secure financial future.

There are a few debts that do not get eliminated in either a Consumer Proposal or a Bankruptcy. They are debts that are the result of fraud or misrepresentation, fines and penalties of the court, child support and alimony, and student loans issued within the past seven years.

Experiencing Financial Difficulty in Manitoba?

Having financial challenges can often cause undue hardship — things like health problems or family breakup. That doesn’t have to happen. There are solutions. The sooner you seek assistance, the sooner you can identify the solution that works best for you, and most importantly, the sooner you will be on the road to a healthy financial life. If you are experiencing financial difficulty in Manitoba today, give LCTaylor a call for a free initial consultation. Get the answers you need.

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