How to Rebuild Credit After Filing a Consumer Proposal

As Licensed Insolvency Trustees, we often get asked how to rebuild credit after completing a consumer proposal or bankruptcy. When debt becomes overwhelming, and you’ve chosen to do something about it, namely filing a consumer proposal or bankruptcy, you’re already on the road to financial freedom. That being said, debt and the various debt solutions can have an impact on your credit score. While it can take time to rebuild, it may not be as difficult as you think. Here are some things that you can do to help get things back to a place where borrowing isn’t a major hassle.

  • Get a secured credit card. With a secured credit card, you (the cardholder) make a deposit to the credit institution and this becomes your limit on the card. Each month you are required to make regular payments to the card (to pay off your ‘balance’), but if you default the money comes from that initial deposit. Keeping up the regular payments helps to rebuild credit as it shows positive credit activity.
  • Pay any and all of your bills on time. This includes things like hydro and gas, insurance, even your phone bill. These all report to your credit report and having good credit history will boost your score.
  • If you’re in a consumer proposal, try to pay it off as quickly as possible.
  • Save some money. When you’re ready to finance a large purchase, a vehicle for example, a large down payment usually makes it possible to do so at a decent interest rate.
  • Make sure that, once you have been discharged, this has been reported to the credit reporting agencies. You want your credit report to reflect that you have completed your proposal or bankruptcy obligations. Making sure that there are no errors on your report is also a good idea. You can do this by requesting your credit report from both Equifax and Transunion. If you find any errors, document these and send, by registered mail, a letter and any supporting evidence to support.

Other tips on how to rebuild credit once you are discharged from bankruptcy or completed your consumer proposal include:

  • Keep balances low on all credit products. When you pay off a credit card, or pay it down significantly, keep it that way. However, if you can’t pay off a big chunk, at least try to keep the balance low.
  • Avoid applying for too much credit. When you apply for any type of credit product, this gets reported to your credit report, and when you continually apply for credit this negatively impacts your overall credit.
  • Pay more than the minimum payments as often as possible.

At Spergel, your financial freedom is our ultimate goal. We are here to help you find a solution to your debt problems, including how to rebuild credit both during and after filing a consumer proposal or bankruptcy.

For more information, call us today to schedule a free consultation: 310-4321.







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CRA Garnishments 101 – How Much Can CRA Garnish?

When you owe money, no matter how much, to any creditor, one of the most problematic forms of collection action you face is a wage garnishment. When the debt is to the Canada Revenue Agency (CRA), things become even more problematic. If you’re concerned that a CRA garnishment may be headed your way due to unpaid taxes, you may be curious about the process or wondering how much can CRA garnish.

Firstly, the process by which CRA garnishes wages is different from the process followed by other creditors. Other creditors must first obtain a judgement against you in court, thereby making you aware of the garnishment. They will also formally notify you of a garnishment. Once this has been done, your employer is made aware of the garnishment and must then forward a portion of your wages to the creditor to pay off the debt.

With CRA garnishments, no court order is required. Instead, a notice is sent directly to your employer notifying them of the garnishment. They are required, by law, to comply. If they do not, they could face legal action. Thus, many are not even aware that CRA has implemented a garnishment until receiving a paycheque that is far smaller than expected.

How much can CRA garnish? This is another important consideration when you’re dealing with CRA debt.

If you are an employee on payroll with taxes deducted at the source, CRA can garnish up to 50% of your wages. If you are a sub-contractor, or receive a different form of income, such as a pension, CRA can garnish up to 100%.

As you can see, CRA wage garnishments are serious business, and can wreak havoc on your finances in a short period of time.

While a CRA wage garnishment should not come as a surprise – you will have been notified of the tax debt well in advance of the garnishment – if you can’t pay the debt in full, you may have limited options. Two of the most effective are a consumer proposal or bankruptcy. Both offer full protection from a CRA wage garnishment and can help you manage your other debts as well.

A CRA garnishment can be devastating financially. Don’t wait, get your tax debts resolved as soon as possible to stop a garnishment in its tracks. At Spergel, we have over 25 years of experience dealing with CRA debts.

Call us today, toll free, for a free consultation: 310-4321.


