Friday, May 29, 2015

Bankruptcy: A decision with strong ramifications

I encounter a number of calls/emails from people who have declared bankruptcy and are looking for financing. Although there are mortgage solutions for these people, they are almost always more expensive than it is for people who have not declared bankruptcy.

I have seen people declare bankruptcy for amounts under $10,000, to over $100,000. I have seen people who are 25 years old declare bankruptcy and people in their 50’s and 60’s do so. The stigma is still the same: Whatever the reason for it, people cannot and will not accept responsibility for their debts. I understand some people have no choice, but at the end of the day, it affects your ability to buy a home in the near future.

If you have had a bankruptcy and have been released, the first thing you should do is to get a secured credit card with a $1000 limit. Once this has been open a few months, get a second card with the same limit. Use both sparingly, making sure to use each one every month. Using two cards at the same time, and keeping the balances low, will assure your credit improvement. 


Typically banks want to see you released from bankruptcy for one year, with a year of re-established credit on one or two cards. Since different banks have different policies on this, it is impossible to give you a strict answer. Once you have re-established your credit, you can re-apply with me to a regular chartered bank. Should you require a mortgage, and you were given poor advice, chances are you do not have re-established credit. In these cases, I have lenders that will go up to 85% of the value of the property. This means you need at least 15% as a down payment for a new home purchase. The rates are higher, but the only requirement is that you have proof of a bankruptcy release.

If you are thinking of declaring bankruptcy, look at all your options first. Do you have family/friends that can help bail you out? Most people don’t see the stigma and effects of a bankruptcy until afterwards. They are in a very vulnerable time and their bankruptcy trustee may not be giving them honest advice on what effects the bankruptcy will have. It is important to do your research and find a trustee that will explain the process to you, and may even suggest some alternatives. 

I work with a trustee that has an excellent reputation, so if you need any advice on this topic, please let me know and I would be happy to help.

Tuesday, May 26, 2015

Avoid being haunted by bad mortgage decisions!

Don’t get spooked, but making mortgage/financing mistakes will cost you more than your weight in candy!

People often look at me with fright when I tell them about some of the difficult financings I have handled in the past. I’ve dealt with people who have had bankruptcies, consumer proposals, non-payments of municipal taxes, non-payments of government taxes, days or months being evicted out of their own home! Although there are exceptions to every rule, these horrors usually happen to good people who get involved with bad partners, or people who give them bad advice.

Just to give a few examples of the nightmares I have experienced with clients: I recently advised a woman who had a home free and clear with no mortgage on it whatsoever. She was working but could not afford to put money away for a rainy day. She was 24 hours away from the city repossessing her home for non-payment of her municipal taxes. Her bank was not helping her out with the $4,000 owing, despite the equity in her home, showing once again that your bank isn’t your business partner or your friend when times are tough. I see many people learning that your own bank can sometimes wear a mask and, before you know it, the mask comes off and you see their true colours.

I recently dealt with a gentleman who went through the misfortune of losing a close family member. Around the same time, he was also released from a bankruptcy and was with a lender that stopped lending in Quebec. When he approached his TD branch for a lifeline, requesting some help in his time of need, they showed him the door. I managed to get him approved with another lender and, had I not managed to do so, the current lender would have exercised a judgement to get its money back via judicial sale, thus removing him from his home.

If all of this is not a living nightmare, I don’t know what is.

It is important to get solid financial advice when the decision can affect your long-term financial future. If not, you can find yourself the victim of a trick, rather than a treat!!