Credit Cards, Consumer Debt, and Bankruptcy

Credit Cards, Consumer Debt, and Bankruptcy
By: Dahron, Dajena, Diana, and Suban

Agenda - Presentation Movie Issue overview Credit Cards Consumer Debt
Bankruptcy Conclusion Future Outlook Game 4/17/2017 Free Background from

Issue Overview Credit Cards Consumer Debt Bankruptcy
Consumers’ credit card debt has been steadily rising throughout the years. Consumer Debt For years, consumer debt levels have been rising much faster than incomes have. Savings rates are at record lows and Canadians are spending more than they can afford Bankruptcy 4/17/2017 Free Background from

What is Credit? Credit is what you use to buy products or services today and pay for them at a later date. There are four basic types of credit. Service Credit Loans Installment Credit Credit Cards

What is a Credit Card? A credit card is a small plastic card.
Issued to consumers in order to purchase goods and services with credit and pay for them at a later date. A credit card is the only automatic way of offering credit to a consumer. Different from a debit card.

Major Credit Cards Visa:
Operates the world's largest retail electronic payment network. MasterCard "There are some things money can't buy. For everything else, there's MasterCard.“ American Express [AMEX] Operates in over 130 countries around the globe. Capital One Helped pioneer the mass marketing of credit cards in the early 1990s.

Credit Card Facts & Stats
Standard credit card interest rate (average): 18.9% Range in interest rates by bank-issued credit cards: %-19.90% Number of retailer-issued credit cards in circulation in 2003: 23.9 million Number in 1983: 419,610 Number of credit cards reported lost or stolen in 2003: 810,859 Number of cards fraudulently used in 2003: 146,310 Amount Canadians owed on their Visa and MasterCards by the end of 2003: $49.8 billion

History 1946: The first bank issued credit card was invented by John Biggins. He invented the "Charge-It" program between bank customers and local merchants. 1950: The Diners Club Card issued in the United States was the next step in credit cards. 1960s: First plastic cards introduced.

Interest Interest, is the fee paid for the privilege of borrowing money. Credit Card issuing companies use interest rates to generate revenue. Interest rates widely vary with credit cards. Typical credit cards have interest rates between 7 and 36% in the U.S. Retail store credit cards offer very high interest rates.

Grace period It is the period during which no interest is charged on a credit card. If you do not pay during the grace period, you will begin to pay interest. However, on some credit cards, you will be charged interest on your new purchases immediately -- unless you have paid off your credit card in full the previous month.

How do Grace Periods differ?
A card could have: A typical grace period... A full grace period... No grace period...

Why Do Consumers Land in Debt?
Impulse Buying Not paying balance on time  interest rates charged Uncontrollable Spending Habits

Ways to Deal with Credit Card Debt
Debt Consolidation: A debt consolidation loan is a single loan (generally from a financial institution) that allows you to repay your debts to several or all of your creditors at once.

Ways to Deal with Credit Card Debt
Debt Consolidation: ADVANTAGES DISADVANTAGES As a result, you will save on interest payments. You still have a combined debt. If you are not careful, there is a chance that you will be tempted to use your credit cards again if you still have them. Furthermore, you will only have to make a single monthly payment to your financial institution. Financial institutions may not be as flexible as your creditors. If you run into further problems, financial institutions will generally be less understanding and may refuse to accept a late payment. As long as you follow the terms of your consolidation loan and make your payments on time, your credit rating should not be negatively affected.

Credit History If someone has ever taken out a loan, used a credit card or taken advantage of a "buy now, pay later" offer, they will have a credit history. Credit-reporting agencies are businesses that collect information about you and how long it takes you to pay back money you have borrowed. This information is called your "credit history".

What is a credit report? A credit report is a snapshot of one’s credit history. It is one of the main tools lenders use to decide whether or not to give someone credit. A credit report contains: Personal information Credit information Banking information Public records Collection information

What is a credit score? Your credit score is a judgment about your financial health, at a specific point in time. It indicates the risk you represent for lenders, compared with other consumers. Credit score is calculated using several factors from one’s credit report.

Agenda – Consumer Debt What is it? Personal Loans Line of Credit
Overdraft Protection Cash Advances Pay Day Loan Mortgages Subprime Mortgages

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Consumer Debt: What is it?
Debts resulting from purchasing goods that are consumable and/or do not appreciate. High levels of debt = not beneficial because the strain to make regular payments increases Consumer debt can lead to bankruptcy Some debt can be beneficial, if it helps boost earning power Debts that are owed as a result of purchasing goods that are consumable and/or do not appreciate. Possessing high levels of consumer debt is not typically beneficial for the average individual because it increases the strain on one's sources of income to maintain regular payments. If not managed well, consumer debt can lead to bankruptcy. Possessing some consumer debt can be beneficial under certain circumstances, such as debt accrued to buy something that will boost an individual's earning power. For example, financing a car might be a wise idea if the owner needs it to travel to work at a higher-paying job. 4/17/2017 Free Background from

Personal Loan An unsecured loan (not backed by collateral) made for personal use Helps finance things like: post-secondary education, a car, a trip, an RRSP contribution or home renovations Has fixed interest rates & repayment costs An unsecured loan made for personal, family, or household use as opposed to a business-type loan or a long-term mortgage loan to finance real estate An unsecured loan is a loan that is not backed by collateral. Also known as a signature loan or personal loan. Unsecured loans are based solely upon the borrower's credit rating. As a result, they are often much more difficult to get than a secured loan, which also factors in the borrower's income. An unsecured loan is considered much cheaper and carries less risk to the borrower.[1] However, when an unsecured loan is granted, it does not necessarily have to be based on a credit score. For example, if your friend lends you money without any collateral, meaning something of worth that can be repossessed if the loan isn't repaid, then your credit score has zero to do with it, but rather the value of your friendship is at stake. Therefore the real meaning of an unsecured loan is that it is not backed by any object of value and is lent to you based on your good name. For financial institutional purposes, they may want to look at your credit score because they are not your friend and it is strictly a business transaction, therefore your good name may be associated with your historical payment history on prior debt, reflecting in your credit score. 4/17/2017 Free Background from

