Going Bankrupt and Rebuilding Credit in Canada: Part 4

Posted by Hollie Pollard on Mar 10, 2010 | 4 comments

“Going Bankrupt and Rebuilding Credit in Canada” is a series written by Common Cents Mom (Hollie Pollard) who, in her own words, “really had no sense when she was young but she is a fast study and is learning that you can recover from financial mishaps.” Hollie shares what she is learning and doing on her blog Common Cents Mom.

Rebuilding after Bankruptcy

In the first part of this series we talked about the things that can lead to bankruptcy and then we looked at all the alternatives to bankruptcy and then we defined bankruptcy. After everything is said and done you do get a discharge. I can’t wait for that day. The next day the challenge then becomes: What are you going to do with that second chance? The job of rebuilding must begin.

So how does one rebuild after bankruptcy? First you have to remember that the bankruptcy will stay on your credit report for 6 years. So remember rebuilding will be a slow process but it can be done.

Now with work you can rebuild. What will you and I need to do?

First keep your budget and pay all your bills on time. Even at the bank make sure there are no NSF fees (insufficient funds).

Then the easiest way to rebuild is to start with a secured credit card. With a secured card you have to make a deposit sometimes equal to your credit line. Here in Canada you can apply for a Mastercard with Capital One or a Visa with Home Trust. Once you get those cards you will want to make sure you use them and pay them on time. There are usually annual fees with these cards so be prepared for them.

Creditors also look for stability: the longer you are at one job and at one residence the better from the perspective of the lenders. Try for stability.

Now if you are having trouble re-establishing things you might try a car loan or a store credit card but watch for the interest rates. If you do get a store card please do yourself a favor and use it minimally.

Whatever you do you must make it habit to pay your bills on time. If you can’t pay a bill in full make at least the minimum payment.

This is how I plan on rebuilding: paying thing on time and I will apply for a secured card while also preparing for the future with an emergency fund and a savings plan.

This concludes Hollie’s four part series on her story of going bankrupt and how she plans on rebuilding credit going forward. It certainly sounds like she is on the right track and I wish her the best of luck! Thanks Hollie.

Going Bankrupt and Rebuilding Credit in Canada: Part 3

Posted by Hollie Pollard on Mar 9, 2010 | 4 comments

“Going Bankrupt and Rebuilding Credit in Canada” is a series written by Common Cents Mom (Hollie Pollard) who, in her own words, “really had no sense when she was young but she is a fast study and is learning that you can recover from financial mishaps.” Hollie shares what she is learning and doing on her blog Common Cents Mom.

Bankruptcy Defined

In Part 1 we looked at what can lead you down the road to bankruptcy and in Part 2 we looked at the ways you might want to try to avoid Bankruptcy by consolidating or by using other means. Today we are going to talk about the actual bankruptcy.

As defined by Wikipedia:

“Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay its creditors. Creditors may file a bankruptcy petition against a debtor in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor that is filed by the insolvent individual or organization.”

To go bankrupt in Canada you have to owe at least $1,000 and not be able to pay your debt. I owed just over $40,000

I filed bankruptcy just a few days ago. When I went to my first appointment at my local trustee’s office I was nervous and well to be honest filled with dread.

I first met with a credit counselor and we went over my debt load, my income and my options. In this case there was only one path that was viable and that was bankruptcy.

My monthly budget was looked at. Because of me being a single parent of one child earning less then $2,300 a month I do not have to make monthly payments. How much you will be required to pay will be determined by a number of factors: income, family size and ability to pay. Your assets are also looked at.

You are allowed to keep:

• your primary residence (if you are a home owner, you will want to seek out separate representation because if your home has equity you may be required to sell the home, as well rules vary province to province so do ask. In most cases though with representation and a plan the residence can be kept.)
• tools of your trade
• sometimes a vehicle
• pensions
• food
• household furniture

For more information on your own personal situation I recommend Bankruptcy Canada. Remember every situation is unique and you will want to ask lots of questions about the process  and what you get to keep and what exactly applies in yours.

Basically if you have funds available after there set thresholds then you will have to make regular payments.If you have items of value you may be required to liquidate them depending on value. Again ask questions.

You will have  to go back to sign the papers and make your first payment. For me this was $250. At this meeting you will actually meet the trustee who will  ask you some basic questions to make sure you understand what you are doing

If your creditors request a meeting you have to attend that. Most of the time time these are not requested.

Basically from then till the time you are discharged the trustee is responsible for making sure you follow the rules.

