debtcare.ca

Author: mgoldenberg@debtcare.ca

  • Thinking of Filing for Bankruptcy or a Consumer Proposal in Canada? You’re Not Alone

    Have you considered filing for bankruptcy or for a consumer proposal in Canada? If so, you’re far from the only one.

    Insolvency statistics show that bankruptcies and consumer proposals continue to be popular debt management options for Canadians throughout 2018.

    Here’s exactly how many Canadians are filing for bankruptcy or filing for a consumer proposal:

    2017 (Total Across Canada)

    Total: 125,807

    Bankruptcies: 60,669 (Personal Bankruptcies: 57,969, Business Bankruptcies: 2,700)

    Consumer Proposals: 65,138 (Personal Consumer Proposals: 64,229, Business Consumer Proposals: 909)

    Top Three Highest Provinces:

    Quebec – Total: 43,731, Bankruptcies: 24,210, Consumer Proposals: 19,521

    Ontario – Total: 39,045, Bankruptcies: 15,968, Consumer Proposals: 23,077

    Alberta – Total: 13,481, Bankruptcies: 5,139, Consumer Proposals: 8,342

    First Quarter of 2018: January, February, March

    Total (Canada): 31,327

    Bankruptcies: 13,863 (Personal: 13,163, Business: 700)

    Consumer Proposals: 17,464 (Personal: 17,234, Business: 230)

    Top Three Highest Provinces:

    Quebec – Total: 11,301, Bankruptcies: 5,664, Consumer Proposals: 5,637

    Ontario – Total: 9,507, Bankruptcies: 3,638, Consumer Proposals: 5,869

    Alberta – Total: 3,463, Bankruptcies: 1,227, Consumer Proposals: 2,236

    Second Quarter of 2018: April, May, June

    Total (Canada): 33,534

    Bankruptcies: 15,450 (Personal: 13,163, Business: 700)

    Proposals: 18,084 (Personal: 17,234, Business: 230)

    Top Three Highest Provinces:

    Quebec – Total: 11,109, Bankruptcies: 5,930, Consumer Proposals: 5,179

    Ontario — Total: 10,435, Bankruptcies: 4,202, Consumer Proposals: 6,233

    Alberta – Total: 3,884, Bankruptcies: 1,343, Consumer Proposals: 2,541

    Compared to the first and second quarters of 2017, the first half of 2018 is keeping pace. The total number of insolvency filings are slightly down, as are the total number of bankruptcies filed. However, the total number of consumer proposal filings are slightly up, indicating that more Canadians are choosing this option.

    If you are considering filing for a consumer proposal or for bankruptcy, it’s important to know the difference.

    Consumer proposals:

    • Are for unsecured debts less than $250,000 (not including mortgage debt).
    • Make a settlement offer to your creditors that the majority of creditors must accept.
    • Generally, leave assets intact.

    Bankruptcies:

    • Are for any amount of debt.
    • Clear most unsecured debts and potentially some secured debts, such as a mortgage or car loan, if the assets are seized.
    • Could result in losing assets, such as your home or your car.

    For more differences, see this blog: How is a Consumer Proposal Different from a Bankruptcy?

    Both consumer proposals and bankruptcies must be filed with a Licensed Insolvency Trustee (LIT, or formerly known as a Bankruptcy Trustee). However, they will take a portion of the fee that you pay. They aren’t necessarily ‘on your side’ — they are more of a facilitator for the process.

    Before you file, you need an advocate who represents you and only you. At DebtCare, we provide just that. We can represent you when filing for bankruptcy or for a consumer proposal, and we can also make sure you have eliminated all other debt consolidation strategies before filing.

    Contact us today for a free consultation. Call 1-888-890-0888.

  • TREB Has to Make Sold House Prices Public – What This Means for You

    An important court case involving the Toronto Real Estate Board (TREB) could have big benefits for consumers when it comes to sold house prices.

    For nearly seven years, TREB has been trying to keep sold house prices private — meaning only real estate agents or other mortgage professionals could access those figures.

    But on August 23, 2018, the Supreme Court of Canada turned down TREB’s appeal to keep home price data private.

    This means that consumers may be able to see historical sales listing data and prices online, whereas before that data was only available to real estate professionals.