Personal Loan: Example
Student Loan: Helps finance education Requires student to pay back Have to pay interest: 7% in Ontario Non-dischargeable debt (7Years) 3 Options to dealing with the debt Loans and grants are provided to Canadians attending a University, College, Trade School, or Vocational School, if they need help financing their education. As the level of government funding for post-secondary education has decreased, the level of student loan debt in Canada has increased. Students graduate, but with the weak Canadian economy, good jobs are hard to find, and it becomes difficult to repay Canada Student Loans in a timely manner. If a student with student loans files for bankruptcy in Canada, the student loans are not automatically discharged unless the student has been out of school for more than 7 years. If you live in Ontario and have less than 7 year old student loans, bankruptcy is only an option if you also have a significant amount of other debts, and want to clear your other debts so that you can continue to service your student loan debt. If your student loan is less than 7 years old, you have three alternatives to bankruptcy: First, you could contact student loans and attempt to make payment arrangements that are affordable given your current income. Second, you could contact a licensed credit counsellor to attempt to negotiate on your behalf. Third, we could attempt to file a consumer proposal to deal with your debts. A consumer proposal for student loans has a greater likelihood of success if the student loan is at least two years old, and the proposal term is five years long (so that at the end of the proposal the student loan is over 7 years old). To file a proposal, you must be working, or have a steady source of income. In addition, it is important to note that there is no guarantee that the creditors will accept your proposal. 4/17/2017 Free Background from

Line of Credit Can draw down on the line of credit at any time, as long as the maximum credit limit is not exceeded Charged interest from the day you withdraw money until you pay the loan back in full Lower interest rate than a credit card or overdraft Advantages: Interest is not charged on the unused part of the line of credit Borrower can draw on the line of credit at any time Line of Credit: An arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the bank will permit the borrower to maintain. The borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum set in the agreement. The advantage of a line of credit over a regular loan is that interest is not usually charged on the part of the line of credit that is unused, and the borrower can draw on the line of credit at any time that he or she needs to. Depending on the agreement with the financial institution, the line of credit may be classified as a demand loan, which means that any outstanding balance will have to be paid immediately at the financial institution's request. Lines of credit This type of loan, offered by financial institutions, allows you to withdraw money, as needed, up to a maximum credit limit. You are charged interest from the day you withdraw money from your line of credit until you pay the loan back in full. A line of credit offers several payment options that you can choose from. The interest rate on a line of credit is usually lower than the interest rate on a credit card or overdraft.

$ in account - $ withdrawn from account
Overdraft Protection Allows you to withdraw more money than you have in your bank account $ in account - $ withdrawn from account = $ overdraft Pay interest on overdraft until you make a deposit that equals the overdraft, plus any accumulated interest and fees Much cheaper than a payday loan Not all financial institutions offer overdraft protection Overdraft protection Overdraft protection allows you to withdraw more money than you have in your bank account. The amount you owe for an overdraft is the difference between the money you have in your account and the amount you withdraw from your account. For example, if you have $100 in your chequing account and you withdraw $400 at an automated banking machine (ABM), the amount of your overdraft will be $300. The bank charges you interest on the amount you are overdrawn until you make a deposit that equals the overdraft, plus any interest and fees you have to pay. An overdraft is much cheaper than a payday loan.

Cash Advances Cash withdrawals, usually made with your credit card at an ABM or a bank Can be as high as your credit limit No interest-free period Interest charged from the day you withdraw to the day you pay back in full Much cheaper option than a payday loan Cash advances Cash advances on your credit card are cash withdrawals, usually made with your credit card at an ABM or a bank. They can be as high as your credit limit. There is no interest-free period. Interest is charged from the day you withdraw money from your credit card account until the day you pay back the cash advance in full. This is also a much cheaper option than a payday loan. 4/17/2017 Free Background from

Pay Day Loan What is it? A short-term loan that you promise to pay back from your next pay cheque Have to pay it back on or before your next payday (usually in two weeks or less). Amount you can borrow = limited to 50 % of the net amount of your pay cheque A very expensive way to borrow money Owned by private companies and not regulated by the government A payday loan is a short-term loan that you promise to pay back from your next pay cheque. A payday loan is sometimes also called a payday advance. Normally, you have to pay back a payday loan on or before your next payday (usually in two weeks or less). The amount you can borrow is usually limited to 50 percent of the net amount of your pay cheque. The net amount of your pay cheque is your total pay, after any deductions such as income taxes. For example, if your pay cheque is $1,000 net every two weeks, your payday loan could be for a maximum of $500 ($1,000 x 50%). A payday loan is a very expensive way to borrow money. Payday loans are offered by privately owned payday loan companies and by most cheque-cashing outlets. The government does not regulate these companies.

Pay Day Loan How does it work?
Prove that you are +18, have a regular income, a permanent address and an active bank account Show a post-dated cheque/authorize a direct withdrawal from your bank account The combination of multiple fees and interest charges are what make payday loans so expensive Sign a loan agreement Before giving you a payday loan, lenders will ask for proof that you have a regular income, a permanent address and an active bank account. Some payday lenders also require that you be over the age of 18. To make sure you pay back the loan, all payday lenders will ask you to provide a postdated cheque or to authorize a direct withdrawal from your bank account for the amount of the loan, plus all the different fees and interest charges that will be added to the original amount of the loan. The combination of multiple fees and interest charges are what make payday loans so expensive (Click here for an explanation of the various fees associated with these types of loans). The lender should also ask you to sign a loan agreement. If the lender does not offer to give you a copy of the loan agreement, ask for one. Read this document carefully before signing it, and keep a copy for your records. By signing the loan agreement, you are confirming that you have read, understood and agreed to all of the terms and conditions of the loan. These terms and conditions must include: the amount of the loan and the date you must pay it back, described as the length of the loan, which is expressed in a number of days; the total cost of borrowing, including: any upfront or first-time fees and charges added to the amount of the loan; various service fees and charges; any fees and interest charges added to the amount of the loan when the loan is paid back on time; the consequences and any fees charged when the loan is not paid back on time; the annual percentage rate of the loan; and the cost per $100 borrowed. Before you decide to get a payday loan, make sure you know and understand what happens if you cannot pay the loan back on time, and what the costs are if you make a late payment.

Pay Day Loan How and when do I pay it back?
Must pay the total amount on or before the date stated in your loan agreement: Includes: amount borrowed, interest, any additional fees and charges Some lenders will: Cash your post-dated cheque or process your direct withdrawal on the day the loan is due Require cash payment on or before the due date Cash your cheque or process the direct withdrawal after your loan's due date, and charge you another fee A payday loan agreement usually says that you must pay the total amount you owe for the loan on or before the date stated in your loan agreement. This includes the amount you borrowed, plus interest and any additional fees and charges. Some lenders will cash your postdated cheque or process your direct withdrawal on the day the loan is due. However, some lenders may require that you pay the loan in cash, on or before the due date. If you have not paid the loan in cash by the due date, some lenders may cash your cheque or process the direct withdrawal you signed on the day after your loan's due date, and charge you another fee. Ask the lender what the most inexpensive way is for you to repay your loan.

