The DebtCare team extends our warmest greetings of the season and best wishes for
health and happiness in the New Year.
Author: mgoldenberg@debtcare.ca
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Happy Holidays from DebtCare
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Consumer Corner: Everyone is Recommending a Consumer Proposal When I Want to Go Bankrupt
Most people understand the concept of bankruptcy – a situation where you surrender everything you own in exchange for debt elimination – but what about a consumer proposal? Perhaps you’ve heard the commercials or done your own research. If you’re in significant debt, having trouble making monthly payments, or just looking for some breathing room, a consumer proposal is a fantastic debt relief option.If you’re looking for a solution to a financial problem or accumulated debt, you may be considering the benefits of a bankruptcy versus consumer proposal and wondering which one to choose.
So, what exactly is a consumer proposal? It is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a “proposal”—an offer to pay creditors a percentage of what is owed to them.
Some consumers feel they want to go the bankruptcy route to solve their debt problems in one fell swoop, but find that a consumer proposal is recommended instead. What’s the difference?
Some benefits of a consumer proposal include:
- You can pay it off early – you can’t do that with a bankruptcy.
- It’s your final agreement – bankruptcies will continue until your bankruptcy trustee discharges you.
- You know exactly when the debt will be paid off.
- You can rebuild credit sooner – consumer proposals are removed from the credit report three years after they are paid in full, whereas bankruptcies stay for six years from the date you are discharged.
- Your debts are combined into one monthly payment that you can afford.
- If the majority of your creditors accept the consumer proposal, your other creditors are automatically included.
- All interest stops, as do most wage garnishments. This is the same with bankruptcy.
If you’re thinking of making a consumer proposal, start by consulting with a financial professional who specializes in this before heading directly to trustee. They can structure your information and negotiate your proposal with the LIT to help you potentially save thousands of dollars, even tens of thousands of dollars.
Protect yourself and your money. At DebtCare, we can independently review your financial situation to make practical financial recommendations that will work for you.
We’re always in your corner. Call us today at: 1 (888) 890-0888.
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Canada’s Second Mortgage Rate Increase in a Row – What Does it Mean to You?
Back in September, for the second time this year, the Bank of Canada raised interest rates, leading to the inevitable mortgage rate increase at banks and lending institutions across the country. How does the latest BOC interest rate increase impact you?After seven years of historically low interest rates, analysts and economists predicted that a mortgage rate increase was in the cards. Experts predicted that the BOC would raise rates because of the unending growth of hot urban real estate markets like Vancouver and Toronto and the increasing levels of consumer debt carried by Canadians. They also noted that, despite all signs indicating weak inflation, the economy continues to exceed expectations.
After months of speculation, in July the BOC finally posted the first overnight rate increase in what seemed like forever. But it was the most recent increase in September to a full 1% that really surprised some economists, many of whom believed that at least a few more months would be required to have the economy settle after the first rate increase.
Macleans suggests that this will be the last rise for some time while the BOC monitors the “sensitivity of the economy to higher interest rates.” However, Business News Network put forward an argument that the BOC could just as easily justify rate hike number three as early as October. At the beginning of 2017, economists predicted rates would rise by 1.25% sometime in early 2018. Could it happen even earlier?
Why are interest rates rising? In a nutshell, when economic growth is high, as it is in Canada currently, demand for money increases, pushing the interest rates up. And, with the overnight rate at 1%, the mortgage rates at the Big Five banks went up accordingly.
Mortgage rates now range from 3.25% to almost 5% on a 5-year fixed-term mortgage. Compared to an average rate of 2.3% just a few months ago, such an increase could make obtaining a new mortgage more difficult, especially for anyone with outstanding debt. This is especially true if there’s going to be another rate hike this year.
To improve your circumstances, whether you’re planning on seeking financing at those higher rates or just want to be prepared, you should tackle your overall debt. A great way to do this is by taking advantage of the equity in your home. Home equity loans allow you to borrow against the value stored in your home. They can be useful for borrowing large amounts of money, and they’re easier to qualify for than other types of loans because they are secured against your house.
If your home is worth more than you owe on it, a home equity loan can provide funds for anything you want (you don’t just have to use it on home-related expenses, for example). A home equity loan is a type of second mortgage.
After the recent mortgage rate increase, it may be time for you to take a good look at your financial situation before another one is announced. Whether tapping into your home equity, renewing or refinancing your mortgage, or getting a second mortgage, you could potentially save hundreds, even thousands, of dollars. With so many options available, it may seem impossible to decide which option is best for you.
Before you make a decision, we recommend consulting a financial professional first, someone with your best interests in mind who can guide you to the best solution for you.
At DebtCare, we can help you choose the best options to suit your needs and your budget.
Call us today at: 1 (888) 890-0888.
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Debt Relief for Seniors: A Health Consideration
Unfortunately, we’ve been receiving more and more calls from people recently inquiring about debt relief for seniors, as more and more people over the age of 65 head into retirement saddled with debt. With an ever-increasing elderly population and more Canadians than ever carrying huge debt loads, debt relief for seniors facing retirement is a growing concern.The Financial Post recently reported that in the last year, the number of Canadians over 65 with debt rose by 4.3 percent, whereas almost every other age group experienced a decrease. Why are seniors racking up so much debt? Even with many home equity lines of credit in the 3% range, it’s easy for seniors to borrow for real estate, renos, or to help their kids, but quickly get in over their heads.
