The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
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Written by Kale Havervold
Best Bankruptcy Hamilton (Online) September 2021
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Debt is something that many Canadians have struggled with at one time or another. While debt is experienced across the country for a variety of reasons, there are a few areas of the country that have it worse than anywhere else. For example, those who live in Hamilton, Ontario have among the highest household debt of anyone in Canada.
Some Canadians are capable of getting out of this debt on their own, but this isn’t always the case. Many people around the country will require a debt relief solution to get out of debt. And in extreme cases, bankruptcy in Hamilton might be required.
For everything you need to know about bankruptcy court, click here.
What is Bankruptcy?
Bankruptcy in Hamilton is a relatively simple concept to understand. It is a legal process wherein an individual will surrender their belongings in exchange for their debts being eliminated. There are some exceptions that allow you to keep certain things, but that will vary depending on where you live. Anyone can file for bankruptcy in Canada as long as you have more than $1000 in debt, are unable to pay it off, and have lived or done business within Canada in the last year.
It is one of the most extreme debt relief solutions out there, as it will lead to you losing many of your possessions in order to get your debt forgiven. Bankruptcies are carried out by a Licensed Insolvency Trustee (LIT). A LIT is an experienced and educated professional who will help you with the debt relief process. They are legally the only individuals that can administer a bankruptcy in Canada.
How Does Bankruptcy Affect Your Credit?
As you could expect, bankruptcy in Hamilton has a negative effect on your credit. A bankruptcy will remain on your credit report for a total of six years after your date of discharge if it is your first bankruptcy. If it is your second bankruptcy, it will remain on your credit report for a total of 14 years.
In Canada, all accounts that appear on your credit report are judged on a scale of 1 to 9. The lower the credit rating, the better. Perfect credit is displayed as a 1, while bankruptcy is a 9. All accounts associated with your bankruptcy will be given a credit rating of 9 for six years after your discharge.
However, while it is bad for your credit, sometimes bankruptcy is indeed the best option. Sometimes it’s better to take the credit hit and start from scratch to rebuild your credit than it is to continually struggle with a ton of debt.
Repairing Your Credit After Bankruptcy in Hamilton
So just how do you go about repairing your credit after a bankruptcy in Hamilton Ontario? Well, there are a number of things that you can do as soon as you are done with your bankruptcy. These include:
- Paying your bills on time and in full
- Checking your credit report for any errors or issues
- Use a secured credit card to build your credit risk-free
- Reduce your spending and save more money
- Use credit sparingly and responsibly
Without repairing your credit after a bankruptcy, it may be quite difficult to borrow money as lenders will see that your credit is low as a result of a bankruptcy. While it may not happen overnight, these tips and tactics we have mentioned will help your credit improve over time.
How to calculate bankruptcy payments in Canada, check this out.
What Types of Debt Can and Cannot Be Included in Bankruptcy?
So while bankruptcy in Hamilton remains a good option for a number of different people, it is important you familiarize yourself with everything about bankruptcy before you file. For example, not all types of debt can actually be included in bankruptcy. Of course, it makes sense to know what can and can’t be included in bankruptcy before you file. In an effort to help, we’re going to look at the types of debt that can (and cannot) be included in a bankruptcy.
Debt that can be included in a bankruptcy
Types of debt that can be included in bankruptcy include most types of unsecured debt like credit card debt, medical debt, loans, contract obligations, and many others.
Debt that cannot be included in a bankruptcy
While the debt many people have fallen into the above categories, this isn’t always the case. There are many types of debts that cannot be included in a bankruptcy, like secured loans, child support, alimony and other types of legal fines and tax liens.
If you have some more questions about whether the specific type of debt that you have can be included in a bankruptcy, be sure to speak with your LIT.
How Much Does it Cost to File for Bankruptcy?
Of course, if you are filing for bankruptcy, there is a good chance that you don’t have a lot of money to throw around. As a result, knowing the actual cost to file for bankruptcy is important. There are a total of three different costs that are associated with bankruptcy. These are the base contribution, surplus income, and the assets you lose.
No matter who you are, everyone needs to pay the base contribution for their bankruptcy. The amount is $1,800, which can be paid all at once or can be paid out over 9 months at a rate of $200 a month.
However, if you make enough money, there is a chance you could be paying additional penalties called surplus income payments. If your monthly income is above the set surplus income threshold, you will need to pay more than someone who makes less. If your income is $200 above the limit your bankruptcy and the payments that go along with it will be extended by a year.
Assets You Lose
In addition to the monetary costs of a bankruptcy, it is impossible to avoid the cost of losing your assets. Many of your belongings will be lost, your tax return will be lost, your investments and all of your RRSP contributions made over the last year (for more information about how your RRSPs are treated during bankruptcy, click here). Home equity and even your vehicle could be lost. However, exactly which assets you lose will depend on where you live and the rules in that given province or area.
As a result, everyone will pay at least $1,800 for their bankruptcy in Hamilton, but it has the potential of costing you a lot more, as well.
Be Sure to Consider Pre-Bankruptcy Options
While filing for bankruptcy in Hamilton is often the right call for many consumers, it shouldn’t be the first debt relief option that you consider. As mentioned earlier, bankruptcy is quite extreme and can completely change your life and finances. It should be a last resort for people who have tried and considered everything else.
So what other options do you have to consider before filing for bankruptcy? Well, there are plenty. In order to help you see which is right for your situation, we have decided to put together a little guide that will go over all of the different pre-bankruptcy options at your disposal.
Do you know what the Bankruptcy and Insolvency Act is? Find out here.
Debt consolidation is when an individual takes out a larger loan to cover all of the smaller debts they might have. This is often done to simplify payments every month, as well as potentially even get a cheaper interest rate on the loan. This is a great way to simplify your finances, while possibly saving money at the same time.
In addition to a debt consolidation loan, there is also a debt consolidation program. This is similar in principle, but you don’t need to take out a whole new loan. Instead, you will work with a credit counsellor to come up with a repayment plan, present it to your creditors, and then make monthly payments to your counsellor who will distribute the money accordingly.
Debt settlement is a solution where a borrower will try to settle with their creditors for a portion of what they owe. For example, if you owe $10,000 to a creditor, you may try to settle for the amount of $6,000. This will save you money while getting the debt off of your books.
So, you might be wondering why a lender would allow you to settle for less than what you actually owe? The answer is because sometimes it’s better to recoup some of the money, instead of getting nothing back. Of course, when dealing with submitting a debt settlement, be sure it is for a fair amount. If not, there is a good chance your creditors might deny the settlement request.
Credit counselling is a solution where someone will meet with an experienced and educated professional to help them with their financial issues. They will work with you to come up with a plan of attack to deal with your debt and can make suggestions about what you should do next. While they are called credit counsellors, they can technically help with a range of financial issues from dealing with debt, to building a budget, reducing spending, etc.
A consumer proposal is a process where a trustee will help you pay back a portion of what you owe to your creditors. You two will craft a proposal that will outline how much you can afford to pay back (click here to learn what happens to your debt a consumer proposal). Of course, there is no rule that your creditor has to agree to it, so make it attractive. In addition to lowering the amount you have to pay back, you can also propose that you get an extension on how long you have to pay off your debts. It is an alternative to bankruptcy and will protect your belongings/assets and do less overall damage to your credit.
Is Bankruptcy Right For You?
If you still have some questions or concerns about whether bankruptcy in Hamilton is right for you, feel free to reach out to us at Loans Canada. We are confident we can help you out and answer any questions that you’d like to know.