Pay Day Loan How does it affect my credit report?
Credit score = ability to pay back, and on time If the score is bad, you can rebuild it by using a type of credit and paying the money back on time. Paying a payday loan on time will not improve your credit score BUT, if you do not pay it on time and it is sent to a collection agency, it could do damage to your credit report Credit-reporting agencies collect information on whether or not you make your payments on time. This information, also called your "credit history", is part of your credit report and is used to calculate your credit score. Making payments on time can help improve your credit score by demonstrating that you are able to manage your debt. Even if you have poor credit, you can rebuild it by using a credit card or other type of credit and paying back the money you owe on time. This is not the case with payday loans. Since payday lenders are not currently members of the main credit-reporting agencies, getting a payday loan and paying it off on time will not improve your credit score. However, if you do not pay your loan back on time and it is sent to a collection agency, this will likely be reported to a credit-reporting agency and could have a negative impact on your credit report.

Pay Day Loan: Costs Comparing the cost of a $300 loan, taken for 14 days Payday loan Cash advance on a credit card Overdraft protection on a bank account Borrowing from a line of credit Interest — $2.13 $2.42 $1.15 + Applicable fees $50.00 $2.00 = Total extra cost of loan $4.13 Cost of loan expressed as a % of amount borrowed 435% per year 36% per year 21% per year 10% per year A payday loan is much more expensive than most other types of loans offered by financial institutions such as banks or credit unions. Before you apply for a payday loan, find out about all the fees and charges you will have to pay — including the fees you will be charged if you cannot repay the loan on time. The fees may not be easy to see right away, so read the agreement carefully before signing it. If you do not receive an explanation of all of the fees, charges and interest that will apply to the loan, or if you are not satisfied with the explanation you receive, do not sign the loan agreement. The following is a list of some of the most common types of fees and charges associated with payday loans. Interest Interest is charged from the day you take the loan out until the day the loan, including all the fees, is paid back in full. Payday lenders are not allowed to charge more than 60 percent interest on a loan, according to the Criminal Code of Canada. There are cases where payday lenders have taken customers to court for not paying back a payday loan, and the courts have determined that most of the fees and charges connected with payday loans are actually interest costs. This means that, in many cases, when the fees, charges and interest on payday loans are added together, they amount to a lot more than the 60 percent interest allowed. According to the Criminal Code, all of the fees and charges described in the paragraphs below (except for NSF charges) may be considered "interest". Several provincial governments have taken payday lenders to court over the amount of interest and fees they charge. Administration fee/Processing fee/Convenience charges/Verification fee These are all names for the same type of service charge that may be attached to payday loans. Sometimes service charges include the interest charged on the loan. Service fees usually cost $10 to $35 for every $100 borrowed — or 10 to 35 percent of the amount of the loan. A $300 payday loan, due in two weeks, may cost you between $30 and $105, depending on the fees that apply. Broker's fee Sometimes a payday lender acts as a loan broker or intermediary between you the customer and an unidentified lender. Loan brokers charge a "brokerage fee", in addition to any interest on the loan. Collection fees If you are not able to pay back your loan, the payday lender may place your account in collection. This means that a collection agency will contact you about the debt you owe in order to make sure you pay it. Payday lenders may charge a fee if your debt to them is placed in collection. This will also likely have a negative effect on your credit report, and the lender could take you to court. Early repayment fee This is a fee that may be applied if you pay your loan back early, before the due date. Initial or one-time set-up fee Some lenders will charge you a one-time set-up fee of $10 to $15 if you are a first-time customer. Loan repayment fee/First-party cheque-cashing fee This is a fee that applies when you don't pay the loan in cash on or before the due date. Some lenders may charge you for depositing your postdated personal cheque or processing your direct withdrawal. Locate fee This is a fee that applies if mail sent to the address you give the payday lender is returned or if the phone number you give is disconnected when the payday lender tries to contact you. Return fee/Non-sufficient funds (NSF) fee If you don't have enough money in your bank account to cover the cheque you gave the lender, or the direct withdrawal you authorized to repay the loan on its due date, you may have to pay the lender a return fee or NSF fee. This fee can range from $25 to $75. Your bank or credit union may also charge you an additional NSF fee if you don't have enough money in your account to cover the cheque or direct withdrawal. Roll-over fee/Renewal fee/Finance charge/Additional charge/Extension fee This fee is applied when you don't pay the loan in cash on or before the due date and the original loan is rolled over or extended for another period of time. If you roll your loan over, you will have to pay this extra fee. Wage assignments or liens on personal property Some lenders may try to get you to sign an agreement that says that you agree to have your employer sign over all of your wages to the payday lender if you are unable to repay what you owe. In many provinces, this is illegal. If you think that a payday lender may be trying to do this, call the Financial Consumer Agency of Canada toll-free at , to find the appropriate government body in your area that deals with these types of issues. Some lenders may also try to get you to agree to use your personal property, such as your car, as security for a small loan in case you are unable to pay back what you owe them. Think carefully about this before signing any agreement. The value of the property you are signing over to the lender may be greater than the amount of the loan you are receiving. Also, once your property has been given to a lender, it may be very difficult to get it back, or the lender may already have sold it. Some payday lenders also offer services or products to accompany payday loans, such as the following. Insurance coverage Some lenders may offer you death or disability insurance on your loan. This type of protection is usually expensive. Before you take this protection, make sure you need it and that you know exactly how much it costs, what the insurance covers and how to make a claim. Make sure your lender has the right to sell you insurance. Ask the lender to show you proof that he/she is a licensed insurance agent. If you are not sure, call the Financial Consumer Agency of Canada toll-free at , to find the appropriate government body in your area that deals with these types of issues. Electronic loan cards Some payday lenders offer electronic cards that can be loaded with your personal information, which allow you access to different branches of the same payday lender. The card can also be loaded with the amount of your payday loan and used like a debit card. You should know that these cards come with additional fees including issuing fees, reloading fees and fees for each electronic transaction you make with the card. These cards are also non-replaceable. They are like carrying cash. If you lose the card, you lose the money that is left on it, and the payday lender will not reimburse you. How does the cost of a payday loan compare with other credit products? Payday loans are much more expensive than other types of loans, including credit cards. But how much are you really paying? How does the cost of a payday loan compare with taking a cash advance on a credit card, using overdraft protection on your bank account or borrowing on a line of credit? Let's compare the cost of using different types of loans. We'll assume that you borrow $300, for 14 days. Note the considerable difference in the cost of each type of loan 1. The costs and fees shown in these examples are for illustration purposes only. 2. The monthly service fee you pay for your banking service package often covers any processing fees for overdraft protection. To be sure, check your account agreement or talk to your financial institution. 3. This is an estimate of the annual cost of the loan. This is calculated by adding together all of the fees, charges and interest charged after 14 days, and projecting this cost over a one-year period. Although the cost is expressed as a percentage of the amount borrowed, it does not represent the annual interest rate. The following chart shows just how expensive payday loans are compared to other types of short-term loans. [D] As you can see, borrowing from a line of credit is the cheapest option, followed by using overdraft protection on a bank account and taking a cash advance on a credit card. Payday loans are by far the most expensive option. For a step-by-step guide on how to calculate the cost of these short-term loan options yourself, see the section on how to calculate the cost of different short-term loans. Here is some additional information about the various short-term loan options mentioned in the preceding tables.