    How does this affect the average consumer? It could be a big help. Consider the following:

    • With access to historical sales data, you’ll be able to see how much your house has sold for in the past.
    • You’ll be able to see how many times a house has sold in the past.
    • You’ll be able to see how much houses in your neighbourhood sell for to get an approximate idea of your home value.
    • If you’re considering putting an offer on a home, you’ll be able to see how much it has sold for in the past.
    • There will likely be greater competition and innovation in the Greater Toronto Area (GTA) real estate market, which could have a positive affect for consumers.

    This decision only affects GTA home data currently, but it may spread to other Canadian cities. Many real estate boards were watching the TREB court case to determine their own action. Now that a legal precedent has been set, it’s likely that other boards will follow suit.

    Similar real estate data has been available publicly in the U.S. for the past 10 years.

    As Canadian interest rates increase and new mortgage stress test rules are in place, it’s more important than ever for homeowners or potential homebuyers to understand the real estate market. This could help you decide whether you should keep or sell your home.

    Time will tell how exactly the court order plays out, but we are calling this a victory for consumers.

    Interested in buying a home or selling your house? DebtCare Canada can help. We offer first mortgages, second mortgages, home equity loans, and more.

    Contact us today for a free consultation. Call 1-888-890-0888 or visit https://debtcare.ca/.

  • Should You Get a Home Equity Loan to Pay Off Debt Before Interest Rates Increase Again?

    How confident are you that you could survive another Canadian interest rate increase? If your answer is “not very” perhaps it is time to consider getting a home equity loan to pay off debt.

    Since July of 2017, the Bank of Canada (BOC) interest rate has increased from 0.5% to the current 1.5%. Although the BOC held off on increasing the rate again in September of 2018, economists speculate that rates could go up as soon as October 24, 2018 — the next scheduled BOC announcement.

    Throughout the remainder of 2018 and 2019, experts predict that interest rates could reach as high as 2.25%. If that happened, would you be able to cope?

    Increasing interest rates affect all forms of unsecured debt — credit cards, lines of credit, unpaid bills, variable-rate mortgages, and more. Even some secured debts, like a fixed-rate mortgage, could be affected when it is time for renewal as Canadian mortgage rates have also increased along with the interest rate.

    This means that if you owe $10,000 on a credit card and are paying 1.5% interest, you would owe $10,150 with the interest calculated. However, if the interest rate were to increase — say to 1.75% — you would owe $10,175.

    That may not seem like much of a difference, but credit card interest rates are rarely that low, so you may be paying even more in interest. In that case, even an extra $25 could be a big burden. And many people have more than $10,000 worth of debt. Some have hundreds of thousands worth of debt; 1.75% interest on a debt of $100,000 would be an extra $1,750.

    Plus, the longer it takes to pay off a loan, especially one like a credit card debt without a repayment schedule, the more interest you will be charged. Imagine that extra $25 multiplied by 12 months — suddenly you would be paying $300 more during the year than you otherwise would have. Even if you can afford it, couldn’t that money be put to better use elsewhere?

    The solution is to deal with your debt before interest rates increase again. And you may just be standing on a way to pay it off — literally.

    If you own a house, you could potentially access financing to pay off your outstanding debts by taking out a home equity loan or refinancing your mortgage. You would likely be left with one monthly loan that you would have to repay, but you would have a fixed-interest rate. This way you would know exactly what you have to pay every month, so you could plan for the expense.

    Some debt consolidation options available through your home equity include:

    By consolidating debt through a home loan or mortgage refinancing, you could protect yourself against future interest rate increases and make sure you stay financially well no matter what the BOC decides.

    At DebtCare, we offer one of the most competitive financial programs to help people no matter their credit or income. Bad credit? No problem. Self-employed? No problem.

    Contact us today for a free consultation to find out more about using a home equity loan to pay off debt.

    Call 1-888-890-0888 or visit https://debtcare.ca/financial-products/.

  • Bank of Canada Prime Interest Rate Staying the Same for September 2018

    The Bank of Canada prime interest rate is remaining at 1.5% for September 2018.

    On September 5, 2018, the Bank of Canada (BOC) announced its decision to keep rates the same, referencing high gas prices, uncertain trade policies, and a stabilizing housing market.

    Canadian interest rates have increased four times since July of 2017, going from 0.5% to 1.5%. The last hike came in July of 2018.

