Vice-President of Sands & Associates and Licensed Insolvency Trustee Blair Mantin was a recent guest of Global News Vancouver, for a segment highlighting November’s Financial Literacy Month. Blair shares “5 Things You Didn’t Know about Debt” with viewers.
Watch the clip below, and read on for more!
Why a Focus on Financial Literacy Month?
In 2014, Sands & Associates surveyed around 900 people to find out how many could correctly answer a series of questions relating to debt and debt management options:
- While nearly 60% of survey participants felt they had a good or excellent grasp of financial skills and concepts, only 3% correctly answered all questions asked.
- Of that 3%, all had previously filed a Personal Bankruptcy or Consumer Proposal!
Every year tens of thousands of Canadians are unexpectedly faced with a difficult debt management situation. If you were faced with a financial crisis due to your debts, would you know all your legal rights, options and remedies?
True or False?
1 – There’s no way to ‘make a deal’ with the government if you owe them money.
- False! The reality:
- Owing the government money can be incredibly stressful – whether it’s income taxes, student loans, unpaid GST or other amounts owing, Canada Revenue Agency has more powers of collection than any other party.
- A personal bankruptcy or Consumer Proposal are the only methods of ‘making a deal’ with the government to repay only a portion of the debt owed.
- Taxes, student loans, even ICBC debts can be forgiven via personal bankruptcy or Consumer Proposal.
2 – Spouses are automatically responsible for each others’ debts.
- Think you’re marrying your partner’s debt? Think again!
- Many people assume that debt automatically becomes joint once you are married or cohabitate for an extended period. This can lead to situations where couples make poor financial decisions because they are unaware that one partner’s assets do not need to be used to pay the other partner’s debts.
- The reality:
- Unless a spouse has explicitly signed to be responsible for his/her partner’s debts, there is no right simply by way of marriage or cohabitation for a creditor to try to collect from the spouse who does not owe this money.
- This applies to all debts – student loans, taxes, credit cards, bank loans – unless you are the person who actually owes the money, you can’t “marry yourself into the liability”.
3 – You lose everything if you’re bankrupt.
- This is absolutely a myth!…but a common one. (Almost 55% of people we surveyed believed this to be true.)
- The reality:
- Most people keep all of their assets.
- BC law sets out a minimum level of assets each person is entitled to retain if they file a personal bankruptcy. This includes household furniture, tools of the trade, clothing, even RRSPs!
- Most people keep their house and car during a bankruptcy, as long as they are able to keep up on the monthly mortgage/car loan payments.
4 – If you file a personal bankruptcy, you’ll never get credit again.
- False!
- The reality:
- For someone who has never been bankrupt before, a bankruptcy will purge from their credit report 6 years after completion of their bankruptcy.
- Although many people believe they can’t get credit for 7 years, this is untrue! It is common for credit to be sufficiently re-established for new credit within 2-3 years of filing personal bankruptcy.
5 – A credit rating is a good measure of your financial health.
- A credit score is absolutely not a reliable measure of financial health – good or bad!
- Why?/The reality:
- A credit score is essentially just a number used by lenders to assess your profitability to them– based on various transactional information contained in your credit report.
- Credit ratings/scores are not permanent – and they can change dramatically in a short amount of time.
- The most financially secure person may actually have the worst credit rating because they don’t need to use credit! For example, an individual who owns a house with no mortgage and pays cash for their every day bills would likely have an extremely poor rating as the banks would simply not have enough ‘credit’ information to fit their algorithm.
- Consider:
- You may have an “ideal” score but be unable to manage your debt effectively, or be unable to pay down the debt in a reasonable amount of time.
- Immediately following bankruptcy, a person’s score may be poor – but they’re debt-free and can start to rebuild because of the “reset” the bankruptcy has provided.
We have a slogan here at Sands & Associates – “Knowing Is Not Owing” – whether or not you have debt, it’s important to be aware of your rights and responsibilities.
Book your free confidential debt consultation with a debt management professional in a local office near you today and get a financial fresh start!