Pay Day Loan: Costs As you can see, borrowing from a line of credit is the cheapest option, followed by using overdraft protection on a bank account and taking a cash advance on a credit card. Payday loans are by far the most expensive option. 4/17/2017

Mortgages - Amortization
Length of time to pay off a mortgage Assuming that: Interest rate and payment amount do not change All payments are made on time No additional payments are made Longest period used to be 25 years – now it can go up to 40 years Longer period may = lower mortgage payments The shortest amortization period will save you thousands of dollars in interest in the long run Amortization The amortization is the length of time it takes to pay off a mortgage, assuming that the interest rate and payment amount do not change, that all payments are made on time and that no additional payments are made. In Canada, until recently, the longest amortization period on a mortgage was typically 25 years. Today, some institutions may offer a period of up to 40 years. Although a longer amortization period may mean lower mortgage payments, it is to your advantage to choose the shortest amortization period that you can afford. This will save you thousands of dollars in interest in the long run. The following table shows how much interest is paid (over the entire amortization period) on a $150,000 mortgage, assuming a constant annual interest rate of 6.45 per cent.

Mortgages - Amortization
Mortgage amount Amortization Monthly payment Interest paid $150,000 40 years $865 $264,620 35 years $890 $224,795 30 years $935 $186,540 25 years $1,000 $150,060 20 years $1,105 $115,550 15 years $1,295 $83,200 10 years $1,690 $53,150 Example - Amortization vs. interest paid The following table shows how much interest is paid (over the entire amortization period) on a $150,000 mortgage, assuming a constant annual interest rate of 6.45 per cent.

Mortgages – Payment Options
Monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly and accelerated weekly payments They may look the same They are not Much is being saved in interest Payment Options Most financial institutions offer a number of payment options (monthly, semi-monthly, bi-weekly, accelerated bi-weekly, weekly, and accelerated weekly payments). Although these options may all seem the same, some payment methods such as accelerated weekly and bi-weekly payments can save you a lot in interest charges, compared with regular monthly payments. The following table illustrates the savings in interest you can get with various payment options. It assumes that you have a mortgage of $150,000, amortized over 25 years, with a constant interest rate of 6.45 per cent. As you will note, choosing the accelerated weekly or bi-weekly payment option can save you thousands of dollars in interest charges over the duration of your mortgage. 4/17/2017 Free Background from

Mortgages – Payment Options
Payment Frequency Amortization Interest paid Interest saved Monthly $1,000 Every Month 25 years $150,060 -- Semi-Monthly $500 24 times a year $149,660 $400 Bi-Weekly $460 26 times a year $149,630 $430 Weekly $230 52 times a year $149,455 $605 Accelerated bi-weekly 20.7 years $120,650 $29,410 Accelerated weekly $250 20.6 years $120,300 $29,760 Note: For illustration purposes, numbers in this example have been rounded off. Each institution may calculate interest differently. The interest paid and saved was calculated over the period of amortization of the mortgage. It assumes that you have a mortgage of $150,000, amortized over 25 years, with a constant interest rate of 6.45 per cent. As you will note, choosing the accelerated weekly or bi-weekly payment option can save you thousands of dollars in interest charges over the duration of your mortgage. Monthly With monthly payments, funds are taken from your account on a specific day once a month (or 12 times a year); for example, on the first day of each month. This type of payment does not result in any interest savings when compared to the other payment options that follow. Semi-monthly If you choose the semi-monthly payment option, half of your monthly payment amount will be taken from your account twice a month (e.g., on the 1st and 15th of each month), and you will make 24 semi-monthly payments a year. This type of payment does not result in any significant interest savings. Bi-weekly (non-accelerated) With the non-accelerated bi-weekly payment, you make a payment every second week (e.g., every second Thursday). Since there are 52 weeks in a year, you will make 26 payments a year (52 weeks ÷ 2). To calculate the amount of your bi-weekly payments, multiply your monthly payment by 12 and divide it by 26 ($1,000 × 12 ÷ 26 = $461.54). This type of payment does not result in any significant savings in interest. Weekly (non-accelerated) With the non-accelerated weekly payment, you make a payment every week (e.g., every Thursday). Since there are 52 weeks in a year, you will make 52 payments in a year. To calculate the amount of your weekly payments, multiply your monthly payment by 12 and divide it by 52 ($1,000 × 12 ÷ 52 = $230.77). This type of payment does not result in any significant interest savings. Accelerated bi-weekly The accelerated bi-weekly payment allows you to pay half of your monthly payment every two weeks (e.g., every second Thursday). Since there are 52 weeks in a year, you will make 26 payments a year (52 weeks ÷ 2). By doing this, you make the equivalent of one extra monthly payment a year, which means you pay off your mortgage faster and save interest charges. Accelerated weekly If you choose the accelerated weekly payment, one-quarter of your monthly payment amount will be debited from your account every week (e.g., every Thursday). Since there are 52 weeks in a year, you will make 52 payments a year. As with the accelerated bi-weekly option, you make the equivalent of one extra monthly payment a year, which means you pay off your mortgage faster and save on interest charges.