    Interest rates affect all forms of non-fixed (variable) debt. This might include unpaid bills, lines of credit, variable-rate mortgages, and, of course, credit card debt.

    Credit card interest rates already tend to be very high — much higher than many loans. Added BOC interest rate increases would only bring that amount up more.

    Equifax Canada estimates that Canadians carry $599 billion worth of non-mortgage consumer debt, including credit cards, auto loans, and the like. They predict that the amount of delinquencies — people who can’t or don’t pay their debts on time each month — will increase by the end of 2018.

    Part of that prediction is based on a decline in the number of people who completely pay off their credit card bills each month. Even if you make the minimum payment every month, you will still be charged interest on the remaining balance.

    The September rate hold can give Canadians a chance to deal with outstanding debts — particularly credit card debt interest.

    Consider the following options for managing credit card debts, or other consumer loans, that you can’t pay off in full:

    • Seek a consolidation loan with a fixed-interest rate.
    • Don’t open up any more credit cards if you can’t pay the balances on existing ones.
    • If you have home equity available, consider using it to pay off outstanding debts.
    • Consider filing for a consumer proposal or filing for bankruptcy.

    At DebtCare, we can help you break free from your debt. We will assess your financial situation and make a plan to manage it before the next Bank of Canada prime interest rate increase.

    There is another BOC announcement scheduled for October 24, 2018. Many economists are predicting rates will increase again at that time.

    Don’t wait — get in touch with us before October 24.

    Call 1-888-890-0888 or visit www.debtcare.ca for a free consultation.

  • Iwasan ang Bangkarota(Bankruptcy)sa pamamagitan ng Mga Panukala ng Mamimili

    Napagtanto ng maraming mga Canadian na maaari nilang maiwasan ang pagkabangkarota (bankruptcy) sa pamamagitan ng mga panukala ng mga mamimili.

    Sa nakaraan ito ay medyo madaling mag-file ng isang bangkarota. Dati, ang unang pagkakataon na bangkarote ay awtomatikong  nawawala o mapaliban mula sa bangkarota pagkatapos ng siyam na buwan. Noong nakaraang taon ang mga batas sa pagkabangkarote ay nagbago at nabuo ito ng isang hindi gaanong kaakit-akit na opsyon upang harapin ang utang ..

    Ang mga batas sa pagkabangkarote ngayon ay nagsasaad na kung ang isang indibidwal ay tinasa na magkaroon ng “surplus income” (kita na lumampas sa kung ano ang pinahihintulutan sa pagkabangkarote) hindi sila mapapaliban sa siyam na buwan, sa halip ay maaari silang manatiling Hindi mapaliban hanggang dalawampu’t isang buwan. Kung mangyari ito, ang bangkarota ay kailangang mag-ulat ng kita sa kanilang tagapangasiwa at gumawa ng mga pagbabayad sa bangkarota para sa buong dalawampu’t isang buwan. Kailangan din nilang bayaran ang tagapangasiwa ng limampung sentimo sa dolyar para sa bawat dolyar na “surplus” na kanilang kinita.

    Ito ay isa sa maraming mga pagbabago na nagbago ang paraan ng mga Canadians tungkol sa bangkarota. Upang maiwasan ang pagkabangkarote, marami ang nagpipili ngayon ng mga panukala ng mga mamimili. Ito ay makikita sa mga istatistika ng pagkabangkarote, na nagpapakita ng isang matinding pagtanggi ng mga pagkabangkarote sa Canada at sa gayon ay nagdudulot ng pagtaas sa mga pag-file ng panukala ng mga mamimili.

    Sa panukala ng isang mamimili, ang isang kasunduan ay iniharap sa iyong mga nagpapautang. Ang iyong mga kreditor ay magkakaroon ng 40 araw upang tanggapin o tanggihan ang panukala ng mamimili. Kung ang karamihan ng mga nagpapautang ay tanggapin ang iyong panukala ng mamimili, ito ay nakatali. Sa pagtanggap ng abiso ng pag-file ng panukala ng mamimili, ang mga nagpapautang na hindi tumutugon ay ituturing na tinanggap ang iminungkahing kasunduan. Sa sandaling tanggapin ang panukala ng mamimili, babayaran mo ang tagapangasiwa ng isang buwanang kabayaran para sa 3, 4 o 5 taon, hanggang sa ang halaga ng panukala ng mamimili ay binayaran nang buo. Tatlong taon mula sa petsa na ang iyong panukala sa kustomer ay binayaran nang buo ay aalisin ito mula sa iyong credit report.

