Top Ten Money Problems Questions

	Top Ten Money Problems Questions - Money Problems Radio Show (Opens in a new window. Optimized for Windows Media Player 6.4 and later versions.)
Originally aired on April 10, 2006.

Show Topic:

Out of all financial problems questions submitted to moneyproblems.ca website, some are asked more often than others.

On this show we have discussed the top ten money problems questions that our bankruptcy experts receive.

Guests:

Douglas Hoyes is the co-founder of Hoyes, Michalos & Associates Inc, one of Ontario's leading personal insolvency firms. They emphasize a fresh start when dealing with money problems, and file dozens of consumer proposals and personal bankruptcies every month. Doug can be reached at www.hoyes.com or, in Ontario, at 310-PLAN (no area code required).

Robert Floris is a mortgage consultant in Hamilton, Ontario. He uses his many years of experience to serve clients in Hamilton, Ancaster, Dundas and Grimsby area. Robert can be reached at 905-574-9200, ext. 215.

Scott Schaefer is a chartered accountant with many years experience. He specializes in personal bankruptcies and consumer proposals, and he also manages the tax group at Hoyes, Michalos & Associates Inc, so Scott will answer a question today that deals with both money problems and taxes.

Show Summary:

Here are the answers to the top ten money problems questions we receive:

10. I went to get a loan, but the bank refused the loan because they said I had negative information on my credit report. Can you explain what this means, and what I can do to fix it?

A credit report is a summary of where you have borrowed money, and whether or not you paid it back on time. If you can't get a loan because you have negative information on your credit report, the first thing you should do is get a copy of your credit report. Once you know what's on your credit report, you can take steps to fix it. Those steps might include making a plan to repay your debts on your own, or perhaps filing a consumer proposal.

9. What is a consumer proposal, and how can it help me avoid personal bankruptcy?

A consumer proposal is a settlement negotiated with your creditors and approved by the court. It is a legally binding agreement. Once the proposal is approved, you make one regular payment to deal with your debts.

8. If I own my own house, but I owe money on credit cards, is there anything I can do, or do I have to sell my house?

Selling your house is an option, but it may also be possible to increase your mortgage to generate sufficient cash to pay off your credit cards. Robert Floris explained that for many people re-financing is the best option.

7. If I have serious money problems and I have to go bankrupt, will I lose my house?

Not necessarily. It depends on the value of your house, and whether or not you are current on your mortgage. This is a complicated area, and the rules are different in each province, so a consultation with a bankruptcy expert is necessary to review your specific situation.

6. If I go bankrupt, how will that effect my spouse? Do they have to go bankrupt to?

Your debts are your debts. Your spouse is not liable for your debts just because you are married. They are only liable for your debts if they co-signed with you, or if they have a joint credit card on your account. One spouse going bankrupt does not mean that the other spouse must also file for bankruptcy.

5. I'm self employed, and for the last three years I haven't been able to pay my taxes. Last year I cashed in my RRSPs, so now I owe even more money on taxes. What can I do? Can I make a deal with Revenue Canada?

Yes, it is possible to make a deal with Canada Revenue Agency. The first type of deal would be to make payment arrangements, where you agree to make monthly payments until the debt is paid. In most cases CRA will only accept that type of arrangement if the debt is paid in one year or less. By law CRA cannot accept a deal for less than the full principal amount owing, unless it is done through a legal process such as a consumer proposal.

4. If I go bankrupt, what happens to my tax refund?

In a personal bankruptcy you will lose your tax refund for the period up to the date of bankruptcy, and in most cases you will lose your tax refund and GST credits for the year of bankruptcy.

3. What do I get to keep if I go bankrupt. Can I keep my car?

The bankruptcy exemption laws are governed by provincial legislation. They are different in every province, so a consultation with a bankruptcy expert is necessary to for full details. As an example, in Ontario you are permitted to keep one motor vehicle with no liens worth up to $5,650.

2. Are all debts included in a bankruptcy? What debts don't go away if I go bankrupt?

Unsecured debts, such as credit cards, are discharged in a bankruptcy. Secured debts, such as car loans and house mortgages, are not discharged in a bankruptcy. Other debts are specifically excluded from discharge in a bankruptcy, including child support, government fines, certain student loans, and debts arising as a result of fraud.

1. If I go bankrupt, will I ever get credit again? Will I ever be able to buy a house?

Each year in Canada approximately 100,000 individuals file a consumer proposal or go bankrupt. It stands to reason that if people who filed bankruptcy were never able to own a house, very few people in Canada would actually be able to own a house! You can get credit after bankruptcy if you live within your budget and save money. By saving money you demonstrate to lenders that you can handle money, and you will also have the down payment or security deposit necessary to allow you to re-build your credit.

Question of the Week:

Q. I have some credit card debts. I own a house. I'm self employed. I had a rough year last year and I didn't file my taxes. My house has gone up in value, but I'm having trouble increasing my mortgage because I'm self employed. I'd like to borrow against my house and get back on track, but now I'm worried that I might even lose my house. I'm under a lot of stress. What can I do?

A. First, you need to file your taxes. With un-filed taxes it is difficult to re-finance, and obviously impossible to work out a repayment plan with Canada Revenue Agency. Since you own a house, the next possibility may be to refinance to repay your debts. A home equity debt consolidation loan carries the best interest rate, which allows you to put more of your monthly payment towards paying off your debts, and less to interest payments. A consumer proposal may be an option, if you have sufficient income to make a repayment plan. If you cannot work out payment arrangements, a personal bankruptcy may be necessary.

Don't let your money problems overwhelm you; if your money problems questions are not in this group of frequently asked questions, contact a bankruptcy expert today for the answers and for more information on dealing with your money problems.