Mortgages - Types Fixed-Rate (Closed) Mortgage Open Mortgage
Lock in interest rate for a predetermined length of time Allow additional payments without any penalty. To pay more than the annual allowable maximum, or the entire mortgage you will pay a penalty Open Mortgage Can pay off any amount of mortgage without any penalty Short term: interest rate = higher than the fixed rate for a closed mortgage with a similar term Types of Mortgages Fixed-Rate (Closed) Mortgage With a fixed-rate mortgage you benefit from the security of locking in your mortgage interest rate for a predetermined length of time, usually ranging from six months to five years. Other terms such as three months, or six, seven and 10 years are also available. If you think interest rates will increase, you may want to choose a longer term, such as a five-year term. If you think that rates are going to decrease or remain relatively stable for a long period of time, you may want to choose a shorter term. Most lenders will allow you to make additional payments on your mortgage without any penalty. These could amount to as much as 25 per cent of your original mortgage amount (depending on the institution). However, if you want to pay more than the annual allowable maximum, or pay off the entire mortgage at any time, you will generally have to pay a penalty. Make sure you understand this before choosing your term. Open Mortgage An open mortgage allows you to pay off part of your mortgage, or the entire mortgage, at any time without any penalty. Open mortgages usually have a short term, ranging from six months to one year. The interest rate is usually higher than the fixed rate for a closed mortgage with a similar term. One situation where an open mortgage may be appropriate is if your house is for sale and you want to repay the financial institution with the money you get from the sale.

Mortgage - Types Variable Interest Rate Mortgage
At the start, the lender will calculate a mortgage payment that includes both the principal and interest. Payments do not change during term of mortgage As the base rate for the variable interest-rate mortgage changes, so will the interest rate on your mortgage. Some are completely open, some may be closed and charge a penalty for paying off all or part of the mortgage Variable Interest Rate Mortgage At the start of a variable interest-rate mortgage, the lender will calculate a mortgage payment that includes both the principal and interest. During the term of the mortgage, your payments usually do not change. However, as the base rate for the variable interest-rate mortgage changes, so will the interest rate on your mortgage. If interest rates drop, less of each payment will go towards paying interest and more will go towards paying off the principal. If interest rates rise, more of your payment will go towards paying interest and less will go to reducing the principal. Some variable-rate mortgages are completely open (you can pay off all or part of your mortgage at any time, without a penalty). Others may be closed and charge a penalty for paying off all or part of the mortgage.

Mortgage - Types Convertibility Feature Adjustable Rate Mortgage
Allows for renegotiations of your interest rate (renew it early) before the maturity date. Adjustable Rate Mortgage The interest rate and payment amount are adjustable from time to time during the term. Convertibility Feature A mortgage with a convertible feature allows you to renegotiate your interest rate (renew it early) before the maturity date. However, not all lending institutions offer a convertibility feature. With a convertible rate mortgage, you can lock into a longer term during the current term of your mortgage without paying a penalty – but only if you stay with the same lender. For example, if after a couple of months you see that interest rates are going to increase, you may change to a longer-term mortgage such as a five-year term. The convertibility feature is often on variable interest-rate mortgages or fixed-rate mortgages with short terms. Adjustable Rate Mortgage An adjustable-rate mortgage is a mortgage where the interest rate and payment amount are adjustable from time to time during the term. 4/17/2017 Free Background from

Mortgages – Down Payment
Money paid upfront towards the purchase of your home Minimum down payment is usually 5% The less you borrow, the less interest you will have to pay If down payment < 20 % , your mortgage = "high-ratio” By law, must purchase mortgage default insurance If down payment > 20 % , your mortgage = "conventional" Does not have to be insured Lender may still require mortgage default insurance for a high-risk loan Down Payment The down payment is the amount of money that you pay upfront towards the purchase of your home. You should have a good idea of how much you can put towards the down payment before talking to a potential lender or broker. The minimum down payment for the purchase of a home depends on many factors (geographic location, the type of house, its cost, etc). Normally, the minimum down payment required for the purchase of a single home, a condominium or a two unit home (duplex) is five per cent of the accepted purchase price (or appraised value, whichever is lower). Usually, for the purchase of a three-unit home (triplex) or four -unit, the minimum down payment is ten per cent. However, the less you need to borrow, the less interest you will have to pay. If your down payment is less than 20 per cent, your mortgage is considered a "high-ratio" mortgage. In this case, the mortgage lender must, by law, require you to purchase mortgage default insurance. If your down payment is 20 per cent or more, your mortgage is considered a "conventional" mortgage and does not, by law, have to be insured. However, a lending institution may still require mortgage default insurance for a high-risk loan, despite the fact that the law does not require it.

Subprime Mortgages Target people who:
Like a mortgage that lends them more than the value of the house Want mortgages that are structured so that their first payments are extra low Would be unable to afford the payments if they weren’t structured that way Are convinced that real estate prices will continue to rise Who have a poor credit history

What makes a mortgage “subprime”?
Rising house prices + poor regulation = mortgage monster "Subprime"  the risk associated with a borrower Interest rates above prime to customers with below-average credit ratings Soaring housing prices started to fall People with subprime "bargains" suddenly found their loans were being reset at rates that were in the double-digits They could no longer count on the increasing value of their homes to refinance their way out of the mess What makes a mortgage "subprime"? The term "subprime" isn't well known in Canada because most of our mortgage lending is "prime," or conventional. In the U.S., however, rapidly rising house prices and a poorly regulated industry combined to create a mortgage monster that is now busy running amok. "Subprime" refers to the risk associated with a borrower, not to the interest rate being charged on the mortgage. Typically subprime mortgages are offered at interest rates above prime, to customers with below-average credit ratings. Subprime mortgage lenders in the U.S. tend to target lower-income Americans, the elderly, new immigrants, people with a proven record of not paying their debts on time — just about anyone who would have trouble getting a mortgage from a conventional lender such as a major bank. Their pitch is irresistible and it unfolds along lines like this: "You want to buy your first house? We'll make it happen! And don't worry about a down payment. In fact, we'll even lend you more than the house is worth. We'll even charge you a super low rate [the "teaser"] during the first year or two to keep your payments low. Sure, the loan will eventually reset at prevailing rates, but since housing prices are rising by 20 per cent a year, all you have to do is refinance your house to keep your payments low!" Needless to say, the subprime bubble soon burst. After enjoying a short period at low fixed rates, people with subprime "bargains" suddenly found their loans were being reset at rates that were in the double-digits. U.S. housing prices, which had been soaring, started falling. People with subprime mortgages found they could no longer count on the increasing value of their homes to refinance their way out of the mess. By late 2006, one subprime loan in eight was in default across the U.S. Foreclosures were soaring. More than 20 subprime lenders were bankrupt. And the National Community Reinvestment Coalition estimated that as many as 1.5 million Americans could lose their homes by the time all the damage is done.