    Ang isang pinagkakatiwalaan ng bangkarota ay magtatasa kung ano ang pagbabayad ng panukala ng iyong mamimili batay sa iyong mga ari-arian at kita. Halimbawa, kung may utang ka na $ 25,000 at natukoy na maaari mong bayaran ang $ 400 kada buwan, ang isang tagapangasiwa ay maaaring magmungkahi ng isang mungkahing binabayaran nang higit sa 5 taon na nagdadala sa kabuuan na babayaran mo $ 24,000. Ang isa pang tagapangasiwa ay maaaring magrekomenda na ipakita mo ang isang panukala na nagsasangkot sa paggawa ng isang buwanang kabayaran na $ 400 sa loob ng 4 na taon. Ang pagkakaiba sa isang taon na ito ay katumbas ng isang $ 4,800 na ipon. Layunin ng tagapangasiwa na ipakita ang isang panukala na maaari mong bayaran ng buwanan at na nakakatugon sa iyong mga nagpapautang. Titiyakin ng iyong tagapangasiwa kung gaano agresibo ang nais nilang maging.

    Ang pagsisikap na makipag-ayos sa isang tagapangasiwa sa bangkarota sa iyong sarili ay patunayan na walang bunga. Ang karamihan ay magmumungkahi na ang mga tuntunin na kanilang inaalok ay kung ano ang iyong babayaran batay sa kanilang pagtatasa sa iyong mga pananalapi. Ito ay maaaring humantong sa iyo upang maniwala na kung ano ang nagmumungkahi ng bangkarota tagapangasiwa ay ang iyong lamang na pagpipilian.

    Ang isang mahusay na tagapayo sa pananalapi na nakakaalam ng maraming mga trustee sa pagkabangkarote ay maaaring makatulong sa istraktura mo ang iyong impormasyon sa pananalapi. Makikipagtulungan sila sa iyo upang matukoy kung ano ang isang makatarungan at abot-kayang panukala ay bago ka magsalita sa isang tagapangasiwa ng bangkarota. Maaari mo ring gabayan ka sa proseso, na kasama ang pagharap sa lahat ng iyong mga pagpupulong sa tagapangasiwa.

  • Pagharap sa Utang Bahagi 1 – Mga Pagkolekta ng Utang sa Canada

    Maraming mga tao ang may mga utang sa Canada. Ang mga ahensya ng pagkolekta ay pangkaraniwang inaarkila ng mga pribadong kumpanya upang mangolekta ng pera mula sa mga indibidwal na nag-default. Kapag ang isang kumpanya ay nagtatalaga ng isang account sa isang ahensiya. Ang ahensyang ito ay magpapatung ng karagdagang bahad at interes sa utang, na nagging sanhi ng mabilis na pagtataas ng pagkaka-utang.

    Ang ilang mga ahensya ng koleksyon ay gumagamit ng mga taktika, tulad ng pagtawag sa iyo nang maraming beses araw-araw sa bahay at upang mangolekta ng pera mula sa iyo, samantalang ang iba ay maaaring pinahintulutan ng iyong pinagkakautangan na kumuha ng Maliit na Klaim sa Korte laban sa iyo. Ang mga ahensya ng pagkolekta ay maaari ring mag-file ng “item sa koleksyon” sa iyong ulat ng kredito na magagawa ng malaking pinsala sa iyong kredito; gayunpaman kung nabigo ka sa isang pautang o credit card, maaaring nasira ang pinsala sa iyong kredito. Kahit saan mo man tignan ang pagharap sa mga utang sa Canada ay hindi kabayan-aya.

    Ang tipikal na mga utang tulad ng mga pautang at mga balanse sa credit card ay hindi lamang ang mga uri ng utang na nakatalaga sa mga ahensya ng pagkolekta. Kung ikaw ay default sa isang utang sa isang utility provider, default sa bill ng telepono, pagiging miyembro ng gym, bayad sa toll, multa ng trapiko, lahat ng ito ay mga halimbawa ng utang na maaaring italaga sa mga ahensiyang pangongolekta para kokolektahin.