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Are You Part of the Sandwich Generation? Helping Parents and Children Through Financial Challenges

Are you part of the sandwich generation and feeling the impacts on your bank account?

The sandwich generation refers to those in the 35-55 year age range, those who care for their own parents while also supporting their own children. Financially, they’re stuck in the middle.

According to Statistics Canada, as of 2016, the sandwich generation included more than two million Canadians. As Canada’s population ages and the older generation is no longer capable of caring for themselves, this number is expected to rise.

Young children are, for the most part, wholly dependent on their parents, and thus their expenses are to be expected. However, with rising home prices, and wages not rising with inflation, more and more young adults are choosing (or finding it difficult to do otherwise) to stay at home with parents rather than leaving the nest and living on their own. This, of course, can put a strain on the parents’ resources at a time when, historically, finances should be trending downwards.

Furthermore, many in this situation are also caring for their older parents, those who are in retirement but need assistance, whether financially or otherwise. This has been cause for some concern for those Canadians worried that funding their parent’s retirement will erode their own savings.

Caring for kids – no matter their age – is expensive. Caring for parents and helping them out financially can also be costly. But what’s the solution?

One of the most important things you can do if you’re part of the sandwich generation is keep the lines of communication open, and have a plan, especially with aging parents. This means having a real conversation about finances, where your parents stand financially, looking at savings and assets and how these can be used to better prepare for future costs.

On the other side, it is also important to communicate with your kids. Be frank about finances and budgeting, and help them better understand money and the importance of saving. For older children, a discussion surrounding debt, future goals, and saving for their future goals can help.

Being stuck in the middle is often a tough spot, especially when money is a concern. Careful planning and clear communication, as well as a strategy to get finances (no matter if they’re yours, your child’s or your parents’) back on track is crucial.

At Spergel, we can help you best prepare for the future and develop a plan to ensure all members of your family are well situated for financial freedom.

Call us today, toll free, for a free consultation: 310-4321.


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Sears Bankruptcy Could Spell Financial Trouble for Many Employees

Sears has been experiencing financial trouble for a few years now, and back in late June, it finally bit the bullet and filed for bankruptcy. This is a significant concern for those employees facing (or already dealing with) layoffs as a result. Worrying about pension payouts, not to mention the ability of former employees to make ends meet after the job loss, is weighing heavily on those most directly impacted by Sears’ decision to file.

According to CNN, early in June, “Sears Canada said it hoped to be able to restructure and emerge from bankruptcy later this year. It did not give any details about store closing plans or staff cuts it might make as part of its restructuring.” However, since that time, the retail giant has announced the closing of almost 60 stores and job cuts for almost 3000 people.

Sears began making moves earlier this year. Back in March, as CBC News reported, when the Coburg location closed, employees found themselves out of work, and because of the regulations regarding bankruptcy, severance packages were not required. For many employees, this has meant a major hit financially. Retired employees are also concerned about what this filing could mean for their pensions.

As CBC News noted, “deep financial troubles left the iconic retailer with no choice but to seek court protection from its creditors while it restructures. As part of the court proceedings, Sears said it’s not able to make payments to a number of stakeholders, including laid-off employees owed severance… As far as retiree benefits and pensions are concerned, Sears contends it’s too early to predict what will happen and claims employee pension payments may not be compromised.”

While Sears has stated that former employees can make claims as far as compensation, chances are the results won’t be worth the effort as bankruptcy proceedings ensure secured creditors get priority.

Many of these jobs will be cut without much notice, and those employees, regardless of their years of service, will be left with nothing.

For many, especially with the recent BOC interest rate hike, this could spell disaster. An inability to meet monthly financial obligations could quickly become problematic.

Whether you’re a former Sears employee, or just concerned about your finances and debt in general, Spergel is here to help. We can help you understand your options for debt relief and better financial stability.

Call us today, toll free, for a free consultation: 310-4321.



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BOC Interest Rate Hike and the Impact to Line of Credit Holders

We’ve spoken at length over the last few weeks about how the Bank of Canada’s (“BOC”) interest rate hike will impact Canadians. Most of what we’ve discussed has been with regard to mortgages, but what about line of credit (“LOC”) holders? If you have a line of credit, the impacts of the July interest rate hike may already be visible for you!