Could it happen in Canada?
Available in Canada subprime market much smaller US = about 20% of all mortgages Canada = 5 % Mortgages with less than 20 % down must be secured by mortgage insurance Canadian financial institutions do not finance more than 100 % of a home's purchase price "We have not seen the aggressive lending practices common south of the border," said Paul Grewal, chair of the Canadian Association of Accredited Mortgage Professionals. The association says Canadian underwriting practices are "more prudent." Could it happen in Canada? Subprime mortgages are available in Canada. But it's a different story up here. For one thing, the subprime market share is much smaller in Canada. About 20 per cent of all U.S. mortgages are of the subprime variety in That compares to just five per cent in Canada, according to industry figures. All high-ratio mortgages in Canada — those with less than 20 per cent down — must be secured by mortgage insurance, through, for example, the Canada Mortgage and Housing Corporation. In addition, Canadian financial institutions do not finance more than 100 per cent of a home's purchase price, and that value must be verified with a separate appraisal. Canadian mortgage lenders have been scrambling to assure the population that there are major differences between the subprime markets in the two countries. "We have not seen the aggressive lending practices common south of the border," said Paul Grewal, chair of the Canadian Association of Accredited Mortgage Professionals. The association says Canadian underwriting practices are "more prudent."

Subprime mortgages in Canada
No evidence linking subprime lending in Canada with the increase in house prices In U.S.  a "very high correlation“ Price appreciation in the U.S. housing market was artificial boosted by aggressive lending and irresponsible borrowing Outside analysis backs up that assertion. Benjamin Tal, an economist with CIBC World Markets, noted recently that "only 22 per cent of subprime borrowers in Canada use variable rate mortgages — half the rate seen in the U.S." Tal also says there is no evidence linking the use of subprime lending in Canada with the increase in house prices. In the U.S., there is a "very high correlation," he says. "Our view is that the price appreciation in the U.S. housing market over the past two years was, in many ways, artificial — boosted by aggressive lending and irresponsible borrowing." Overall mortgage arrears in Canada are at just 0.5 per cent, the industry says, near record lows. That doesn't mean there's nothing to worry about in Canada. A drop in Canadian housing prices and increases in interest rates would pose problems for borrowers. But with Canadian real estate showing fewer of the warning signs, with fewer subprime mortgages in this country, tighter borrowing restrictions and fewer mortgages at floating interest rates, the risks do seem to be considerably lower. But the U.S. subprime meltdown has recently shown signs of spreading to the wider U.S. economy and into Canada. General Motors cancelled a shift at a truck plant in Oshawa, throwing 1,200 out of work, because sales of pickup trucks have plunged in the U.S. Most of Oshawa's production goes south of the border. Stock markets in Canada and the U.S. began moving lower in the summer of 2007 as investors reacted to signs that lenders were beginning to tighten credit, boosting fears of a slowdown. Many Canadian companies reported having millions in cash tied up in normally safe short-term debt products that suddenly became illiquid as no one wanted to buy investments perceived as being risky. Central banks on both sides of the border are watching closely for further signs of subprime fallout in the months ahead, as interest rates in many more U.S. subprime mortgages reset at higher levels. 4/17/2017 Free Background from

Then Why Worry? Drop in Canadian housing prices and increases in interest rates = problems for borrowers U.S. subprime meltdown spreading to the wider U.S. economy and into Canada Central banks watching for further signs of subprime fallouts, as interest rates in many more U.S. subprime mortgages reset at higher levels That doesn't mean there's nothing to worry about in Canada. A drop in Canadian housing prices and increases in interest rates would pose problems for borrowers. But with Canadian real estate showing fewer of the warning signs, with fewer subprime mortgages in this country, tighter borrowing restrictions and fewer mortgages at floating interest rates, the risks do seem to be considerably lower. But the U.S. subprime meltdown has recently shown signs of spreading to the wider U.S. economy and into Canada. General Motors cancelled a shift at a truck plant in Oshawa, throwing 1,200 out of work, because sales of pickup trucks have plunged in the U.S. Most of Oshawa's production goes south of the border. Stock markets in Canada and the U.S. began moving lower in the summer of 2007 as investors reacted to signs that lenders were beginning to tighten credit, boosting fears of a slowdown. Many Canadian companies reported having millions in cash tied up in normally safe short-term debt products that suddenly became illiquid as no one wanted to buy investments perceived as being risky. Central banks on both sides of the border are watching closely for further signs of subprime fallout in the months ahead, as interest rates in many more U.S. subprime mortgages reset at higher levels. 4/17/2017 Free Background from

[edit] Lending Decisions by Institutions
The GSE-Government Sponsored Entities (Fannie Mae & Freddie Mac) purchased mortgages from a variety of mortgage companies and banks. These mortgages were packed into mortgage-backed securities (MBS) and sold. The GSE had missions that included helping provide housing to lower-income Americans by purchasing mortgages from originating firms. A variety of politicians supported this mission both formally and informally.[2] Banks and investment banks funded the housing boom and also packed mortgages into MBS for sale or their own accounts. Investors demanded MBS, as they were considered safe investments that paid a higher rate of return than treasury bills during the boom period, when defaults were minimal. Credit risk insurance was available through credit default swaps (CDS). Both MBS and CDS are relatively opaque investments and once the bubble burst, their valuation became difficult to determine. Loanable funds (capital) was readily available due to: low interest rates early in the decade; abundant foreign capital flowing into the U.S.; low taxes and deficit spending supporting robust economic growth; and the recent dot-com stock bubble bursting. Credit rating agencies assigned optimistic "AAA" ratings to subprime MBS, which made the investments easier to trade (liquid) and supporting demand for them. Credit rating agencies are paid by those whose instruments they are rating. Rather than using the boom period to build their reserves, banks increased risk as evidenced by higher debt to equity ratios also known as financial leverage, which multiplies profits during a boom but reduces them during a bust. The financial regulations did not cover the shadow banking system, non-bank entities that were assuming increasingly leveraged and important roles in the financial system through MBS and credit default swap (CDS) derivatives. Non-banks did not have the same leverage restrictions as commercial banks. Incentive structures on Wall Street tended to be short-term rather than multi-year. Bankers received over $26 billion in bonuses during 2006. [edit] Borrowing Decisions by Individuals In a competitive lending environment, mortgage brokers developed a variety of "innovative" mortgage products that were increasingly high-risk to the lending institutions and to borrowers. These included adjustable-rate mortgages and interest-only payment terms. Many homeowners were encouraged to purchase high-risk mortgages due to the belief that increasing home values would enable them to pay for the property. The American Dream as recently interpreted includes a house with several bedrooms, a yard, and a picket fence. This is reinforced widely in the culture, through television and movies. America is a consumption-oriented culture, with a negative savings rate. During the housing boom, many made significant profits through speculation or heard stories of massive home appreciation. The housing bubble developed for over a decade, with housing prices peaking in June-July Between 1997 and 2006, American home prices increased by 124%.[3] Speculation in real estate was a contributing factor. During 2006, 22% of homes purchased (1.65 million units) were for investment purposes, with an additional 14% (1.07 million units) purchased as vacation homes. During 2005, these figures were 28% and 12%, respectively. In other words, nearly 40% of home purchases (record levels) were not primary residences.[4] With such an upward trend, housing seemed a safe investment, particularly after the dot-com bust. American household debt relative to income increased to record levels, to nearly 140% during 2008. [edit] Transition to the Subprime Mortgage Crisis Once housing prices began to fall in June-July 2006, homeowners were often stuck with mortgages they could not afford or refinance. Delinquencies and foreclosures increased dramatically. As mortgage payments fell, the money flowing into MBS decreased during Many financial institutions suffered enormous losses, with hundreds of mortgage companies and several major financial institutions going bankrupt. Due to uncertainty regarding the financial condition of many financial institutions and banks dramatically increasing lending standards, loanable funds liquidity became less available. This is further described in the second subprime crisis diagram at right 4/17/2017 Free Background from