    Ang mabuting balita ay ang mga ahensya ng koleksyon sa Canada ay kinokontrol sa karamihan sa mga Lalawigan. Nangangahulugan ito na mayroon kang mga karapatan! Sa Ontario halimbawa, ang Ministri ng Mga Serbisyong Pang-consumer ay nag-uutos ng mga ahensya ng pagkolekta sa pamamagitan ng pangangasiwa ng “Batas ng Ahensya sa Koleksyon”. Maaari mong tingnan ang Ontario Collection Agencies Act sa website ng E-Laws. Kung may naganap na utang sa Canada at ang ahensiya ng pagkolekta ay nakakakuha, maaari kang magreklamo sa Provincial Ministry na nagreregula nito. Ang ilang mga Lalawigan ay makakatanggap ng mga online na reklamo (tulad ng kaso sa Ontario) habang ang iba ay nangangailangan na ipadala mo sa kanila ang isang sulat at isama ang katibayan upang suportahan ang iyong reklamo.

    Kung mayroon kang isang koleksyon ng utang sa Canada malamang na dahil hindi mainam ang iyong pagsasa ayos ng iyong utang. Sa halip na nakaharap sa pagkilos ng pagkolekta, mas mahusay na magkaroon ng isang solusyon upang harapin ang iyong utang at may mga solusyon. Mayroong ilang mga programang magagamit na tumutulong sa mga tao na harapin ang kanilang utang at itigil ang pagkolekta. Ang pagharap sa utang ay maaaring maging sanhi ng stress at strain sa mga relasyon at maraming mga tao ang nag-iisip na ang tanging paraan upang makawala sa utang ay sa pamamagitan ng personal na bangkarota. Hindi ito ang kaso. May iba pang mga solusyon sa pagharap sa utang na may kinalaman sa pagtigil sa interes na nakukuha sa iyong utang at pagbabawas din sa pangunahing halaga ng utang na mo.

    Kung ikaw ay may hinaharap na pagkakautang, ang pinakamasama mong gawin ay balewalahin ito. Ito ay pahahabain lamang ng panahon na ang iyong kredito ay masira at ang utang ay hindi mawawala ngunit magpapatuloy lamang na lalago sa paglipas ng panahon. Ang mabilis mong pagayos sa iyong utang, ay mabilis mong maayos patungo sa muling pagtatayo ng iyong kredito at mga pananalapi at tuluyang iwaksi ang hindi mapigilang paglaki ng iyong utang.

    Para sa higit pang impormasyon tungkol sa pagharap sa utang at mga utang sa koleksyon sa Canada mangyaring bisitahin o tumawag 416-907-2582.

  • How is a Consumer Proposal Different from a Bankruptcy?

    Consumer proposal vs. bankruptcy — what’s the difference?

    At first glance, they can appear similar. Both clear your debt, stop collection action, and can harm your credit. But when we get into the nitty-gritty, there are several big things that set them apart.

    1. Assets

    Bankruptcy: When you file for personal bankruptcy, your assets are on the line. There may be allowable exceptions, like a car beneath a certain value, but anything over that can be taken. Each province in Canada has specific exceptions.

    Consumer Proposal: When you file for a consumer proposalyour assets aren’t touched. Instead, an agreement is made with your creditors to pay an amount of money in lieu of the full payment, and if they accept your debt is cleared, collection action stops, and your assets cannot be seized. But you have to prove that it is more lucrative for your creditors to accept your consumer proposal than it would be for them if you declared bankruptcy.

    1. Cost and Payment Schedule

    Consumer Proposal: A consumer proposal payment schedule is designed for you. You make a proposal to your creditors, usually a percentage of your total unsecured debt, and then you create a schedule to pay back that percentage. These are usually fixed, monthly payments that are made over a term of 48 to 60 months (four to five years). You also must pay the Licensed Insolvency Trustee (LIT) who files your consumer proposal a portion for his fee.

    Bankruptcy: Bankruptcy payments vary as they are based on your income. The more money you make, the more you’ll have to pay. A first-time bankruptcy can be completed in as little as nine months. If you have surplus income (if your household income is over the allowed amount) it may be extended up to 21 months. You are also required to pay the LIT a portion for his fee.

