Mortgage 101 – Reestablishing Credit After Backruptcy

Clinton Wilkins and Todd Veinotte, along with guest Tina Powell from MNP to explore the challenges and strategies for reestablishing credit after bankruptcy or a consumer proposal.

Todd Veinotte
All right, welcome back to Mortgage 101—your guide to home ownership.

Clinton Wilkins
We’re teaching you one thing or another here, and our guest is teaching me a couple of things. This is Mortgage 101, and we’re talking about “Merry Debtmas”, we have Tina Powell back with us from MNP. She is a trustee, and we’ve been asking a lot of questions and should be sharing all kinds of great information with us. During this episode, we talked a lot about refinance, and Tina talked to us about what you can do around a debt situation when maybe you can’t refinance, maybe you don’t own a home, or maybe, for some reason, you can’t qualify. But, right now, we want to talk about it. You’ve come through bankruptcy. You’ve come through a proposal. How can you best reestablish yourself, and how can you make sure that you’re not in the same situation again?

Todd Veinotte
I think, first of all, pay. Once you pay the price, pay it out, right? That’s the key. If you don’t pay out to discharge, then it’s not going to be any good and you need to pay it on time. And how often do you see that happen?

Tina Powell
Quite on in all seriousness, if people don’t or if they’re non-compliant, well, if they’re non-compliant in bankruptcy, we’re required to file a notice of opposition to the bankruptcy court.

Clinton Wilkins
That’s death. That’s not a good situation.

Todd Veinotte
Don’t go through the process and put yourself in that and do all the hard work and heavy lifting and then not discharge.

Impact of Missed Payments on Proposals

Clinton Wilkins
Yeah, exactly. And then what about a proposal? What happens if you get this proposal, and you’re not following your end of the agreement by paying that proposal on time? I assume that’s quite grave as well.

Tina Powell
If you miss three consecutive monthly payments, or payments totaling three monthly payments, your proposal is deemed annulled. Okay, so under certain circumstances, we can annul the or we can revive the proposal, or we can also go to court to have the court revive the proposal. But we look long and hard, because if somebody’s struggling with a proposal, maybe it’s not the best option.

Reestablishing Credit After Bankruptcy

Clinton Wilkins
When we’re talking about really reestablishing credit. I asked Tina, from a bankruptcy perspective, the bankruptcy doesn’t come off the credit bureau for six years after the discharge, for a first-time file for a first-time filer, and if you’re a second-time follow-up filer, it’s 14 years, which seems like an entire lifetime to me so and I think the majority of the consumers that I see anyway, especially in the housing business and mortgage business, usually there, we don’t see multiple filers, because these people either can’t qualify to buy a home or if they had a home, they probably lost the home, right? But what we see is quite a few people you know that might have gone through a hard time. Maybe it was a matrimonial breakdown, maybe it was the loss of employment. Maybe they had health issues and they had a bankruptcy for some reason. It’s not the end of the world, but it’s how can you get re-established. From our perspective, in the prime, lending space, you need to be discharged for two years and need to have two years of re-established credit, and it needs to be significant credit. It can’t just be a $300 Credit Card from Capital One. We want to see significant credit to the tune of $2,000 plus. And it’s good to have a mix of credit. You know, maybe it’s a car loan. Because really, any consumer can get a car loan these days. It doesn’t matter what the credit looks like. It doesn’t matter if you’ve been out you’ve been out of bankruptcy or consumer proposal. You could always get a car loan and then a credit card. There are so many credit card companies out there that will do a secured card, sometimes even up to $10,000 and that’s a great way for us to see that people can make their payments, because there’s a piece of the credit that’s around character, and there’s a piece of credit that’s really around willingness to pay, and those are the things that we’re looking at, and that’s in a prime space, but we see a lot of consumers coming out of a consumer proposal or bankruptcy that potentially own a property but need to get a mortgage, either they need to refinance or they need to buy another property. We do quite a few transactions with alternative lenders, and sometimes we can do a mortgage even one day out of bankruptcy, or one day out of a proposal. Or when we were on our break, I was joking with Tina that we pay out some of her proposals early in a refinance situation where people own a home, especially. They bought their home before 2020 they had a lot of equity in those homes. So we’re able to pay out some of these consumer proposals early, which have been, so beneficial for these consumers. And Tina tell us, if you paid out early, how long does that proposal stay on the credit bureau for?