Seniors now account for 8% of bankruptcies, up from 6% five years ago. The fastest growing risk group among all age groups filing for bankruptcy continues to be seniors. They carry an enormous amount of debt, built up over a lifetime. On average, they owe more than $64,000 in credit card and other debt.
When seniors carry debt into retirement, they run the risk of not being able to meet payments because generally their income has dropped. This makes it hard to repay existing debt. Seniors then borrow more money to cover their mortgage or credit card bills, eating up a much larger chunk of their fixed, lower income.
The stress of carrying debt is hard on anyone, but is especially so for seniors who may be more vulnerable to mental and physical health issues. For example, depression is one of the more common consequences of stress among seniors, which can lead to loss of interest in eating.
Stress can also cause damage to brain cells, and in seniors that can lead to permanent cognitive issues such as memory loss. Not only does stress affect mental health, it can also affect a senior’s physical health too. When we’re stressed, our immune systems are weakened, and in seniors this could mean critical complications, such as catching pnemonia.
With consumer debt levels rising in Canada, more seniors find themselves facing retirement with high levels of credit card debt, lines of credit, and bank loans. These are serious financial problems that could lead to health issues just as they’re getting ready to enjoy retirement.
It doesn’t matter how old you are. If you are looking at mounting debt, you need a plan to deal with the situation so you can avoid the impacts of being stressed about your finances.
If you or an elderly person you know is struggling with debt, find a financial consulting company who specializes in advising on debt relief for seniors so that they can help you enjoy retirement stress free.
At DebtCare, we can help. Get in touch today by calling 1 (888) 890-0888.
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Avoiding a Wage Garnishment or Other Enforcement Action: Protecting Your Information
If you find yourself drowning in debt, unable to meet your monthly financial obligations, you may soon find yourself facing a wage garnishment or other enforcement action if you don’t take the appropriate steps to deal with the problem. Being in debt isn’t a great feeling, but it doesn’t mean the situation is hopeless. To help avoid having a creditor garnish wages, it pays to be diligent in keeping your personal and financial information safe.A wage garnishment, frozen bank account or property lien on your home can happen easily if you are not careful about how you guard your personal and financial information. With very basic information about you and your assets, including any property you own, your creditors can easily take action to collect.
Creditors often investigate public documents regarding property ownership and income to find out if you have the means to pay. If they have reason to believe you have sufficient income or assets, they will come after you. Some innocent sounding questions from your creditor when discussing repayment plans can lead to serious enforcement action down the road. Working with a creditor, you may be asked where you bank. Now they know which account to freeze. Maybe they ask where you live, and now they know where to look to place a property lien. Questions about employment and clients can easily lead to wage garnishment, which can be a substantial cut.
Simply by protecting your information you can buy yourself some time to get your debt straightened out.
If you’re concerned about a potential wage garnishment, whether a creditor has contacted you for the above information or not, the best thing you can do is pay the outstanding debt in full. This will eliminate the need for your creditor to seek you out. However, if you’re worried that your current financial situation won’t allow for payment in full (as is likely the case, otherwise you wouldn’t be in the situation), you need to think about other ways to remedy the situation.
One of the best things that you can do if you know that you owe a creditor, and want to avoid a wage garnishment because you don’t have the means to pay in full, is to consult a financial professional. Whatever you do, don’t panic. And DO NOT answer any financial/personal questions from creditors without first consulting a professional.
At DebtCare, we can help you explore your options. Call us today at 1 (888) 890-0888.
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Remembrance Day
We Remember
This weekend we take a moment to remember and thank all of the brave men and women who’ve courageously dedicated their lives to upholding everything we cherish. To those who have sacrificed so much, and continue to do so, we thank you.
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CRA Tax Debt? Is a Voluntary Disclosure Application the Answer?
Did you know about the Canada Revenue Agency (CRA) Taxpayer Relief Program for tax debt relief? If you have a CRA tax debt you’re likely pretty stressed about it, but don’t worry, you are not alone. Dealing with a tax debt takes work, but in order to avoid further aggravating the issue, it is something you need to do right away.Maybe you’ve already considered applying for the CRA’s Taxpayer Relief Program. This program gives taxpayers the opportunity, under certain conditions, to apply for relief of interest and penalties. Since penalties and interest on a CRA tax debt grow very quickly, this is an important resource.
Tax debt may leave you feeling hopeless, but just remember: you’re not breaking the law simply because you owe money to the CRA. Just don’t ignore the problem either, hoping it will go away. CRA is mandated to act within their means to get the taxes you owe, and they can utilize all available enforcement tricks and strategies to do so. If you’re not careful, this can easily leave you in a financial mess.
What types of enforcement action are we talking about? Wage garnishments, frozen bank accounts, even property liens, are all popular options for the CRA. Each one, however, has the potential to leave you feeling strapped.
