Debt-Free Forever Gail Vaz-Oxlade (best ereader for epub TXT) 📖

last resort, with a consumer proposal being the much-offered alternative. But what they don’t tell you is that your credit history will be crap for the same amount of time regardless of which method you choose. This is because as far as creditors are concerned, a proposal is as bad as a bankruptcy. (For that matter, as far as creditors are concerned, seeking credit counselling is as almost as bad as bankruptcy.)

Trying to decide between bankruptcy and a consumer proposal boils down to this: if you believe you can dig yourself out if you can negotiate with your creditors, a consumer proposal will work for you. However, if you’re at the point where you’re choosing between paying your debts and eating, bankruptcy will let you keep eating.

GAIL’S TIPS

if you have between $5,000 and $75,000 worth of debt, and have the money to repay at least a portion of your debt given enough time, you could file a consumer proposal, which is like a debt management plan carved in stone. A consumer proposal is a legally binding procedure administered by the courts and a bankruptcy trustee, which takes about five years to fulfill. The black mark (an R7) remains on your credit history for a further three years. The big benefits of using a consumer proposal is that the interest clock turns off on your debt, you can negotiate to repay a portion of what you owe, and no one can take legal action (garnishees are automatically stopped) against you. Now you have the breathing room to repay your debt. if you offer to do a consumer proposal, 50% plus one of your creditors must agree for it to work. if your creditors don’t agree, bankruptcy is the next step.

So what do you do if you find yourself considering bankruptcy?

STEP 1: VISIT A BANKRUPTCY TRUSTEE AND GET THE FACTS

Hiding won’t do you any good, and denial is a fool’s game. If you think that bankruptcy is the only way out of the mess you’re in, get thee to a trustee and find out just what’s entailed in the process. Not all trustees are good trustees, so choose someone with a sparkling reputation, not a big ad.

How will you know if you need to see a bankruptcy trustee? Easy. If you add up your debt repayments to your various creditors and you just can’t make them and keep food on the table, you’re overextended to the point where bankruptcy could be an option for you.

STEP 2: KNOW WHAT’S EXPECTED OF YOU AS YOU FILE FOR BANKRUPTCY

Your duties as a bankrupt are outlined in the Bankruptcy and Insolvency Act. Essentially, you must do the following:

Make an inventory of, and help to sell or hand over, all your assets (excluding the ones that are excepted, and they differ from region to region) over to offset what you owe.

Cancel all your credit.

Prepare a “statement of affairs,” which shows what you own and what you owe, and you’ll have to swear to the veracity of this document.

Go to a meeting with your creditors.

Execute any documents required under the act, including a power of attorney, transfer, deeds, or whatever else is necessary.

Keep your trustee up to date with what’s going on financially in your life, and if you move, how to keep in touch with you.

STEP 3: LEARN WHAT CAN’T BE DISCHARGED BY BANKRUPTCY

Not every debt goes away if you file for bankruptcy. It would make sense to learn what will be discharged and what won’t before you take the big step. Your bankruptcy trustee should tell you all of this, but here’s a list:

Debts that are “secured” cannot be discharged, so your mortgage, which is secured by the property, or a car loan, which is secured by the car itself, won’t be eliminated as part of your bankruptcy.

Child support, maintenance, and alimony (both current and accrued) won’t be discharged, so if you haven’t paid your spousal or child support for a few years, filing for bankruptcy won’t make your obligation to pay go away; ditto court fines, penalties, and traffic offences, or civil claims arising from personal or sexual assault.

Debts accrued through fraud or misrepresentation won’t be discharged.

Student loans won’t be discharged unless it’s been seven years since you’ve been in school. In cases of undue hardship, an ex-student may apply to the court to obtain a discharge of student loans after five years. As long as the court is satisfied that the debtor has acted in good faith and is expected to continue to experience financial difficulties, this application could succeed.

STEP 4: UNDERSTAND THE RAMIFICATIONS FOR CO-BORROWERS/CO-SIGNERS

Keep in mind that if you try to discharge a debt on which someone else has co-signed with you, you’re sticking your co-signer with the problem. Your bankruptcy may prevent a creditor from trying to collect from you, but nothing will stop them from collecting from your co-signer (unless he/she also goes bankrupt). Kids often have their parents co-sign on their student loans or credit cards; partners often co-sign for each other or take out credit jointly. If anyone else’s name is on the debt, creditors will just go after the next name on the application.

I’ve heard from people who have co-signed with mates or friends because with their better credit rating, they can help their pals get a lower rate of interest. I’ve heard from parents who wanted to help their kids through school. I’ve heard from wives and husbands who took out credit jointly, got divorced, never had their names removed from the debt, and then got stuck with the payments because their exes went bankrupt.

People, wake up! Credit is a great tool if used wisely. But it’s equally as dangerous if you don’t understand your responsibilities. Signing a piece of paper without understanding the ramification is dumb, dumb, dumb.

I’ve always felt that a co-signature is a bad idea. If a person can’t qualify for credit on his or her own, why should he or she get credit? If