debtcare.ca

Author: mgoldenberg@debtcare.ca

  • Will Canadian Interest Rates Keep Rising? We Think So

    Canadian interest rates are on the rise. From July 2017 to April 2018, the Bank of Canada (BOC) interest rate rose from 0.5% to 1.25% — the highest it’s been in nine years.

    The question on everyone’s mind is will Canadian interest rates keep increasing? The short answer is yes, we think so.

    The long answer is in the evidence we’ve found to back it up.

    Fact #1: Canada’s new mortgage rules.

    On January 1, 2018, new mortgage regulations came into effect for Canadians. These introduced a mortgage stress test for uninsured mortgages to make sure that Canadians shopping for a home or renewing a mortgage can afford their house at higher rates. The new mortgage rules make it clear that regulators are assuming interest rates will keep increasing. If the regulators believe that, there is probably merit in that view.

    Fact #2: Canada’s economy is strong.

    The BOC increased interest rates to 1.25% in January of 2018 due to Canada’s strong economy. Canada had solid economic growth in 2017, exports are up, and new jobs are being added. Economic experts are predicting that the economy will keep doing well in 2018. BOC officials say consumer spending will have less of an effect on the economy going forward than it did in the past.

    In a nutshell, this means the government doesn’t need the average Canadian to spend as much anymore. In the past household spending played a bigger role in keeping the economy afloat. Lower interest rates made it easier for Canadians to get credit to fund those purchases. But now that the economy is doing better, household spending isn’t needed as much, and interest rates can go back up.

    BOC officials have also said they are worried about the current level of Canadian household debt and hope that higher interest rates will stop Canadians from relying on credit so much.

    Fact #3: The BOC has said to expect more increases.

    When they made the January 2018 interest rate announcement, BOC officials wrote, “While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.”

    In summary, BOC officials think that interest rates will keep increasing, but it’s not going to happen all at once.

    What does interest rates increasing mean for you? If you are carrying a large amount of high-interest household debt, the time to take action is now. Rising interest rates could cause financial turmoil.

    You need a plan to deal with the debt and eliminate the highest interest rates before it becomes too much. Debt consolidation options are plentiful and a financial consultant can help find the right solution for you.

    At DebtCare Canada, we deal with debt. We can work through your debt consolidation options and help you prepare for increasing Canadian interest rates.

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

  • 2017 Tax Deadline for Sole Proprietors Right Around the Corner – Are You Prepared?

    While the 2017 personal tax deadline has passed, the self-employed tax deadline is still approaching. Sole proprietors have until June 15, 2018. Are you prepared?

    If you don’t file before the June 15 deadline, you will be subject to CRA interest and penalties.

    CRA late-filing penalties and interest charges are the same for the self-employed tax deadline as they are for personal income tax. If you file late, you’ll be subject to paying an additional:

    • 5% of your balance owing, plus;
    • 1% of your balance owing for each month the return is late, up to 12 months, and;
    • compounded daily interest starting June 16, 2018.

    The CRA late-filing penalty is even higher if you’ve missed filing a return in a previous year. If you’ve been charged for late filing previously, you may have to pay an additional:

    • 10% of your balance owing, plus;
    • 2% of your balance owing for each month the return is late, and;
    • compounded daily interest starting June 16, 2018.

    While the late-filing penalty is the same for sole proprietors as for individuals, the collection penalties can be substantially steeper.

    A CRA garnishment on a sole proprietor business can be up to 100% of your earnings. CRA can contact your clients for the garnishment and your clients are legally obligated to pay.

    If you are an employer, the amounts that you deduct and withhold from the wages of your employees are considered trust amounts. If you operate a business as a sole proprietor, partnership, or corporation, the GST/HST amounts you collect from your customers are also deemed trust amounts. You can’t use these as cash flow and they must be paid in full when owed.

    If you owe taxes as a sole proprietor, don’t wait to file until after the 2017 tax deadline. The consequences will be much worse.

    But if you can’t pay your tax debt, what can you do instead?

    Step 1: Make a Plan.

    If you’re not filing because you don’t have receipts, there are solutions.