Tina Powell
If you pay your proposal early, it will stay on for a maximum of three years from the date that you pay it out, but as long as it doesn’t exceed the six-year rule, right for the proposal.

Clinton Wilkins
Everything’s kind of pointing towards proposals if you can afford to pay the proposal, that’s what I’m hearing today, and that’s the one kind of takeaway that I had. I don’t know. What do you think, Todd?

Todd Veinotte
Well sure, it’s something that I wanted to ask you about, if people declare bankruptcy, how does that affect spousal income, or spouses or people? Can your bankruptcy or your proposal impact a spouse? I guess that is what I’m getting at.

Tina Powell
It can if the spouse is co-signing on that.

Todd Veinotte
They call co-signers, but you’re not really, you’re the loanee.

Tina Powell
You’re 100% responsible. You’re not responsible for 50% of the debt. So if you’re joint, so you’re a joint holder on a debt, you’re 100%.

Todd Veinotte
So if let’s say, it suggests that in some cases people break up and they don’t know somebody’s paying on a loan, and they have that obligation, do they not? To notify the person that they say, look!

Tina Powell
No, they don’t. But I always when I’m meeting with somebody, and if they do disclose that, some people are co-borrowers on that debt, I like to ask them if they’ve notified the other person. And I also like to gently suggest that they do.

Todd Veinotte
That other person may say, “Look, I don’t want this.” I’ll take that debt on and I’ll pay that off, right? I’m surprised, though it’s not there’s no legal responsibility, there are no fiduciaries.

Clinton Wilkins
I think the moral of the story is, don’t co-sign, never co-sign. Well, because I think anything can go wrong, just imagine, if you co-sign for someone and they have even a little legal issue, they may not be planning on having a legal issue. They could have maybe hit someone, and they’re sued and they’re having a problem.

Todd Veinotte
With their insurance, I think parents often do this. So they would get dragged into this as well, unbeknownst to them. Do you see that happen?

Tina Powell
We generally see parents co-signed on student lines of credit, which is basically when an individual is filing and they want to include their student debt. The students, the creditors going, it’s going to go after the parents for the debt.

Todd Veinotte
That’s very interesting. I guess in the couple minutes we have left to give some people some bullet point pointers or tips for advice who are contemplating whether this is something they should do, I guess a consultation is always a good thing, right? That never hurts anything. Does it exactly?

Tina Powell
So, if you have debt and you don’t have a solid plan to pay down that debt, and you’re not budgeting, you’re not tracking where your money’s going, that’s a real sign of financial distress, right? If you’re not paying your credit cards off every month, or if you’re requesting credit limit increases, if you’re borrowing money from friends and family, if creditors are calling and you’re rejected for consolidation loans, or that is a clear sign of financial difficulty.

Todd Veinotte
And there’s no charge for a consultation?

Financial Distress Indicators and Consultation Advice

Tina Powell
We offer a free consultation, and at that time, we basically asked the individuals to bring us some information, so you know, a detailed list of their assets, a detailed list of their debt, and information on their income and what their monthly expenses are, and that helps us, basically sit down with them, formulate a plan of how we can tackle this and find a solution that works.

Todd Veinotte
Okay and quickly, how can people can get a hold of you?

Tina Powell
People can get a hold of us at MNP by calling 310-DEBT. That’s 310-DEBT or visit us online at MNPdebt.ca.

Todd Veinotte
Okay, and Clinton, of course. How do people get a hold of you?

Clinton Wilkins
Visit us online at teamclinton.ca/radio. We have hundreds and hundreds of blog posts, and there are going to be clips of Tina, Todd, and me online, and you’ll be able to read what we said, and watch our videos. I thank all our listeners for coming back for 2025 Sure. Tina, you did a great job!

Tina Powell
I just want to say thank you to both of you for having me on. It’s been a blast.

Clinton Wilkins
Thank you. It’s all about education, and I hope our listeners got a lot of information, you know, a lot of good information, and learn something I certainly did, and I’ve been doing this for 20 years. Know, I always love learning something. Yeah, absolutely.

Todd Veinotte
A big thanks to everybody tuning in and listening. We appreciate it very much. And Mortgage 101, your guide to home ownership. We’re happy to be alive in 2025 and we’ll see you many more times. We’ll be back.