    1. Credit Rating Impact

    Bankruptcy: If you claim bankruptcy in Canada, you will receive an R9 credit rating. This is the worst rating you can have. It will stay on your credit report for six to seven years after you are discharged, depending on your province. If you are discharged after nine months, then the credit rating might stay on your record for seven to eight years total.

    Consumer Proposal: With a consumer proposal, you will receive an R7 credit rating. It will remain for three years after you complete your payments. So, if you complete your payments in five years, the R7 credit rating will remain for eight years total (five years, plus three years after it’s completed).

    1. Monthly Duties

    Consumer Proposal: There are no monthly requirements with a consumer proposal, besides making your payments on time. You do not need to report any changes in your income. You have to attend two credit counselling sessions.

    Bankruptcy: You are required to complete a monthly budget for income and expenses and supply copies of your pay stubs to your Licensed Insolvency Trustee (LIT). You also have to attend two credit counselling sessions.

    1. Tax Refund

    Bankruptcy: You will lose all tax refunds or tax credits you are owed.

    Consumer Proposal: You keep all tax refunds or credits you are owed.

    1. Eligibility

    Consumer Proposal: Your total debt cannot exceed $250,000 (excluding a mortgage) and you must be able to afford to repay a portion of your debts. You are not guaranteed to be granted a proposal just by filing one. It must be accepted by the majority of your creditors. You need to prove that they would be better off with this arrangement than if you filed for bankruptcy.

    Bankruptcy: Any Canadian resident who owes more than $1,000 in debt and is insolvent is eligible to file for personal bankruptcy.

    When you’re choosing between filing for a consumer proposal or filing for bankruptcy, there is no clear winner. They both have far reaching consequences and will take years to recover from.

    You also need to consider the bigger financial picture and all your forms of debt. Both a bankruptcy and a consumer proposal can cover unsecured credit and debt, such as credit cards, unsecured bank loans, lines of credit, payday loans, and unpaid bills.

    But they won’t deal with secured debt, like your mortgage, secured car loan, or lease. They also won’t include debts like spousal or child support, court-imposed fines, and student loans that are less than seven years old. You will still have to pay those debts.

    If you’re in a position where you’re considering filing for either one, make sure you have explored all of your other options. There could be another debt management solution that works better for you, without the same repercussions. And if you do decide to file, make sure that you seek independent representation besides your LIT.

    Remember, LITs make money off of your consumer proposal or bankruptcy. You need someone who represents you — and only you — when you’re going through the process.

    At DebtCare, we provide just that. We can represent you when filing for a consumer proposal or bankruptcy, and we can also make sure you have eliminated all other debt consolidation strategies.

    Contact us today for a free consultation. Call 1-888-890-0888.

  • CRA Collections and You – How You Can Protect Yourself

    Canada Revenue Agency (CRA) collections can be financially and personally devastating. Whether you’re hit with a wage garnishment, frozen bank account, or lien against your property, the effects can be far-reaching. It might impact your ability to pay your regular bills, alert your employer or clients to your financial position, or put your assets in jeopardy.

    CRA collections can begin without warning and without a court order.

    Often, when a person is hit with a CRA collection action, they ask, “How did the CRA find out my personal information?”

    The answer, usually, is that you told them.

    If you’re talking to the CRA, you need to be careful about what you voluntarily disclose. They can’t begin collection action unless they know where to collect from. For example, your bank account can’t be frozen if the CRA doesn’t know where you bank.

    One of the ways the CRA gets your personal information is through financial disclosure forms. For instance, say you wanted to make a payment plan with the CRA to pay your tax debt. You might directly contact the CRA to do so. They may indicate that they are willing to accept a three-to-six-month payment plan based on $500 per month if you fill out a form providing financial disclosure.

    This form might ask for information about your income, income sources, expenses, assets, liabilities, where you bank, and more. And now they have all this information on file. Even if they accept your payment plan this year, they might not be so lenient if it happens again in a following year. And now they will know where to collect from.

    There’s another added danger of providing this information: once they have your data, the CRA could go back on their original payment plan offer and demand a much larger monthly payment based on what you’ve disclosed.