The rules for me for the next 9 months:

1. File a monthly budget; basically I have to account for income and how I am spending it.
2. Attend 2 money management sessions
3. Take on no new debt
4. Allow the trustee to file tax returns on my behalf
5. Make my monthly payments on time.
6. Surrender all credit cards

If I do all of this then for me I will be discharged (how long you will be bankrupt depend on certain factors relevant to your case) and I will have that 2nd chance in a mere 9 months. Once those 9 months are done then it will be time to rebuild. Next week we will conclude the series with how to rebuild your credit.

Thanks again Hollie for sharing your story so far. We look forward to the last installment tomorrow…

Going Bankrupt and Rebuilding Credit in Canada: Part 2

Posted by Hollie Pollard on Mar 8, 2010 | 0 comments

“Going Bankrupt and Rebuilding Credit in Canada” is a series written by Common Cents Mom (Hollie Pollard) who, in her own words, “really had no sense when she was young but she is a fast study and is learning that you can recover from financial mishaps.” Hollie shares what she is learning and doing on her blog Common Cents Mom.

Click here for Part I.

Consolidation and Other Alternatives to Bankruptcy

Yesterday I shared what lead me to declare bankruptcy very recently. The road was long and when I finally made the choice that I wanted a second chance at real financial health I had to look at the options. The bankruptcy laws here in Canada are there to give people a second chance and I am thankful for mine but before I decided on declaring bankruptcy I did look at the other options.

There are several other options before bankruptcy:

First you can contact your creditors and see if they are willing to work out a better payment plan for you at perhaps a lower interest rate. This one I recommend if you are a little behind and have had a decent history of paying your bills.

If you live in Alberta, Saskatchewan, Manitoba, Nova Scotia or Prince Edward Island you could think of a consolidation order. A Consolidation Order sets out the amount and the times when payments are due. You pay the court and they pay your creditors. This part of the Bankruptcy and Insolvency Act. You have only 3 years to work with this method though but it does get rid of any garnishees.

If you live in Quebec, the voluntary deposit scheme is similar to a Consolidation Order. You must make a  payment based on your income and number of dependents to the court. This service is usually available at the local courthouse.

There are two types of proposals an individual can file:

Now if none of these are working for you or you feel like I did, totally weighed down by huge debt, it may be time to think about bankruptcy and get that fresh start that the bankruptcy act wants us to have. There will be more about what is bankruptcy and what to expect when meeting with a trustee next post.

Going Bankrupt and Rebuilding Credit in Canada: Part 1

Posted by Hollie Pollard on Mar 7, 2010 | 2 comments

“Going Bankrupt and Rebuilding Credit in Canada” is a series written by Common Cents Mom (Hollie Pollard) who, in her own words, “really had no sense when she was young but she is a fast study and is learning that you can recover from financial mishaps.” Hollie shares what she is learning and doing on her blog Common Cents Mom.

The Road to Bankruptcy

I wish I knew what I know now when I was a young woman just starting to make financial choices. I wish there had been more talk about managing money but that didn’t happen and well, the next 20 years were filled with financial mishaps.

Many things can happen that can change your financial future in the blink of an eye. One can prepare the best they can and still things can get out of hand. I want to share my experience so that maybe someone can avoid a few of the pitfalls that can lead to bankruptcy . Did you know every year 100,000 Canadians declare bankruptcy? This year I am one of them.

My road to bankruptcy began when I was 18 and took out my first loan. It was a student loan so I could go to university. As a teen, credit cards were also sent my way. Back in the 80′s it was easy to get credit. I am sure today it still isn’t that hard. I then left school a little early as my mother got cancer and I took care of her. I then married and divorced and was busy raising a child with special needs all the time accumulating more debt and loads of interest along the way.

My word of warning to Canadian students: before you go for that loan, look at the cost of borrowing versus your expected pay and then knock at least $10,000 a year off that (because we all think we will get a decent job) and see if you really can afford to pay it back. I went to school for 4 years and took out $13,000 in loans. Well that nice little loan turned into a $40,000 debt. Interest over years adds up.

There are many things that lead to the road to bankruptcy:

• illness: either your own or the need to care for a close family member
• divorce
• a weak economy
• poor money management choices

All those are just some of the factors that can contribute to getting you in financial trouble.

How do you recognize if you are on the road to bankruptcy? Ask yourself these questions:

1. Are you living in overdraft or taking out payday loans?
2. Do you really know how much debt you have?
3. Are you fighting over money?
4. Are you avoiding picking up the phone?
5. Are you spending more in a month then you earn?

If you recognize yourself as a Canadian in financial trouble you are not alone. Over the next month we will look at what can be done to get you and me back on the road to financial health.

The series will include:

Part 2: Consolidation and Other Alternatives to Bankruptcy
Part 3: Bankruptcy Defined
Part 4: Rebuilding After Bankruptcy

Thanks Hollie! We look forward to the rest of the series. Click here to go to part 2.