    If you’re not filing because you know you can’t pay, you need a plan to deal with debt. The plan you make will depend on your business, income, and debt. There are options available. A financial professional can help you find the right answer for you.

    Step 2: Get Filed.

    As we outlined above, there are no benefits to delaying your filing. At best, it will only result in interest and penalties that will make your tax debt even bigger. At worst, it could lead to court action for tax evasion. Make sure to file before the 2017 tax deadline.

    Step 3: Implement Your Plan.

    After you’ve filed, it’s time to take action to deal with your tax debt.

    DebtCare Canada offers one of the only solutions that stops CRA, freezes CRA interest, stops collection action, and can actually reduce the principal tax debt.

    Don’t wait until the self-employed tax deadline.

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

  • Spring Financial Planning – Getting Your Books in Order in 1-2-3

    Spring cleaning doesn’t have to be only for your house. Nature’s rebirth can be a fresh start for many things — including your financial planning.

    Messy finances can affect your life in many ways. Stress, uncertainty, and anxiety around money have all been shown to have a direct connection to mental and physical health. It’s in your best interest to take the time to get your financial planning in order now.

    To get started on sprucing up your personal accounting, follow these steps:

    Step 1: Make a Budget

    Most people don’t know how they spend their money. Creating a personal budget is one of the best things you can do for your financial planning. It can help you see where you currently sit and forecast future expenses. When you have a budget, you can make room to set aside savings and better plan for emergencies. You’ll be able to see exactly where you can cut back or make a purchase if you so desire. A budget can give you peace of mind and help set you up for future financial success. In addition to a budget, tracking your expenses for a few months can really give you an idea of where your money is going and help you better manage your finances.

    Step 2: Look for Ways to Save

    Once you know how much you spend each month and have created a budget, you can see opportunities to save money. For example, a coffee-a-day habit may not seem like a big expense, but over the course of a year could end up costing $500. If you can afford that, great. But if that $500 is needed elsewhere, you might be better off taking a homemade brew in a travel mug. Or perhaps you’re eating lunch out every day and spending $15 on a meal. Over the course of the year, that could add up to nearly $4,000.

    In addition, if you don’t have one already, you may want to set up a specific savings account where you put money that you don’t intend on using for everyday expenses and set aside money for retirement in a RRSP.

    Step 3: Lock In Your Mortgage

    If you own a home with a variable-rate mortgage, locking in to a fixed-rate mortgage could save you stress and money. With Canadian interest rates increasing, variable-rate mortgages are also going up. A fixed-rate mortgage means you make standard, monthly payments so you’ll always know what you have to pay and won’t be subject to increasing mortgage interest rates.

    Step 4: Deal with Debt

    We can’t talk about financial planning without talking about debt. Even if you have the best budget and have found ways to save in your everyday spending, if you’re putting a large portion of your paycheque towards high-interest, unsecured debt, such as credit card payments, student loans, and lines of credit, it’s going to be that much harder to save. Making a plan to pay down debt and get as much of it as possible out of your budget will help your personal accounting grow by leaps and bounds.

    Financial planning doesn’t have to be done alone. At DebtCare Canada, we can help you make a budget, find savings, understand your mortgage options, and deal with debt.

    Contact DebtCare today for a free consultation: 1-888-890-0888.

  • Did You Know? When Filing a Consumer Proposal Many People are Able to Keep Their Homes

    Filing for a consumer proposal is becoming a popular debt consolidation option for Canadians. In 2016, 62,506 Canadians filed for consumer proposal. More Canadians are opting for consumer proposal than bankruptcy, and the number of people who filed for a proposal is steadily increasing.

    If you’re filing for a consumer proposal, you are making an offer to your existing creditors to pay back a portion of your debt. This number is then presented to the creditors, and the majority must accept. Once accepted, the proposal is legally binding.

    The downside to a consumer proposal is that your credit will be critically affected for years afterward, making it difficult to secure any types of loans or refinance your mortgage. Plus, a consumer proposal must be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who will take a portion of your consumer proposal as their payment.

    One of the questions we’re always asked about filing for a consumer proposal is “Can I keep my house?”

    The short answer is likely yes, but it depends.