    They may accept the lesser monthly payment for three-to-six months, but if they demand more, or if you don’t meet the payment plan obligations, the CRA will have all of your personal financial information that you provided in the financial disclosure form and can proceed to take enforcement action against you.

    They can also get your banking information in other ways. For example, if you make a payment to the CRA using your main chequing account and you still owe money, expect your bank account to get frozen.

    You also might unknowingly provide personal information just by talking with a CRA agent on the phone. Remember, they are trained to seem friendly, so you feel comfortable talking with them and revealing personal details. But the friendship isn’t all it seems. Once they have what they need, expect the CRA to turn to collection action.

    All of these reasons are why many agencies advise people who have large tax debts not to deal with the CRA directly. The CRA may say they are willing to negotiate, but they are agents hired by the government to collect the tax debt from you. Their primary objective is to close your file, which can only happen if you pay the amount in full (or you end up filing for a consumer proposal or bankruptcy).

    If you know you owe the CRA and can’t pay in full, you need a plan before even initiating contact.

    • Don’t contact the CRA on your own.
    • Don’t attempt to negotiate with the CRA.
    • Don’t fill out any financial disclosure forms they provide or answer other personal questions when speaking with an agent over the phone.

    Instead, contact a financial consultant to explore your options so you can get your CRA tax debt cleared before collection action is started.

    DebtCare provides access to one of the only programs that can resolve a CRA back tax problem. We can help you before the CRA registers a lien against your home, issues one of your customers a requirement to payorder, or freezes your bank account.

    Contact us today for a free consultation at 1-888-890-0888.

  • Mortgage Refinancing Tips for Reducing Debt

    If you own a home and struggle with debt, you may have considered mortgage refinancing.

    As we’ve written before, if mortgage refinancing is on your mind, you may want to start the process now, before Canadian interest rates increase any further.

    But before you begin you need to make sure that you understand the process and are picking the mortgage refinancing option that is best for you.

    Below are some common refinancing options you may be considering.

    1. Refinancing First Mortgage

    First mortgage refinancing can be a way to assess your monthly mortgage payments and ask if they are still working for your lifestyle. Do you find you’re struggling to make mortgage payments? Or perhaps you have other forms of high-interest debt (credit cards, lines of credit, etc.) and are having trouble repaying those. If you have equity available in your home, then first mortgage refinancing may be for you.

    Consider the following scenario:

    You have a mortgage for $350,000 with Lender A at an 8% interest rate, and you have $25,000 in high-interest debt. You find that you can get a mortgage of $375,000 from Lender B with a 6% interest rate. You use the $350,000 to pay off Lender A, and the $25,000 to pay off your other debt, and then you repay Lender B over the long-term with a lower interest rate.

    But there are downsides to refinancing your first mortgage, too. If you’re breaking your current mortgage in the middle of the term, you might be subject to penalties. Your lender may charge you a prepayment penalty. For fixed mortgage rates this penalty is the greater of three months’ interest or the interest rate differential payment (IRD). For variable mortgage rates this is the equivalent of three months’ interest.

    You will also incur legal fees as a lawyer must change the financing on the title.

    1. Second Mortgage

    A second mortgage is an additional loan taken out on a property that’s already mortgaged. It doesn’t affect your first mortgage, so you won’t be charged for breaking your mortgage early. If you have good credit and more than 20% equity in your home, you may be eligible.

    A second mortgage often carries a higher interest rate than a first mortgage, but the interest rate is still lower than other forms of debt you might be paying off, like credit cards, car payments, or unsecured lines of credit.

    If you use a second mortgage to consolidate debt and make your payments on time, it could help increase your credit score.

    The big downside to a second mortgage is that most lenders will want to know you have good credit and a reliable source of income. A second mortgage is inherently riskier as you’ll now have two mortgages, so a lender will want to make sure you won’t default. And while you won’t be subject to fines for breaking your mortgage early, there may be other fees incurred during the set up.

    If you have equity available in your home and a plan to pay for your second mortgage debt, it could be a good option.

    How to Decide What is Right for You

    If you have good credit, at least 20% equity available, and a plan to pay off the debt long-term, a second mortgage can be a great option for debt consolidation. But you need to know how you will repay it. If your credit has been harmed because of excessive debt, a second mortgage can help you rebuild it so long as you make your payments on time.