With fixed-rate mortgages, the interest rate won’t increase until it is time to renew, thus payments won’t change until then. However, if you have a line of credit, the rates charged by the bank will likely already have gone up as a result of the BOC increase.

There are a few things that you can do to reduce those impacts or prepare yourself for them. Here are a few valuable pieces of advice from a recent CBC News article.

  1. Pay down your debt. With interest rates increasing, this one is a no-brainer. The less you owe, the less interest you’ll have to pay. Be aware of interest rates on your various products, and adopt a plan that makes the highest rate products a priority.
  2. Call your lender to ensure that you are 100% clear on the terms and structure of your credit products.
  3. Consolidate debt. If you can’t pay off a significant amount in a reasonable period of time, consider consolidating debt to decrease interest rates and combine payments.
  4. Hold off on any and all home renovations that require borrowing. According to the article, big banks always seem to be pushing LOCs for home renovations to help homeowners increase the value of their homes. However, if you are only paying the minimum payment on a line of credit with a high interest rate, you may actually end up paying more than the increased value.
  5. Hit the reset button. The article notes that a careful review of your finances to see where your money is going is crucial. We go a step further and argue that now is the time to actually hit reset if you’re overwhelmed. While cutting back may help you save a little, there are other options available that may just save you plenty more. A consumer proposal, for example, can help you combine all of your debts into one easy monthly payment, stop interest from accumulating, and often reduce the total amount of debt that you owe. If you’re stressed and think it is time to get some real relief, a consumer proposal may just be worth considering.

Read the full CBC News article here:

If a higher interest rate has you concerned about meeting your monthly financial obligations, don’t wait until things get worse. At Spergel, we have years of experience helping Canadians regain control of their finances.

Call us today, toll free, for a free consultation: 310-4321.



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Economists Warn That the Canadian Interest Rates Can be Expected to Continue Rising

Back in early July, the Bank of Canada announced that its key interest rate would increase from 0.5% to 0.75%. After months of speculation, during which economists continually warned that an increase was inevitable, the Bank of Canada finally determined that the economy was stable enough to handle such an increase.

What’s more, that 0.75% rate is not likely to hold. Several economists have noted that a further Canadian interest rate increase is highly likely, if not with the Bank of Canada’s September announcement, with the one following.

As Canadian Business explained (in several easy-to-understand graphs), a stable economy was one determining factor for the decision to raise the rate, and steady employment growth was a big part of that.

Other factors that led to this decision included business expectations for future sales, rising demand for Canadian-made products (exports), and several solid years of retail sales growth.

Furthermore, with things continuing to look good, many have argued that a further rate hike is to be expected. That being said, the Bank of Canada has been strongly cautioned to take its time when handing out another rate increase, especially since the economy has just recently shown signs of regrowth – not to mention the serious impact this rate, and any further rates, stand to have on Canadians and their debt.

What kind of impact are we talking about? What many Canadians don’t realize is that rate increases, even small ones, can have major impacts, especially for your mortgage or personal credit lines. For example, a 1% rate increase does not signify a 1% increase in your payments. In fact, a 1% rate hike could actually result in a 10%+ increase in your mortgage payments. For instance, if you have a $200,000 mortgage with an interest rate of 3%, you’re paying $6000 in interest per year. However, if that rate increases to 4%, the interest grows to $8000 per year, which means you’re actually paying 33% more.

Whatever happens – whether the Canadian interest rate jumps again in the fall of 2017 or early 2018 – getting a handle on your debt before it becomes an even bigger problem just makes sense. If interest rates increase yet again, and thus your minimum payments rise, you may find yourself dealing with creditors and collection calls you can’t shake.

At Spergel, we have over 25 years of experience helping Canadians find solutions to their debt problems. If you’re concerned about another Canadian interest rate increase, you’re not alone – we’re here to help.

Call us today, toll free, for a free consultation: 310-4321.