Free Background from www.brainybetty.com
Text Explanation of the Diagram The ripple or domino effect was summarized in plain language by President Bush in his address to the Nation on September 24, 2008.[1] Housing Market: As the housing bubble burst in late 2006 and prices declined, mortgage holders counting on home price appreciation found themselves unable to pay their mortgages. Rates on adjustable-rate mortgages increased. Mortgage payment delinquency rates and foreclosures increased. With an oversupply of homes, housing construction declined. Housing value declines meant consumers had less money available for consumption. This placed downward pressure on economic growth, increasing the risk of recession. Financial Market: Mortgage-backed securities (MBS) derive their value from housing prices and mortgage cash flows. As these cash flows declined or became uncertain, financial institutions and investors holding MBS faced large losses. In certain cases, they had to sell these assets to pay off margin calls. Bank capital available for lending declined due to these losses. Several major banks and dozens of mortgage companies went out of business. Loans became more expensive (higher interest rates) or unavailable to those without stronger credit. Compared to the boom period, credit became considerably less available, placing downward pressure on both consumption and business investment. Government responses: Central banks have lowered interest rates to stimulate economies and make it more profitable for banks to loan. Tax rebates (stimulus package) were provided to U.S. taxpayers. Homeowners received assistance with re-financing their mortgages. Individual firms received bailouts and in September-October 2008 a comprehensive, global solution to "recapitalize" banks (e.g., to provide taxpayer funds in exchange for periodic dividend payments) was implemented. It is important to note that government actions took place throughout the period, not just after the financial market impacts indicated. For example, the Federal Reserve lowered interest rates several times during various stages of the crisis. Other Information The aggregate demand side of the economic equation is: Consumption + Business Investment + Government Spending + Net Exports = Gross Domestic Product or GDP. The subprime crisis has erased $ trillions of household and stock market value, which places downward pressure on consumption (C), a key economic engine. In addition, liquidity or solvency concerns means bank loans are less available or more expensive for business investment (I), placing downward pressure on this engine. With the "C" and the "I" engines in the equation struggling, we are facing an enormous shock to the world economy, increasing the risk of global recession. As housing prices went up, people used homes like ATM's, borrowing against equity to use for consumer spending. When housing prices stopped appreciating and liquidity dried up, consumer spending and business investment slowed down, applying downward pressure to economic growth (GDP). This is the "real" or "main street" economy. High levels of debt or financial leverage across the household sector and financial system have made this crisis considerably worse, as the solvency of key financial institutions is a major factor. Certain financial institutions borrowed and lent enormous amounts of money relative to their cash or capital reserves, such as U.S. investment banks like Lehman Brothers. Alan Greenspan has said that until home prices have hit bottom, MBS values will be volatile and the crisis will continue.[2] Fortunately, there is a helpful series of historical precedents for financial sector bailouts to guide the international response. This is typically recapitalization, which involves the government providing cash to banks in exchange for preferred shares, which pay a dividend to the government. Economist Paul Krugman explained the crisis and bailout steps taken by banks around the world.[3][4]Time magazine summarized some of the lessons from previous Japan and Asia financial crises, which also included bank recapitalization as the primary solution.[5] See also Emergency Economic Stabilization Act of 2008 regarding the "$700 billion bailout" of September/October 2008. [edit] Caveats This diagram helps illustrate how a decline in housing prices ripples through the housing market and MBS to affect the banks. It does not show all the root causes of the problem. The diagram does not assign relative importance and key factors are not included. Some factors are critical to the housing market or the financial markets; some are critical to both. Experts disagree on which factors matter most. The many elements of the diagram interact and provide feedback on each other to varying degrees. This is a very simplistic representation. It would take a rather complex computer simulation to show the interaction of the two meta markets--the housing market and the financial market. 4/17/2017 Free Background from

Debt repayment plan: consumer proposal vs. other options
The following is an example of how your monthly payment would look like if you were to repay your unsecured debt through a consumer proposal, as opposed to repaying it on your own (e.g. through budgeting), or by obtaining a debt consolidation loan, or through credit counselling. The monthly payment calculations in the example are based on a total unsecured debt of $35,000 and a 5-year pay-back period. Personal budget planning starts with making a list of what your income is every month, and what you spend you money on every month. To make a personal budget you will need a piece of paper, or a computer. To make a personal budget, first write down everything you spend money on each month. Most people remember their rent payment, but often forget the newspaper they buy on their way to work each morning. A debt consolidation loan is a loan that allows you to repay many other debts. For example, if you have three credit cards, you may be able to get a debt consolidation loan to pay off the credit cards, so that you only have one payment instead of three each month. You are consolidating your many debts into one, by getting a loan to pay off many of your debts. A debt management plan is a service provided by the Ontario Association of Credit Counselors. These are non-profit agencies created to help individuals experiencing financial distress. Debt management plans are designed for people who can afford to repay all of their debt over a period of time, but are unable to qualify for a debt consolidation loan, and require a period of time to make the repayments. In a debt mananagment plan the non-profit credit counselling agency "pools" your unsecured debts together so that you are only required to make a single monthly payment (to the not-for-profit agency). The agency then divides your payment amongst each of your creditors, with the larger creditors getting a bigger share of payment. Some of the advantages of a debt management plan are: Relief from collection agencies (no more phone calls from collection agents); A single monthly payment; Reduced and sometimes zero interest charges; and It's a voluntary procedure - you decide to start the process.