    Secured debts, such as mortgages, aren’t included in consumer proposals. So, when you file for a consumer proposal, it is only paying off your unsecured debts — loans without collateral — such as credit cards, student loans, and payday loans. When you’re in a consumer proposal, so long as you continue to make payments on time to your secured debts, such as your mortgage, your car payments, etc., those assets can’t be taken away.

    In many cases, filing for a consumer proposal is actually going to allow you to keep your house. If you’re struggling to keep your head above water because you’re relying on unsecured credit, a consumer proposal is going to ease that suffering. If your income is enough that you can afford to keep paying your mortgage, car payment, cost of living, and consumer proposal payments, then you will be able to keep your house. But you have to be sure to make your payments on time and not miss any.

    If, however, after filing for a consumer proposal your income is still not enough to make ends meet, it’s a different situation and it would be a good idea for you to consult a debt counsellor to either make a budget or look at other financial options. If you don’t pay your mortgage, you will lose your house.

    DebtCare Canada can help you make a budget for life after a consumer proposal or answer any questions you have about filing for a consumer proposal.

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

  • 30-Day Countdown: How to Tackle Back Taxes and Tax Debt

    The 2017 income tax deadline is on April 30, 2018. Have you filed your taxes yet? If you’re waiting or afraid to due to back taxes or because you’ll owe a tax debt, read on…

    If you have back taxes:

    When you owe back taxes, the best thing you can do is consult a financial professional before the income tax deadline. Don’t try to negotiate with CRA directly — that can be a dangerous game. A debt consulting organization can help you take stock of your situation and make a repayment plan. DebtCare Canada has one of the only programs that can resolve a CRA back tax problem.

    If you’ll owe a tax debt:

    Not filing because you know you’ll owe? That’s about the worst thing you can do. Tax evasion is illegal, but it’s not illegal to owe. Failing to file your taxes before the 2017 deadline will only lead to more trouble — namely CRA interest and penalties.

    In 2018, CRA starts charging interest on May 1, 2018 at a daily compound rate. And CRA late-filing penalties are also hefty: 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. Plus, if you’ve been charged a late-filing penalty in a previous year, you could be charged 10% of your balance owing, plus 2% for each full month your return is late for up to 20 months.

    The key is to avoid enforcement action. CRA is powerful and can garnish wages and freeze your accounts even without a court order. They will come after you, and fast. And if you can’t pay in full, CRA may negotiate with you, but it’s not likely to be to your benefit.

    What can you do instead? Don’t contact CRA until you know how you will proceed. They will use your information against you.

    If you owe a tax debt, don’t delay filing, but do consult a financial professional. With 30 days to the deadline, you still have time to do so. A debt counsellor can help you explore your tax debt repayment options.

    DebtCare Canada offers one of the only solutions that stop CRA, freeze CRA interest, stop collection action, and can actually reduce the principal tax debt.

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

  • CRA Penalties, Interest, and More – What to Do if You Will Miss the 2017 Tax Deadline

    The 2017 income tax deadline is nearly a month away. April 30, 2018 is the date you must file by or be subject to Canada Revenue Agency (CRA) penalties, interest, and possibly collection action.

    Tax time can be a source of stress — gathering your receipts, filing your return, and worrying about whether you’ll owe can be a hassle that’s tempting to avoid. But like it or not, paying taxes is something that can’t be avoided and if you attempt to do so, the stress and consequences will only be worse.

    Consider this case, reported on the CRA website. On December 4, 2017 a Cobourg, Ontario man was sentenced to a fine of $97,173 after pleading guilty to two counts of tax evasion for failing to report income on his personal tax returns from 2006 to 2007. This court-imposed fine is only one part of what he must pay. He also has to pay the full amount of tax owing (an additional $97,173) PLUS related interest and any penalties assessed by the CRA.

    This is a cautionary tale, but it’s also not uncommon. Between April 1, 2012 and March 31, 2017, courts have convicted 408 people for CRA tax evasion. This involved $122 million in federal tax evaded and court sentences totaling approximately $44 million in court fines and 3,103 months in jail.