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Debt Advice: What to Do When Canadian Wages are Shrinking but Debt is Growing

More often than not, when monthly finances are tight, most Canadians turn to their credit cards or personal loans to make ends meet. Perhaps you feel as though this is something you alone are dealing with, but trust us, it is not. If you’re struggling financially, and looking for valuable, realistic debt advice, you’ve come to the right place.

While for some, this reliance on credit may be a rare occurrence, for others it is far more common, and is a symptom of a larger problem. Canadian wages are not increasing – they’re stagnating, according to Statistics Canada – and thus, when things cost more (as they do), and your income isn’t rising to meet those demands, taking on more debt may be the only answer you’ve got.

According to a recent Huffington Post article, “Canadians are taking on more debt and spending more money, but they aren’t earning more than they used to — a reality that may be sending Canadian households into what Conference Board of Canada chief economist Craig Alexander is calling ‘an endless debt cycle.’”

As Alexander notes, often when prices increase, but wages do not, people are motivated to borrow that which they don’t already have. This has been especially true with mortgage debt as house prices in Toronto and the GTA (and elsewhere) skyrocketed over 2016 and the first half of 2017, causing the average size of a mortgage in Toronto to increase by $50,000 in only a year. Low interest rates also contributed to the borrowing influx, which will also become problematic as interest rates rise, as they are expected to continue doing.

What this often results in, unfortunately, is an inability to pay those minimum payments.

As Licensed Insolvency Trustees, we see this all the time. If your debt has grown substantially over the last few years, and you’re having trouble meeting minimum payments, or worse, not meeting them, you could be digging yourself a hole that will be incredibly difficult to climb out of, even when wages and prices even out.

Instead of continuing to pile on the debt, perhaps it is time to consider the alternative options that may help alleviate some of your financial stress and get you back to a place where you’re not living paycheque to paycheque because of your monthly debt requirements.

At Spergel, we offer real-life debt advice – advice that doesn’t get you deeper in debt or lead to even more sleepless nights. Call us today, toll free, for a free consultation: 310-4321.



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Debt Consolidation: Be Ready for Back to School

The back to school season is officially here and that means kids are headed back to the classroom and parents finally get a little break from the boredom or mayhem that can come with summer holidays. That being said, September leads the way for another three to four months of expenses: back to school, Thanksgiving, Halloween, and yes, the holiday season. This can be exciting – or it can be stressful if you are still struggling with credit card debt left over from last year’s holiday season.

If you are heading into another busy family and holiday season and you are loaded in debt, it may be time to make some changes rather than racking up even more debt.

Sometimes a fresh start is the answer.

A debt consolidation is one way to find some relief from debt that has become overwhelming. Taking numerous debts and combining them into one manageable monthly payment can really reduce the stress and free up some much-needed liquid cash, especially at this time of year.

A debt consolidation usually takes the form of a loan from a bank or other lender – perhaps a personal loan, a line of credit, or even a second mortgage. You then use this loan to pay off all debts. This often results in a reduction of the total amount of interest paid, typically a lower rate of interest compared to your credit cards, and one monthly payment.

That being said, in order to qualify for a debt consolidation of this nature, you will need good credit.  Additionally, once you’ve rolled all of your debts into the loan, that monthly payment may be more than you’re comfortable with.

If this has you concerned, you may want to think about a consumer proposal as a possible debt consolidation alternative.

A consumer proposal is a formal proposal put forth to your creditors offering an amount to settle your debts. Typically, this amount is much less than what you currently owe, but it is attractive to creditors because it is more than they would receive if you chose to file for bankruptcy. Once it has been accepted by the majority of your creditors, the result is a monthly payment that you can actually afford – and interest stops!

A consumer proposal in Ontario must be administered by a Licensed Insolvency Trustee, one who is regulated by the Superintendent of Bankruptcy, so you know that you will be protected and treated fairly in the process.

Want to find out more about the benefits of a debt consolidation or consumer proposal? Spergel is here for you.

Get in touch with us today to schedule a free consultation: 310-4321.


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A War on Wages: Are You Suffering from a Wage Garnishment?

Arguably one of the most embarrassing things that one can endure is a wage garnishment. It is bad enough to have to walk around with a demanding debt looming over your head, but often no one else needs to know about that debt. Once a wage garnishment has been put in place, that level of privacy is gone and your employer is going to know about the debt. If a creditor is going to war on your wages, your situation has inevitably become far more serious.