Bankruptcy MYTH : I’ll just file for bankruptcy and start over; it seems so easy. TRUTH : Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage. “.. it’s a living nightmare. It can devastate your job, destroy your marriage and steal your peace of mind.”

Bankruptcy .. what is it? method to get out of debt
legally declared the inability to pay creditors designed to give debtors a “fresh start”

Bankruptcy.. history 1st bankruptcy law : England in 1542
1604 amendment law : debtor’s ear cut off 1800 : U.S Congress passed the first American bankruptcy law 1898 : Modern American bankruptcy law 1978 : major changes were made .. 2005 : Bankruptcy Abuse Prevention and Consumer Protection Act

Bankruptcy .. CONS doesn’t cover : child support payments alimony, fines, taxes, student loans no property ownership liquidation of assets difficult to obtain credit penalties for bankruptcy

Bankruptcy.. how it works
eligibility (?) the means test counseling requirements limited credit repaid total amount? .. start from the ground up !

Bankruptcy.. types differs from one country to the next; but purpose and concept of bankruptcy remains the same i.e In the U.S, (two main ones) Chapter 7 Bankruptcy (Liquidation of Assets) Chapter 13 Bankruptcy (Repayment Plan)

Bankruptcy (Canada) Bankruptcy in Canada means that you assign (surrender) all that you own to a Trustee in Bankruptcy in exchange for the elimination of your debts Personal bankruptcy (consumer debt) is a legal process, governed by federal law (the Bankruptcy & Insolvency Act) This law is designed to give an honest and unfortunate debtor some relief, while also treating their creditors fairly and equally

Requirements To File for Bankruptcy in Canada
Must live in Canada or do business in Canada Must Be Insolvent Owe at least $1000 Not able to pay your debts as they are due to be paid

Bankruptcy Trustee Bankruptcy Trustees are federally licensed
Their fees are regulated and moderate, as to make the cost reasonable They are licensed by the Superintendent of Bankruptcy to administer proposals and bankruptcies and manage assets in trust. There main job is to also respect both the rights of the debtors and creditors.

Bankruptcy Trustee Considered to be the middle man
For instance, if you own a house with no mortgage, the trustee would sell the house and pay your creditors. Whatever money that is left behind would be distributed to other creditors.

Bankruptcy Trustee Suggestion: A bankruptcy trustee doesn’t just file bankruptcy, they also provide credit counselling, negotiate settlements, and help you to create proposals for creditors in order to avoid bankruptcy. While they help to solve the problem, they also help prevent the problem. Final duty could be to recommend an insolvency lawyer who can provide more expertise.

Why Rely on a Trustee? They are the most highly trained and educated debt consultants in Canada Almost all of them have a university degree and an accounting designation All complete a rigorous 3 year bankruptcy and law course Finally, investigated by the RCMP They are also constantly being retrained

Three Leading Causes of Bankruptcy
Job loss or a reduction of income in general is one of the three leading causes of bankruptcy. Overtime it becomes increasingly difficult to service one’s debts.

2. Another leading contributor to bankruptcy is separation or divorce. According to Bankruptcy Canada, about one third of all personal bankruptcies occur around an interval of divorce and separation.

The final leading cost is medical problems as they often lead to financial problems.

Wage Garnishment A garnishment is when your debtors believe you will be unable to pay off your debts and they get a court order for your employer to make payments out of your pay check. Because bankruptcy is a legal process, there is a stay of proceedings that prevents any garnishment or any legal action from happening (by creditors).

From The Horse’s Mouth Bankruptcy Options

Wage Garnishment The court sets the amount of the garnishment, and if you try to convince the creditor that you will pay off your debts, you probably won’t succeed. This is because you haven’t been paying before. If you are being threatened with garnishment, it is imperative to act quickly.

Duration of Bankruptcy (Canada)
Automatic discharge from bankruptcy after 9 months (minimum) provided that you’ve never been bankrupt and you complete various duties Your credit will definitely be affected because the bankruptcy will remain on your credit report It is extremely important to comply your duties during bankruptcy or the 9 month discharge from bankruptcy is postponed

Bankruptcy Duties (Canada)
As soon as your bankruptcy starts you must surrender all assets to your trustee: credit cards, and any non exempt items. If a creditor’s meeting is held, one must attend to explain the details of your bankruptcy to them, often held at the office of the creditors.

Any monthly surpluses in income are to reported to the bankruptcy trustee, and your pay stubs are given into the trustee as well. Furthermore, general changes on the status of you and your family’s living conditions are all reported to the trustee. If you borrow more than $500.00, you must tell your lender that you filed for bankruptcy.

In order to have a successful automatic nine month discharge, it is imperative that the debtor attend two credit counselling sessions. They can be one on one or in a group, depends on preference. The first session must take place between 10 and 60 days after filing bankruptcy, and the second must be attended no later than 210 days after filing bankruptcy. Cost: $85.00, plus GST per session.

Bankruptcy Exceptions (Canada)
Some debts are not erased; Bankruptcy only deals with unsecured debts like credit cards and income taxes. Unsecured debts like student loans are also not discharged less than 10 years since you’ve left school. A secured debt like a mortgage or car loan does not need bankruptcy to be recovered by a creditor since you have given an asset as collateral.

Bankruptcy Exceptions (Canada)
The government has some exemptions that they determine as “necessary for survival” when it comes to the surrender of assets. For instance: a car worth less than $5650 is exempt in Ontario, personal items worth less than $5650, and household items worth less than $11,300. Differs by provinces and territories.

What About Surplus Income?
The amount to be repaid to your creditors during bankruptcy is based on a formula prescribed by law. Basically, if you earn more than is necessary for your family’s or your own survival, you must pay this surplus income to your trustee for the creditors. The more you earn, them more you owe, the more expensive the bankruptcy.

Calculating Surplus Income Payments
There are different ways to calculate the percentage of surplus income to be paid depending on the type of bankruptcy.

Bankruptcy Truths & Stats
Divorces: Bankruptcies:

Conclusion Governments have to be more vigilant
People need to be educated on the consequences of their choices DO NOT CHOOSE THE EXPENSIVE WAY, LIVE WITHIN YOUR MEANS!!! 4/17/2017 Free Background from

Credit Cards, Consumer Debt, and Bankruptcy

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Credit Cards, Consumer Debt, and Bankruptcy

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