How do I correct an error on my credit report?

It is important that you request a copy of your credit report from the two credit-reporting agencies at least once a year to verify that your personal information is up to date, that your financial information is correct, and to ensure that you have not been the victim of identity fraud. You can do this free of charge by contacting both credit bureaus in Canada: Equifax and Trans Union.  Lenders will often refuse credit even if it is clear an error has occurred on your credit report, and they will not issue credit until the mistake is rectified.

To correct an error on your credit report, both credit bureaus provide a form to complete and send back to them.  When completing this form, be as specific as possible.  Once the form is received by the credit bureau and after their investigation, they will either correct the error or not, based on their findings.  Should your dispute be valid, the information on your credit report will be changed according.  If you do not agree with an item following the credit bureau’s investigation, Equifax and Trans Union websites inform you as to how you can add an explanatory statement to your report.

The contact information for the major credit reporting agencies in Canada are as follows:

Equifax Canada

Tel: 1-800-465-7166
Fax: 514-355-8502

Trans Union Canada
Tel: 1-866-525-0262 (For all residents except Quebec)
Tel: 1-877-713-3393 (For Quebec residents)

Give us a call for a free consultation, we would be happy to assist you with a new financial beginning.

What happens if a family member dies – Can you inherit debt?

Typically when someone dies, their personal debt does not get passed on to surviving family members.  Their debt belongs to them and them alone; it is not passed on to their family members when they die.

Normally, the person would have made a will in which an Executor would be appointed.  The Executor is the person responsible to manage the affairs of their estate.  If a person dies without a will, a Court will appoint an administrator to manage the estate.

The basic role of the Executor to identify, value and liquidate of the estates of the deceased person, pay off their debts and distribute the remaining funds to the beneficiaries.  The Executor must pay all the debts in full before he/she can distribute the funds or assets to the beneficiaries; otherwise, he/she may be held personally liable to the creditors of the deceased person.  If there are not enough assets in an estate to cover its debts, the beneficiaries of the estate will not receive anything.  Beneficiaries could be sued if they have received an inheritance before creditors are paid.

If someone has more debts than assets when they die, those debts do not have to be paid by anyone else as a result of the person’s death.  In most cases, the only instance in which another family member would be responsible for their debt is if they co-signed a loan with the deceased person.  By co-signing, both parties assume full responsibility for the loan. If one person cannot pay (for a number of reasons including, but not limited to, death), the other person carries the remainder of the debt alone.

In this circumstance, where the debt exceeds the value of the assets, the Executor may want to assign the estate into bankruptcy, so that the assets can be distributed in the appropriate manner without attracting any personal liability to the executor.

There are some assets that can flow to a beneficiary even if the deceased person has more debts than assets.  These are assets would not become a part of the estate of the deceased, such as life insurance policies with a designated beneficiary, real property that is registered a joint tenancy and property held in a trust for someone else.

Before any debts are paid out, including credit card debt, or any assets are distributed to beneficiaries of the estate, it is recommended that one should seek legal advice first.

Consumer proposals – There is life after debt!

Given the current economic conditions, more people are turning to consumer proposals to settle their debts, rather than filing outright bankruptcy.  As one of the leading Bankruptcy Trustees on Vancouver Island, we have helped many people through the consumer proposal process and onto better lives.

What is a Proposal?

A consumer proposal is legal process provided by the Bankruptcy and Insolvency Act for anyone with over $5,000 but less than $250,000 in unsecured debt, or $500,000 per couple (excluding their primary residence mortgage).  Unsecured debt might include credit cards, lines of credit, loans and unpaid income tax.  The consumer proposal is an agreement to repay a portion of the unsecured debts through the services of a Trustee in Bankruptcy. The proposal terms are normally structured over 5 years with one monthly payment.  While the amount of debt being repaid is usually substantially less than the actual amount owed, it is normally more than the creditors would get if the person went into Bankruptcy.

The consumer proposal is voted on by all the creditors involved, if the majority accepts, it is binding for all creditors.  Once a proposal is accepted by the creditors, all interest is frozen and all unsecured debt collection efforts, including calls, letters, wage garnishments, and legal actions will stop.

During the process, a person can miss two payments, which would then be added on to the end. If a third payment is missed during this process, the proposal would be annulled and the creditors rights would be revived to purse the person for collections of their account, including the interest since the time the proposal was filed.

