Big income . . . and big debt?

Celebrities – and ‘regular folk’ too – often file bankruptcy or consumer proposal for similar reasons:

Limited financial education: If, like a whirlwind celebrity’s (think YouTube insta-sensation) rise to fame you go from having nothing to having the world at your fingertips, a financial education is not usually part of the package. Learning how to effectively save, budget, and invest can take years, and sometimes a team of help, to achieve. When handed huge checks to cash, many celebs go out and buy the biggest house and fastest car, rather than learning how to properly handle their money.

For ‘mere mortals’ a significant career promotion with pay increase (or an inheritance or elusive lottery win) can add a boost to our credibility and add some additional buying power. But, it’s essential to learn how to manage your money, your budget and your long-term financial planning.

Materialism: Our culture can be highly materialistic. It prompts some people to try to ‘one up’ each other with larger houses or forever be ‘keeping up with the Joneses’ with more expensive vehicles. Young people, in particular, can be susceptible to the ‘celeb mindset’ believing their ownership of the latest designer handbag or electronic item is a given. The easy access to credit cards to people with limited income and often limited money management experience (see above) can lead to serious debt problems.

Celebrities, like the rest of us, can get caught up in having the finer things in life. But, a great TV gig can get cancelled and when the paycheques stop rolling in, it’s harder and harder to maintain that same standard of living without getting into serious debt.

Lack of investment in self: Often the stars surround themselves with lawyers, accountants, and insurance professionals to help them with proper estate, tax, and insurance planning. Sometimes they don’t double-check the work done on their behalf, or they don’t properly vet the financial professionals they hire. Not surprisingly, many fall prey to unscrupulous advisors.

The lesson here for ‘man on the street’ is to take ultimate responsibility for your own financial affairs. Yes, seek the advice of proven professionals. Ask other trusted sources for referrals. Get second opinions. And – refer again to the info above – get educated!

If you are facing financial struggles or would like some help with managing your debt—one of our professionals is available to discuss your situation. There are many options available to help and you may not need to go bankrupt. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll at 310 8888.

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Determined to deal with your unmanageable debt load? Then consider a consumer proposal.

Maybe it’s the credit card bills clearly itemizing unplanned holiday spending. Or, perhaps your New Year’s resolution is to finally deal with your debt. Whatever your motivation, it’s important to know all of your options.

One popular option is a Consumer Proposal – which has become favoured over bankruptcy. A Consumer Proposal is a way to address debt but not negatively ‘impact’ yourself – and your assets and credit rating – as much as you would through a bankruptcy.

A Consumer Proposal focuses on what you are capable of paying (not just what you owe)—this could be 75% less than the total amount you owe. You can qualify for a Consumer Proposal if you owe up to $250,000 of non-mortgage debt—and most debts can be covered. This essentially allows you a fresh start.

With the guidance of a Trustee you negotiate to pay creditors all, or a portion, of your debt over a specific time period or to extend the time allowed to pay the entire debt. You need the majority of creditors to agree to the proposal—then all unsecured creditors are bound by it.

With a Consumer Proposal you keep control of your assets and it has shorter-term – and less significant – impact on your credit rating than bankruptcy.

For example, if you make a Consumer Proposal your credit score will be affected for three years after you have paid the full amount promised to your creditors in your Proposal. In contrast, although it varies by credit agency—in general, your credit score would be affected for six years after discharge for a first bankruptcy and for 14 years for a second bankruptcy.

Keep in mind too that some consumers cannot qualify for a consolidation loan (to address their debts), whether because of their debt ratio or their impacted credit score. With a Consumer Proposal it is not about ‘qualifying’. This solution is seen as a consolidation of your debt and a repayment plan—based on your current circumstances.

Avoiding bankruptcy may be important to you too. Your profession or employer may review your credit history and view a bankruptcy as unfavourable. Also, if you are a director of an incorporated company you cannot legally continue to perform this duty if you have filed for bankruptcy.

Not to mention, sometimes it can be a psychological thing—people in general don’t like the ‘b’ word (bankruptcy). A Consumer Proposal provides a solid solution to resolving debt issues without committing to bankruptcy.

If you are facing financial struggles or would like some help with managing your debt—one of our professionals is available to discuss your situation. There are many options available to help and you may not need to go bankrupt. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll free from anywhere in Alberta 310 8888.

Why a consumer proposal is (almost) beating out bankruptcy as the best way to deal with debt.

Across Canada individuals are increasingly using a consumer proposal to address (what has now become) their unmanageable debt. A proposal is based on what you are capable of paying . . . not what you owe – and it allows you a fresh start without going bankrupt.

Under a consumer proposal, with the guidance of a Trustee, you negotiate to pay creditors all or a portion of your debt over a specific time period, or to extend the time allowed to pay the entire debt. You just need the majority of creditors to agree to the proposal—then all unsecured creditors are bound by it.

After you make your proposal, most creditors can no longer ‘hound’ you for collection of their accounts and public utilities can’t discontinue their service. Also, a consumer proposal prevents your creditors from garnishing your wages.

In 2006 only 15 per cent of insolvent Canadians chose to make a consumer proposal. Now that number is at an all time high of 40 per cent. There are a number of reasons why.

Firstly, in 2008, changes to the Bankruptcy Insolvency Act (BIA) increased the limit of the size of non-mortgage debt for qualifying for a proposal from $75,000 to $250,000.

And too, economists suggest it’s a sign of improving times where consumers are more optimistic about the future and are keen to ‘clean-up’ their debt issues in ways that are manageable—and without going bankrupt. With a consumer proposal you keep control of your assets and it has shorter-term – and less significant – impact on your credit rating than bankruptcy.

For some it’s all about keeping their car, home or signed jersey by Jerome. A consumer proposal starts with the consumer – you propose a deal to your creditors to pay back the debt. If you want to sell your car to do it, that is your choice. Remember, whatever you negotiate with your creditors should be fair otherwise they may just ask for your prized collection.

Remember too, in a bankruptcy you are mandated to make some payments toward your debts—for example (depending on the debt) you might be required to pay $1,000 a month for 21 months. In contrast, with a proposal you might negotiate to pay $600 a month for 40 months. This can be a more manageable option.

And, sometimes avoiding bankruptcy is very important. Your profession or employer may require that you not be an undischarged bankrupt. You also can’t be a director of an incorporated company if you are an undischarged bankrupt.

Not to mention, sometimes it’s also a psychological thing—people in general don’t like the ‘b’ word (bankruptcy). A consumer proposal provides a solid solution to resolving debt issues without committing to bankruptcy.

To learn more about a consumer proposal and whether it is the best course of action to address your debt issues, visit our website at www.gt.alger.ca or contact us for a confidential, no-obligation, complimentary consultation toll free from anywhere in Alberta 310 8888.