Financial Articles

If you are on the brink of filing bankruptcy and need a way out, there are other options that may be available to you. This article can offer more information and tips on what you can do to avoid filing bankruptcy.

If you can avoid filing bankruptcy, you should. A bankruptcy can seriously affect your ability to get loans and credit for the next seven to ten years. Here are a few other options worth exploring, as well as a few tips on avoiding bankruptcy.

Debt Consolidation If you are overrun by a number of bad debts, you may want to consider getting a debt consolidation loan. This loan can give you the money you need to consolidate all of your debt into one low monthly payment. This will make your bills much more manageable and allow you to start over with a relatively clean slate.

Credit Counseling When you get behind on your bills, it is easy to feel overwhelmed. Though filing for bankruptcy may seem like the easiest option, it may not be the best. If you want to avoid filing bankruptcy, try credit counseling instead. Professional credit counseling services can review your situation and give you advice to help you turn things around.

Tips on What You Can Do To Avoid Filing Bankruptcy In addition to debt consolidation and credit counseling, there are a few other things you can do to avoid filing bankruptcy:

· Try settling your debts. Some creditors may be willing to accept less than what you owe.
· Tighten your belt. Skip the morning coffee, disconnect the cable, clip coupons, and use any money you save to pay off your debts little by little.
· Filing for bankruptcy isn’t free. You’re going to need to save up or get an extra job. Consider using the money you have and the additional money you could earn to begin paying off the bills instead.

Throughout Ontario, and in fact everywhere in North America, people drive cars, and they worry that they will lose their car if they file for personal bankruptcy. The rules are different in every province and state, so this article only covers the law in Ontario, Canada. Consult your advisor for the rules in your area. In Ontario, if you go bankrupt, effective June 22, 2006 you are permitted to keep one motor vehicle worth up to $5,650.

If you owned, for example, a vehicle that had an appraised value of $6,650, you could pay $1,000 into your bankruptcy estate and keep your vehicle. (This example assumes that there are no liens against your vehicle; if you owe money against the vehicle, you would have to make pay the lender to keep the vehicle).

If you wanted to pay the $1,000 to keep the vehicle, the money could come from your earnings after you file bankruptcy, or you could borrow the money from friends or family (provided they understood that you were bankrupt). If you owned a vehicle worth $9,650, and you could not afford to pay to your trustee the $4,650 necessary to keep the vehicle, the trustee would sell the vehicle. However, according to the Ontario Executions Act, paragraph 3(3):

Where exemption is claimed for a motor vehicle that has a sale value in excess of the amount referred to in paragraph 6 of section 2 plus the costs of the sale, the motor vehicle is subject to seizure and sale under a writ of execution and the amount referred to in that paragraph shall be paid to the debtor out of the proceeds of the sale.

Therefore if you surrendered the vehicle and the trustee sold it, you would be entitled to receive the first $5,650 of the proceeds, and you could use that money to purchase another vehicle, because paragraph 4(4) of the Executions Act goes on to say that:

The sum to which a debtor is entitled under subsection 3 (1), (2) or (3) is exempt from attachment or seizure at the instance of a creditor.

Here’s a final thought. If you do own a valuable car, instead of going bankrupt and losing it, another option is to file a consumer proposal so that you can keep your car. Clearly this is a complicated area, so if you own a car and are considering filing for bankruptcy in Ontario, you should contact a trustee and arrange for a no-charge initial consultation before you make any decisions.

There are lenders in the market willing to refinance home loans for people who have gone through a bankruptcy. However, there are many things you need to know before jumping in to the refinance loan market. Otherwise, you may end up in a worse credit situation than you started.

Time is essential

You need to be very careful when it comes to timing. It is highly improbable that you’ll get approved for a refinance home loan unless at least six months since your bankruptcy has been dismissed have passed. There is no way round this waiting period and you should be very aware of this because applying for a loan and getting declined will affect your credit negatively. Even if the lender doesn’t report the decline to credit agencies the sole credit report pull will affect your credit score negatively.

Credit Requirements

Even though a mortgage loan is a secured loan, bare in mind that a past bankruptcy will show on your credit report when you apply for a refinance home loan. You need to show the lender that you have an impeccable credit behavior since then. In order to do so there are a few things that you should do: Make sure you pay your bills on time and never (absolutely never) miss a payment. This will look good on your credit history. Also, if you can’t get approved for an unsecured credit card, get a secured credit card so you can establish a credit history of timely payments with a credit card.

Searching for the right lender

Finding the right lender is not an easy task, but can be achieved with patience and proper research. Contact as many lenders as possible in order to get loan quotes from them. You can search the net for refinance mortgage loan lenders. However, make sure that by filling their forms you are not authorizing them to pull your credit report. Instead contact someone in the lending institution and ask for an informal quote. You’ll tell him your true credit situation and he will give you an approximate quote. This way you’ll have an idea of what you will be facing but you’ll avoid too many credit pulls showing on your credit report which would otherwise affect your credit negatively.

Once you’ve decided which lender is best for you, you can apply for a refinance mortgage loan. Bear in mind that since you’ve gone through a bankruptcy recently, the interest rate on your loan may be higher than regular home loan, however, if your monthly payments are too high you can extend the loan repayment program in order to reduce them. Once you’ve recovered your credit score you’ll be able to refinance your loan again and get better terms. But in the meantime, this refinance loan will help you improve your credit score and recover from bankruptcy.