Understanding when to file for Bankruptcy

As it stands, filing for bankruptcy should be the last resort when it comes to straightening out the finances, whether they are personal or tied to a business here in Ottawa. The main reason is the outcome of any type of bankruptcy is always going to be negative. The impact on an individual is, life changing, and catastrophic in a financial sense.

However, there are instances when it may be absolutely necessary to go forward with filing for bankruptcy. The important factor is understanding when the time is right. The following items need consideration beforehand, however:

·         Are you receiving harassing calls from Ottawa collectors?

·         Do you shop for necessary items using your credit card?

·         Have you been making minimum payments on the same credit cards?

·         Do you have the feeling that your finances are out of your control?

·         Do you have any idea of the amount of your debt?

·         Lastly, have you made any attempt at consolidating your debt?

Considering all of these points, it is definitely time to access your financial situation if any one of the above points is occurring. Another point is that you understand what being bankrupt means. Accordingly, it means that a person or an Ottawa business owes more than they earn.

This drives the interest on loans higher and the person or business deeper in debt. A tool that is predominately used for business finances also works for individual or personal finance as well. This is the debt ratio.

This determines the financial health and leverage that is present, (the ability or inability to acquire a loan and pay it back). While the results of the formula may be clouded by operational costs in any scenario the higher the ratio the lower the financial health is. The way to find it is to divide the total amount of liabilities, (money owed), by the total amount of assets, (money earned).

An example follows;

Joanne earns $3000 per  month and pays monthly for the following,

$400 for car payment, $1200 for rent and utilities, $200 for groceries, $300  car insurance, $200 for renters insurance. The total liability is $2300 divided by $3000 equals a ratio of over 75%. If she were living by using her credit cards for daily expenses you can see the dilemma mounting rapidly.

This is why it is a good idea to always be aware of your cash flow and your debt. When considering filing for bankruptcy in Ottawa you should look at the outcome, such as bad credit, the biggest deterrent. Naturally, there are two different ways a bankruptcy will occur, the first is to file after deciding it is the best move and the second way is for your creditors to declare it for you. This is typically the worst of either case because of who made the accusation. Moreover, if you determine that bankruptcy is  a best case scenario you should talk to an Ottawa bankruptcy lawyer so they can help guide you through the process.

Need help with Bankruptcy? Surgeson Carson Associates is a renowned Ottawa Bankruptcy Trustee who can provide you better suggestions to get out of your financial problems. There might be other solution than Bankruptcy.  

A Better Choice over Bankruptcy: Talk to a Financial Advisor First

There is a different path that a person, in debt, can take in Ottawa other than filing for bankruptcy. As most people are aware of filing for bankruptcy will devastate a person’s credit rating along with erasing most if not all of their debt. The alternative is filing a consumer proposal with the creditors.

What a proposal does is act as a negotiation tool between the debtor and creditor and it is a way to improve a credit rating as opposed to destroying it. Up until this past year, when Canadian bankruptcy law was changed, anyone who was approved for a 1^st time bankruptcy found a complete removal, or discharge of their debt after a period of at least 9 months. Now that the laws have changed, the courts have made the option of bankruptcy less alluring.

What changed?

What changed is the courts now look at the amount of income, considered as “extra or surplus” income after filing. If it is a specific amount, the debt remains intact. This means that, payments to the creditors or a bankruptcy trustee are mandatory for up to 3 months shy of a full year after filing for the bankruptcy this basically negates the whole purpose of taking this action.

In addition, to bashing a person’s credit here in Ottawa and having to report the income to the trustee, the payments equal 50% of the extra income above the settlement payments. Understand that bankruptcy allows a specific dollar amount as reported earnings once it has been finalized and anything over is what gets tagged as eligible for this additional collection going to the trustee. Most who learn this the hard way have wished they took another path, (speaking with an Ottawa financial advisor prior), instead.

The Alternative Route

While this is just one of the many adjustments made to the bankruptcy law, the alternative route, filing a consumer proposal makes it easier, thus far, to begin to manage debt. As stated above, the proposal is a 1^st step negotiating tool, because it sets a proposed amount for paying down a debt to the creditors. The time frame for acceptance, by the creditors, is 40 days.

What generally takes place is when a majority of the liability holders agree to the proposed terms, the consumer proposal is considered as a binding agreement. As for the creditors that do not respond, it becomes understood that their silence is their acceptance of the proposal. The payments for the amount set by the proposal, then go to the Ottawa bankruptcy trustee for a period of 3 to 5 years. This eventually reduces the debt to zero while leveraging the debt as more manageable.

The way the proposed amount is reached is a trustee will analyse the financial status of the Ottawa applicant and determine a fair amount. This decision takes into account the net income and the liabilities as a debt to income ratio. The resulting amount of the proposal, then reflects a manageable amount of debt accordingly.