    If you’re worried you’ll miss the 2017 income tax deadline, here’s what to do instead:

    1. File Before April 30, 2018

    If you’re owed money and you don’t file before the 2017 income tax deadline, you’ll just have to wait longer for your refund — and who wants that? Even if you’ll owe a tax debt, it’s better to file before the deadline to avoid CRA penalties.

    Interest begins accumulating on your tax debt on May 1, 2018 at a daily compounded rate. And on top of the interest, you’ll have to pay the CRA late-filing penalty.

    The CRA late-filing penalty is 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. And if you’ve been charged a late-filing penalty in a previous year, you could be charged 10% of your balance owing, plus 2% for each full month your return is late for up to 20 months. That’s a lot of extra money to pay on top of the balance you already owe. It’s in your best interest to file by April 30 and avoid the CRA penalties.

    1. Make a Plan to Pay

    If you can afford it, paying your tax debt in full is the best option for avoiding CRA penalties. Look at your budget and see where you can save to pay the tax debt.

    If you absolutely can’t pay in full with your current income, you may have other options available to you. For example, if you own a home with equity available and have good credit, you could be eligible for a home equity loan, which would allow you to pay off your tax debt and then pay your loan off over a fixed repayment schedule. If you don’t own a home, or don’t have equity available, there could be other lending options that you can access.

    Don’t share your income and expenses with CRA. Get a plan together first.

    1. Seek Professional Help

    If you’re going to miss the 2017 income tax deadline because you can’t pay your tax debt, even with a loan, consult a financial professional. Debt counsellors can help you go over your options, see what options are available to you, and help prevent or stop CRA collection action. Burying your head in the sand isn’t going to change your situation and will actually make it worse. If you’re not sure what to do, a professional debt consultant can help you find the way.

    DebtCare Canada can help you avoid the consequences of CRA penalties.

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

  • Your 2018 Debt Consolidation Options

    As Canada’s household debt continues to rise, many Canadians are looking at debt consolidation options. Rising interest rates and new mortgage rules are leaving less room for debt and those who once had a comfortable cushion may now find themselves struggling.

    If you’re finding yourself in a position where your debt is becoming unmanageable, or you want to be proactive and pay it down before it becomes so, here are your 2018 debt consolidation options you may want to consider:

    1. Home Equity Loans

    If you have equity available in your home, you may be eligible for a home equity loan. This can be a viable option, so long as the interest is low. You can use the loan to pay off your higher-interest debts and then repay your home equity loan in single, monthly payments. However, home equity loans often depend on your credit score and the interest can be high.

    1. Lines of Credit

    A line of credit is similar to a home equity loan, only you don’t need to own a home. A line of credit can also help with your debt consolidation, but it can come at price. Many will cost you 8% interest or higher, meaning you’ll be able to pay down debt, but repaying your line of credit will cost you. You also need to have good credit. If you have bad credit or owe a lot of debt, this may not be the answer for you.

    1. Mortgage Refinancing for First Mortgage or Second Mortgage

    Both mortgage refinancing or a second mortgage are great options if you have a lot of debt and sufficient equity. However, your credit often needs to be good and if you’re carrying too much debt, you may not be eligible.

    1. Consumer Proposal

    If your debt is excessive, you may be able to manage it through filing a consumer proposal. An offer is made to your creditors to repay a portion of what you owe in lieu of the whole payment. However, filing a consumer proposal can majorly affect your credit score making it extremely difficult to qualify for any type of credit years after the fact. A consumer proposal must also be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a bankruptcy trustee) who takes a portion of what you pay.

    1. Bankruptcy

    Filing for bankruptcy leaves you with only one monthly payment, stops interest and collection action, and reduces debt. However, like with a consumer proposal, it also majorly affects your credit. It must also be filed through a LIT.

    A seasoned financial professional experienced in all of the above is your best bet to get professional financial guidance. Not only can DebtCare Canada work through the debt consolidation options, but they can also liaise and arrange the solution.

    At DebtCare, we deal with debt. A debt consolidation may just be the answer you’re looking for when it comes to getting rid of debt.

    Call us today at 1-888-890-0888.

