When you file an assignment in bankruptcy, your assets that are not exempt from seizure or fully encumbered, vest in the trustee to realize on for the general benefit of your creditors.  This means that the trustee will cash in your TFSA, will sell your house or car to realize the equity or you can make an offer to purchase them back from the trustee.  If you do not have any assets, there is nothing for the trustee to take.

In the year of bankruptcy, your trustee will file your personal income tax return and any refund for the year of bankruptcy or any prior year will be forwarded directly to your trustee as property of your estate.

Depending on your net monthly income and family size, you may be obligated to make surplus income payments to your trustee.   The Superintendent of Bankruptcy has issued a directive as to what they think is necessary to cover reasonable living expenses, and if your income exceeds this threshold, you must make surplus income payments to your trustee for the benefit of your creditors.

When there are realizable assets, the trustee’s fees can be paid from the assets realized.  If you have no assets and are not required to make surplus income payments, then you will be obligated to pay the trustee a minimum fee for them to administer your estate.  The amount of the fee varies depending on if it is a first, second or third bankruptcy.  The minimum fee that Taylor Leibow charges for a first-time bankruptcy is 9 monthly payments of $200 per month.  We understand that if you are considering filing bankruptcy, the minimum fee may seem unmanageable, but you will no longer be making payments to your unsecured creditors.

You can also consider a proposal to your creditors if you have excess funds available monthly to offer a compromise to your creditors.

Stop struggling alone with overwhelming debt.  Reach out to our Licensed Insolvency Trustees today to explore all potential debt relief solutions at a free consultation.

There is no magic fix to rebuild your credit rating after filing bankruptcy. Slow and deliberate action must be taken to gain positive reportings on your credit report that will then improve your credit score. You must also be cautious about applying for credit if you have concerns about qualifying. Being rejected for credit will further negatively impact your credit score.

Several tips to improve your credit rating after filing for bankruptcy in St Catharines:

• Accumulate savings and then apply for a secured credit card. You will need to save $500 – $1,000 to provide as security and will then be granted a credit card with the same limit.
• If you made monthly payments to your trustee during your bankruptcy, set aside those excess funds in savings until you have the funds for the deposit.
• Invest the time in researching different secured credit cards that are available from your bank or other lending institutions. The annual fees and interest rates will fluctuate, and since you intend to pay the debt in full each month, I recommend the lower annual fee.
• Put your groceries and gas on your credit card every month and pay the balance in full by the due date. You should have developed a budget during your credit counselling sessions, so you are comfortable charging your groceries and knowing you have the funds to pay the balance when due.
• Utilize 30% of your credit limit. Do not max out your credit card every month.
• Pay your bills on time. Cell phone providers typically report to the credit bureaus, so make sure you pay on time every month.
• Once you have used a secured credit card for a year or so, talk to your bank about obtaining a traditional credit card with a low balance.
• Store credit cards like Canadian Tire and Home Depot are typically easier to qualify due to the very high interest rate charged on balances. If you pay the balance in full every month, the interest rate is irrelevant.

If you are struggling with debt, don’t let concerns about the impact on your credit report stop you from taking steps for a permanent solution. Reach out to the trustees at Taylor Leibow Inc. today.

The Office of the Superintendent of Bankruptcy has set guidelines as to what they feel is necessary to cover reasonable living expenses in a bankruptcy.  If income exceeds the threshold, then payment of 50% of the excess must be paid to the trustee as “surplus income payments”.

The purpose of the guideline is to ensure application across all personal bankruptcies on an equal basis.  The guideline anticipates that changes may have to be made in lifestyle to be able to afford the surplus income payment which is a tradeoff for discharging your debt.

The guideline is standard across Canada and based on your income, family size and certain non-discretionary expenses (spousal and child support payments per a Court order or written agreement, medical costs not covered, and childcare are the most common).  The actual funds left over at the end of the month do not impact on the calculation.

For a family of 1, the directive amount is currently $2,666.00.  Net take home income from all sources (employment, Ontario Works, support, etc.) less non-discretionary expenses is compared to the directive.  If the net exceeds the directive, then surplus income payments of 50% must be paid to the trustee and the bankruptcy will be extended by a further 12 months.  For example:

If you are seeking help for overwhelming debt, don’t let the surplus income requirement scare you from reaching out to a Licensed Insolvency Trustee.  Our trustees will review the above and explore all solutions, including a consumer proposal, to come up with a plan that works for you.

There are two credit agencies in Canada; Equifax and TransUnion. They are public companies and not run by any branch of government.

Every time you take out a loan, credit card or borrow money from a financial institution, the lender reports the activity on these to one or both of the credit agencies.  They choose which one(s) they wish to use.  The purpose of these agencies is to maintain financial data on each individual as a resource for financial institutions to decide if you will be a good customer if they were to lend you money. I.e. are you a good credit risk and they will be repaid in full?

The credit bureaus keep information on payments made and whether they were paid on time or late. Each loan/credit card is assigned a risk rating with R1 being the highest (pays on time as agreed) to R9 (debt written off in a bankruptcy) An R5 debt rating is the lowest rating where payments are being made and current. A consumer proposal rates an included debt as an R7.

What is a Credit Score?

Based on your credit report, the credit agencies calculate a number called a credit score by using a complex computer algorithm. A credit score is not a measure of how financially successful you are, it is an indication on how responsible you are using credit. They range from 300 to 900; the higher the score indicating that you are more responsible. With a higher credit score, banks and lenders will be more open to lending you money and at lower interest rates. A lower credit score will indicate that you are less responsible with money and a bank may be unwilling or less willing to lend you money. It may also be at a higher interest rate to compensate them for the perceived increased risk.

Generally, when people visit a Licensed Insolvency Trustee they have been struggling financially for some time; likely obtaining and relying on higher amounts of credit and possibly missing some payments. As a result, the average credit score of someone filing a bankruptcy or consumer proposal is generally on the low to mid-range, depending on how long they have been struggling.

Filing a Consumer Proposal

Filing a consumer proposal with a Licensed Insolvency Trustee is a legal filing and will be noted on your credit report under the legal notices section. This will inevitably cause your credit rating to drop, however filing a Consumer Proposal should be viewed as a positive step towards fixing your finances and you have the opportunity to improve your credit rating as you move forward through the proposal term.

During your mandatory credit counselling sessions, the Licensed Insolvency Trustee will carefully explain to you how your credit score works and what actions you can take to improve it. If you follow their advice, you should notice a gradual improvement over time so you complete the Consumer Proposal with a healthier credit score for your new financial future.

Taylor Leibow Inc. are Licensed Insolvency Trustees and have been helping individuals and businesses with their financial and debt issues since 1947. If you would like to talk to Kathy Lenart or Jeff Lewis about your financial issues and how they can help you, reach out them at freshstartnow.ca