Deal with a Financial Advisor First

It helps to understand that the total amount of debt may not be reduced that much, it still becomes manageable and the creditors stop calling. This depends on the trustee, as an example of a debt of around $30,000 the payments may reach as high as 2% or $600, (1.6%), of the debt for a period of either 4 or 5 years. This only cuts around $1000 off of the total amount making the proposal $29,000 as such different  Ottawa trustee’s will suggest different payment plans according to their own discretion.

Knowing that a trustee will give little leeway in the way they structure the proposal, and will insist that their decision is final. The person considering either a bankruptcy or a consumer proposal should seek help from a financial advisor before hand. The advisor will help determine different scenarios along with acting as a guide through the process and help with finding the best way to present the person’s financial status to an Ottawa bankruptcy trustee. 

Need help with Bankruptcy? You can count on Ottawa Bankruptcy Trustee for Consumer Proposal and Bankruptcy Solution. 

Anyone can Learn to Consolidate their Debt

Everybody is dealing with debt in one way or another, and some feel as if there is no end to the battle of paying it down. After all, is not being in debt a part of life? It is, however, it does not have to be. In the past, it was a difficult task here in Ottawa to find help with going further into debt by using methods that turned out to be high interest loans designed to keep you in financial distress.

Now there are financial advisors in Ottawa that specialize in helping people climb out of the financial holes they made for themselves. These individuals and organizations are helpful through teaching their clients how to budget and pay a little at a time by focusing on their debt to income ratio. This is not an arbitrary number made up by some Wall Street king pin. 

The debt to income ratio is something that Ottawa mortgage businesses use to qualify people for housing loans, and it works by comparing gross income against your expenses and liabilities, (debt). It is found by dividing your total debt by your total gross income and is an indication of your ability to pay. Follow the example below,

A woman pays $1,500 a month for mortgage, $450 for a car loan and $800 for the rest of her liabilities every month. This makes her recurring monthly debt equal to $2,750. If her gross monthly income is $3,000, her ratio would be $2,750 ÷ $3,000 = 0.92, or 92%.

This is a high ratio as it leaves her with a bit over $250 each month. However, as you may guess a lower ratio would be better. An organization that helps people reduce their debt helps find ways to decrease this ratio. Meaning that the lower it gets the better their financial health will become.

The only way this can happen is by being forthcoming with all of your liabilities and expenses in addition to full disclosure of all income resources here in or outside of Ottawa. This is the only way they can get a complete picture of your financial situation. It is a form of credit counselling, and as such, the individual of the company should be prepared to work with you on a long-term basis to reach the goal of reducing your debt.

Need help with Debt Consolidation? You can count on Surgeson Carson Associates for Debt Consolidation advice in Ottawa. 

Debt Counseling: How it Works

Debt in Ottawa or anywhere else is never pretty nor is it easy to confront. In the on going economic turmoil of today’s global market  we have witnessed a rise in bankruptcies and unsettled debt across the broad spectrum  of institutions and individuals world wide, more specifically here in the western hemisphere. In the midst of the newly formed globalized economy, businesses are beginning to realize that this expansion into new territories comes with a price.

The price is debt. Not only is it the consumer that feels the crunch of lower wages, higher cost of living expenses, and larger debt. Business are experience the result of mass layoffs and downsizing through the accumulation of debt that they are unable to reduce.

One main reason is consumers have less to spend freely because of trying to reduce their own form of debt. Fortunately, there are options here in Ottawa for finding a relief from the circular motion and financial turmoil created by this monster known as debt. Counseling is by far the best option available next to just having the money to pay off or having the wherewithal to avoid debt all together. What comes in the following paragraphs is an attempt to clarify how counseling may help with debt accrued through credit.

As it stands, those who would find the most help fro a service like credit debt counseling are those who have been finding it difficult to keep up with paying off their credit charges. There are a plethora of articles floating around the internet explaining the pitfalls of bankruptcy, which is a last desperate mainstay against collectors here in Ottawa, and credit counseling.

The biggest drawback about a bankruptcy is it stays on record for ten years and it leaves the individual or business with a poor credit rating. Enter the boon of counseling. Keep in min that this is not a form of relieving debt in any way, shape, or form. It is a means on negotiating methods to payoff your current debt.

In a perfect scenario, both the critics, and experts in Ottawa agree that counseling can have an outcome of reducing the amount of debt by sixty percent. The result is paying on fifteen percent of the total debt. The way this works out is the counseling company will require the person in debt to cease paying their creditors and begin paying them.

These payments then fund a trust account that the counseling company uses to negotiate the debt. The function of the trust account is to cover part of the debt payments to the creditors, and another portion goes towards current charges. While this is a simplified explanation, it is best to seek an actual credit counselor in Ottawa for more help and further information.

You can count on Surgeson Carson Associates as your trusted Debt Counselling consultant in Ottawa.