  • Surviving Rising Interest Rates – Locking Your Rate May Be the Best Time to Refinance

    So far in 2018 Canadian homeowners have experienced several major changes that could affect finances — new mortgage rules and rising interest rates

    First, let’s look at the new mortgage rules. On January 1, 2018, new Canadian mortgage rules came into effect. These regulations require lenders to stress test mortgages based on higher rates to make sure that house hunters and those up for mortgage renewal can afford their house.

    Second, the interest rates. Interest rates have increased three times since July of 2017. They are currently sitting at 1.25%, the highest they have been in nine years. For homeowners carrying a lot of debt, rising interest rates could mean financial turmoil.

    The Bank of Canada has indicated interest rates are going to keep increasing in 2018 and beyond. And the new mortgage rules seem to back that up — if regulators are stress testing mortgages for increased rates, it stands to reason that rates will keep increasing.

    So, what does that mean for homeowners?

    1. If you don’t have a locked-in mortgage rate or are close to your mortgage coming up for renewal, you may want to think about locking in. A fixed mortgage has standard monthly payments that don’t change with rising interest rates, unlike a variable-rate mortgage.
    2. If you are already locked in, anticipate that when you renew, unless there is a major downturn in the economy, your rates could be higher. The sooner you start planning for this, the better off you will be.
    3. Know that your equity position may change. Real estate is driven by supply and demand. New mortgage regulations and higher interest rates mean that buyers will be able to afford less, which may lead to reduced valuations and less equity.
    4. If you are carrying debt, that should be a further motivator to act. If interest rates increase further, and you’re carrying a lot of high-interest debt, that’s going to mean higher payments for you. Can you afford that?

    One common way of dealing with excess debt is mortgage refinancing. Now could be the ideal time to look at mortgage refinancing before interest rates increase again.

    Ask yourself, what would a new first mortgage look like if you folded in all of your debt?

    In some situations, you may not be able to refinance your first mortgage, or it might not make financial sense to do so. If that’s the case, you may want to consider a second mortgage. If debt is excessive, a second mortgage could mean far less interest than you are likely paying on credit cards.

    If you’re thinking about mortgage refinancing or a second mortgage as a possible debt solution, it’s best to speak with an experienced debt consultant first — one who will assess you and present you with all of the financial options available to you, the pros and cons, and guide you to the best financial plan.

    For more information about mortgage refinancing or second mortgages, please contact DebtCare Canada today by calling 1-800-890-0888.

  • Question Corner: When Will CRA Garnishment Happen to Me if I Owe?

    The 2017 income tax deadline is looming on April 30, 2018 and with it the consequences of not paying a tax debt in full. One such consequence if you fail to pay a tax debt is Canada Revenue Agency (CRA) garnishment.

    A CRA garnishment is just one of several scary collections tactics that can happen if you fail to pay your taxes. CRA can garnish up to 50% of your employment income and 100% of your other income, such as contracts or pensions, simply by sending a letter to your employer, or your clients if you are self-employed. The person who receives this letter is legally obligated to send your money straight to CRA or they could face court action.

    Unlike other creditors, the CRA doesn’t need a court order to obtain a wage garnishment. And, scarier still, you may not even know when a CRA wage garnishment will start.

    A CRA garnishment can start any time after the 2017 income tax deadline once CRA has processed your income tax return and provided you with a notice of assessment. This is where you will see the exact amount that you owe.

    If you can’t pay the tax debt in full, that’s when wage garnishment and other collection tactics can begin. You may be able to make a payment arrangement with CRA, but this is nearly impossible for an individual to do on their own. And even if you are sending payments to CRA, they may still garnish.

    If you don’t pay your tax debt and CRA finds out where your income comes from, you are at risk for a wage garnishment.

    CRA can find out your income source in many different ways, such as:

    • You tell CRA or name your employer on a budget or disclosure forms given to CRA.
    • Tax filings by your employer(s).
    • Your client or supplier is audited.
    • And many more.

    There are options to stop a CRA wage garnishment depending on your income, assets, and debt. Some of these options will immediately stop a wage garnishment. Debt consulting companies, such as DebtCare Canada, can assess personal circumstances and arrange whatever solution is the right one.

    Don’t wait – call DebtCare today. We can walk you through the various options and help you avoid a CRA garnishment. 1-888-890-0888.