    If your mortgage payments are too much, or you have equity available on your current mortgage that you want to access, then refinancing your first mortgage may be the best option. This can be a long-term solution that helps you get out of debt and save more money over time, but it depends on the interest rates you are eligible for.

    Both options include fees. A second mortgage includes appraisal fees, legal fees, a lender’s self-insured fees, and mortgage fees, plus interest on the loan. Refinancing your first mortgage includes legal fees and a potential pre-payment fee if you are breaking your mortgage early. Plus, if you change lenders, you may be subject to another fee.

    If Your Bank Says No

    If you have equity available, but your credit is bruised, you might not be able to get mortgage refinancing or a second mortgage with a prime lender. However, there are many non-mainstream financial institutions that may still lend to you, but you will need a good mortgage broker to get to them.

    Deciding what option is best for you comes down to your debt consolidation needs, your credit score, and your available equity. You don’t have to decide alone. DebtCare’s financial experts can help you take stock of your situation to determine what debt management method is best for you, or if there’s another option that may be even better.

    DebtCare offers one of the most competitive financial programs to help people no matter their credit or income. Bad credit? No problem. Self-employed? No problem. We can assist with first mortgages, second mortgages, home equity lines of credit, and more.

    Call us today for a free consultation: 1-888-890-0888.

  • Missed the Tax Deadline? Read Our Complete Guide to CRA Penalties and Interest

    The 2018 personal tax filing deadline was April 30, 2018. Seeing as we’re now in August, if you missed it and you owe money, you’ve likely racked up Canada Revenue Agency (CRA) penalties and interest by now.

    Late-Filing Penalties and Interest

    According to the CRA, late-filing penalties and daily compound interest start accumulating on May 1, 2018 for any unpaid amounts owing for 2017. You could be charged:

    • 5%of your 2017 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
    • 10% of your 2017 balance owing, plus 2% of your 2017 balance owing for each full month your return is late, up to a maximum of 20 months, if you’ve been charged a late-filing penalty on your return for 2014, 2015, or 2016.

    The above amounts are what you could be charged after filing your tax return late. However, if you decided to not file at all, the consequences could be even worse.

    Failure to Report Income Penalty

    If you fail to report an amount on your return for 2017, and you also failed to report for 2014, 2015, or 2016, you may have to pay a federal and provincial/territorial repeated failure to report income penalty.

    Any amount of income of $500 or more that was not reported is considered a failure to report income.

    These penalties are each equal to the lesser of:

    • 10% of the amount you failed to report on your return for 2017; and
    • 50% of the difference between the understated tax (and/or overstated credits) related to the amount you failed to report and the amount of tax withheld related to the amount you failed to report.

    False Statements, Omissions, and Gross Negligence

    If you make a false statement or omission on your 2017 tax filing, you could be charged an additional penalty:

    • $100; and
    • 50% of the understated tax and/or the overstated credits related to the false statement or omission.

    This penalty can be charged whether you knew about the false statement, or if it is caused by “gross negligence,” for instance if you paid somebody else to file your return for you (like an accountant) and they made an error. Even if you pay somebody else, you are still responsible for the accuracy of your return.

    CRA Collections

    If you fail to pay an amount owing on your tax return, the CRA can begin collection action. This can be financially devastating, and publicly embarrassing. Common collection action includes a wage garnishment, a frozen bank account or putting liens on your assets.

    The CRA can begin collections without warning and without a court order. Once a collection action is in place, it becomes even harder to negotiate with the CRA. If the CRA has started collection action, time is not on your side. The only two things that can force a CRA collection action to stop (besides paying the debt in full) are filing for a consumer proposal or filing for bankruptcy.

    What to Do

    If you’re reading this blog, it’s possible that you’re several months behind on filing your tax return, or you haven’t yet paid back the amount you do owe. If this is the case, you don’t want to delay it any longer — that will just result in even more charges, CRA collections, and potential court action for tax evasion. But you don’t have to go it alone.

    You need an expert that can look at your whole financial picture and put together a plan that will work for you.

    At DebtCare Canada, we can help with your tax debt, whether it’s personal income tax, HST, or payroll. We provide access to one of the only programs that can resolve a CRA back tax problem.

    Contact us today for a free consultation. Call 1-888-890-0888.