When it comes to wage garnishments in Ontario, there are a few different types, some of which come with more warning than others. That being said, in most cases those suffering from wage garnishments know that enforcement action is coming as a result of defaulting on debts or refusing to pay a creditor.

Court-ordered garnishment: When a creditor sues you in civil court for unpaid debts, and successfully obtains a judgement against you, they can then proceed to serve a notice of garnishment to your employer to garnish your wages. In Ontario, upon receipt of such a notice, an employer is legally required to remit up to 20% of your earnings to the court to then be dispersed to your creditor. In this instance, the only ways to get the wage garnishment removed are to pay your creditor in full, make a motion and ask the court to remove or reduce it, or seek intervention from a Licensed Insolvency Trustee.

Canada Revenue Agency (CRA) garnishment: Unlike other creditors, CRA does not need a court order to have your wages garnished. The agent assigned to your case simply needs to send a requirement to pay notice to your employer requiring them to remit up to 50% of your employment income. In cases where your income is contract income or other income (such as a pension), you may be subject to a 100% garnishment. When CRA gets an enforcement plan in place, they can be that much more difficult to deal with. Note that the only ways to remove a garnishment from CRA are to get CRA to agree to remove (unlikely), go to tax court, or to receive assistance and intervention from a Licensed Insolvency Trustee.

If you have a garnishment in place or are concerned that you’re at risk of having one levied in the near future, and you know you have no ability to pay, then speaking to a Licensed Insolvency Trustee is critical.

A Licensed Insolvency Trustee is the only professional (other than your creditor, a judge or the government) that has the power to stop a wage garnishment in its tracks. Sitting down and discussing the various financial restructuring options available to you is a great place to start when a creditor is garnishing your wages.

Don’t wait. The longer you leave a wage garnishment in place, the more difficult your financial situation will become.

Call Spergel today at 310-4321.


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Financial Restructuring: How to Talk to an Aging Parent about Restructuring Their Finances

A few weeks ago, we covered a trending topic in the news – the growing rate of seniors entering retirement in debt – and this week we thought we’d follow it up by discussing the issue of talking about financial restructuring with aging parents. None of us want our parents to struggle financially, especially in their retirement years, but the conversation can be a difficult one.

As of this year, Canada has more people over the age of 65 than under 15. The age group that now encompasses the baby boomer generation – 50 to 69 – makes up 27% of the Canadian population. That is a vast segment of the population set to retire shortly, or already enjoying retirement.

Talking to aging parents can be tough because, while they used to take care of you, there is often a role reversal at some point in life and you will likely come to take care of them. Talking to a parent about their debt can be humbling. In cases where you have a parent who doesn’t have assets and is in debt, it is a delicate topic to bring up – but one that really should be covered to improve their overall wellbeing.

One thing that you have to think about as far as debt in retirement is that debt can be a burden, so while this may be an uncomfortable topic, your parent is living with payments looming over their head each month. This is especially true for those on smaller fixed incomes.

There is no shame in looking at financial restructuring strategies to help your parent better meet their financial obligations. Instead, doing so often allows for a greater understanding and acceptance of what may be troublesome and an opportunity to fix the things that may be causing them stress.

The route you go depends on your parent’s personal financial situation. For example, if your parent owes more than they can pay back and is having difficulty managing their monthly payments, a good first step is to speak with a Licensed Insolvency Trustee. A Licensed Insolvency Trustee can look at their overall financial picture and make strong recommendations that include solutions to reduce your parent’s debt, interest and payments.

If your parent has investments or equity locked up in assets and owes far less in debt than the available equity, perhaps you need to pursue avenues to unlock that equity and consolidate.

Everyone’s situation is different, and the best solution is one that is based on a careful consideration of all the facts. What you can do is start the conversation. Starting the conversation will help your parents enjoy a better financial situation in retirement. Giving them information about the resources available and helping them to access those resources is a great way to start!

At Spergel, we understand how uncomfortable this conversation can be, but we can help make it easier.

To discuss strategies for financial restructuring, please get in touch with us today: 310-4321.



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