The main benefits of filing a consumer proposal over bankruptcy are as follows:

  • allows a person to keep their assets including a home and investments like an RESP (note: secured loans on assets must be paid in order to retain those assets);
  • the person works in a profession that does not allow bankruptcy;
  • the stigma of bankruptcy is totally unacceptable to the person;
  • bankruptcy may prohibit sponsorship of a family member for immigration purposes;
  • going into bankruptcy may force a spouse into bankruptcy;
  • repay less than they owe and make the monthly payment manageable, yet still receive the same creditor protection they would receive in a bankruptcy;
  • make their payments over a period of up to 5 years, with the flexibility to pay their balance off earlier; and
  • actually make lower monthly payments than they would in a bankruptcy if they have a higher than average income.

Contact us today.  We will assess your financial situation to review all your financial options.  If it’s determined that a consumer proposal is the best choice for your situation, we will prepare all the necessary paper work and table your offer to the creditors.  While this arrangement may not work for everyone’s financial situation, a consumer proposal may be the best way to provide you a financial fresh start.

How to avoid bankruptcy – File a Consumer proposal

A Consumer Proposal is a formal procedure that is governed by the Bankruptcy and Insolvency Act (“Act”).  It allows insolvent debtors to settle their debts for less than they actually owe, while avoiding bankruptcy.   Declaring bankruptcy can cause embarrassment, seizure of your assets, and can pose a financial hardship if required to pay surplus income.  A consumer proposal can deal with most of your unsecured debts, including:

  • credit cards of all kinds
  • overdraft accounts
  • unsecured lines of credit
  • loans
  • personal loans from family, friends and others
  • student loans (if older than 7yearsj)
  • income tax debt
  • ·GST

Secured debts, such as mortgages owing on your home and leased or financed vehicles would not form part of a Consumer Proposal and must be dealt with directly with the secured creditor.

The Act ensures that you are protected from legal actions by your creditors and means that your debt repayment follows a strict and monitored process. Your trustee will negotiate a settlement between you and your creditors, and you will typically make one monthly payment over a 5 year period.  Once you have made your final payment, your debts will be eliminated. Though you will be repaying more to your creditors than you would in a bankruptcy, these payments are spread out over a longer period of time.

What are the Advantages?

  • You are able to retain your assets.
  • It can be 75% less expensive then repaying your debts on your own.
  • Your creditors cannot commence or continue legal actions against you once the proposal is filed.
  • Professional accreditation can be retained which may not be in bankruptcy (for example, insurance brokers, director of a corporation, licensed real estate broker)
  • Interest if frozen at the date of your proposal.
  • Under a proposal, you will still be able to sponsor a family member through the Canadian immigration process, were it may be hampered under a bankruptcy.
  • It is an effective alternative to bankruptcy from the aspect of its effect on your credit rating: with a proposal your credit rating is not as adversely affected as in a bankruptcy.
  • If filing a second/third bankruptcy, the process can be lengthy and stressful.  A proposal would avoid this.
  • You likely won’t lose your income tax refunds.
  • If you opt to declare bankruptcy, it can be costly.  You may be required to make additional monthly payments, called surplus income payments. The more you earn at your job, the more you will pay monthly and the longer the duration.

More and more Canadians are looking at the Consumer Proposal option to provide them a financial fresh start.  At Doug Lee & Associates Inc, we will work out the numbers for you and ensure that the proposal is fair and reasonable.  Give us a call for a free consultation, we would be happy to assist you with a new financial beginning.

Not all debts are Forgiven

A consumer proposal or a bankruptcy is a formal process under the Bankruptcy and Insolvency Act that allows people to get discharged from their debts that they owe to creditors.  Certain debts/obligations will survive the process and you will be still required to pay them.  The five most common debts that would survive are as follows:

1)        Student loans less than 7 years old:  A consumer proposal or bankruptcy can only discharge student loans that are over 7 years old.  If you have a student loan that is more recent than this, the debt will still be yours to repay even after completion of the process. If you have other debts, a consumer proposal or bankruptcy would eliminate these obligations possibly making it earlier to service your student loan debts.

2)        Child support: If you have been ordered by a court to pay child support, a consumer proposal or bankruptcy will not affect this arrangement. You will be required to continue to make payments.  As well, whatever payment arrangements you have will remain in effect during the process.

3)        Alimony: Similar to child support, alimony or spousal support is not discharged in a consumer proposal or bankruptcy. Even after completion of your bankruptcy, you are not released from spousal support payments.

4)        Debt related to fraud or misrepresentation: Any debts accumulated as a result of fraud will not be discharged through a consumer proposal or a bankruptcy. For example, if prior to your consumer proposal/bankruptcy, you racked up expensive charges on your credit cards (with no intention of paying these debts back), your creditors can apply to have this debt excluded from your discharge.

5)        Court-imposed fines: If you have been fined in a court of law, you will have to pay the fine regardless of your consumer proposal or bankruptcy.