What options do you have? Enforcement action can be avoided if you have the means to pay the CRA in full. If you don’t, it is time to consider what other avenues are open to get the tax debt dealt with.
Bankruptcy – If you have a tax debt in addition to a mountain of other debt, filing for bankruptcy may be the smartest solution. Doing so provides you with the ultimate fresh start – one you know you can achieve in as little as nine months.
Consumer Proposal – A consumer proposal is another option. If your personal debt, including your tax debt, is significant, a proposal to all creditors may result in a decreased total owing, a definite payback period, and no interest.
What’s important to keep in mind with both of these options though is that you want to have someone in your corner at all times. An experienced debt consultant has the knowledge and expertise to assess your unique situation and help you determine the best course of action to suit your current needs and future goals.
When you have a CRA tax debt, the best thing to do is work with a qualified financial professional to know your options and make the wisest choice.
Call DebtCare today at 1 (888) 890-0888.
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Happy Halloween! The Scariest Collection Action of All: Garnished Wages
In the spirit of Halloween, we decided to dedicate this blog to the most common – and some would even say terrifying – enforcement action a creditor can take against you: a wage garnishment. Yes, it sounds scary and it can be. Having your wages garnished is an extremely unpleasant reality when you’re already struggling with debt.Having your wages garnished means that a creditor has received a court order to obtain unpaid debts from you. This shows up on your credit report, and your employer will receive notice that they should start taking money from your pay to send your creditor. Not only can this be financially debilitating, it may also be potentially embarrassing at work.
Depending on who your creditor is, the amount of the garnishment and process taken to garnish your wages will be different. For example, the process and amount with regard to CRA wage garnishments differs from all other creditors.
The CRA is unique in that they do not need a court order to garnish you. They can garnish up to 50% of your employment earnings, and up to 100% of your other earnings, like contract income or your pension, simply by sending notice to your employer. Where other creditors are concerned, they must file a claim against you and win a judgment to take enforcement action, and typically only take 20% of your earnings.
In either case, if a creditor is garnishing or threatening to have your wages garnished, it is because you have a debt you have not yet, or cannot, pay. To see the garnishment removed you will have to offer some form of arrangement that is satisfactory to your creditor. If they are already getting monthly installments from you on a garnishment – why would they want to accept a voluntary arrangement? Usually the only solution is to pay the debt in full.
Don’t have the ready cash on hand to do so? Perhaps look at your home equity and investments to see if you have anything you could use to obtain financing to pay the debt. If you don’t, a bankruptcy or consumer proposal may be on the table.
There are programs that you can participate in that will stop a wage garnishment, provide you with a single monthly payment on all your debts that you can afford, and stop interest, but the right solution depends on your income, income type, family composition, total debts, and more.
At DebtCare, we can help you determine the best options to settle wage garnishment issues.
Call us today at 1 (888) 890-0888.
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Current Home Mortgage Rates – Serious Food for Thought
In comparison to current home mortgage rates, over the past seven years, Canadians enjoyed relatively low interest rates. While experts repeatedly warned that borrowing costs would eventually have to rise, it didn’t seem to stop people from borrowing and increasing their debt load.Then as predicted, the Bank of Canada hiked rates in July and again in September. Now current home mortgage rates are twice what they were just a few months ago. Both times the Bank of Canada (BOC) raised the key lending rate, Canada’s Big Five banks – the Bank of Montreal, CIBC, Royal Bank of Canada, TD Bank and Scotiabank – all raised their prime lending rate to coincide.
What are mortgage interest rates today? As of right now, these are the mortgage rates the Big Five were offering for a 5-year fixed mortgage:
- TD Bank – 3.24
- Bank of Montreal – 3.24
- RBC – 4.81
- Scotiabank – 4.84
- CIBC – 4.89
**Source: www.Ratehub.ca
As you can see, there’s quite a difference between TD and CIBC – a split of more than 1.5%. It seems amazing that three of the Big Five are offering a rate of almost 5% on a 5-year fixed term after so many years of low interest. 5% is twice the average from before the rates went up. This means a new 25-year mortgage, with a 5-year fixed-term rate, would result in huge increases to monthly mortgage payments, not to mention the increased payments on any other debt – credit or otherwise – that you may be carrying.
For comparison, let’s look at what a homeowner buying a $250,000 home, with a 10% down payment, could expect to pay on a 5-year variable-rate mortgage. For interest’s sake, we’ve compared what they would have paid before BOC raised the rates, and what they can expect to pay now.
In any scenario, if you bought a $250,000 house and paid a 10% deposit, the mortgage you would need would be $231,975 (if you purchased a home for $250,000 and paid a 10% deposit, the deposit would be $25,000 and you would start with a mortgage of approximately $231,975 once the CMHC premium is added. If CMHC is not insuring the deal you would have a mortgage of $225,000). When Canadians were still living large with low interest, the average mortgage rate for a 5-year fixed rate and 25-year amortization was 2.3%. That works out to $1,016 a month in mortgage payments and at the end of five years, the remaining principal would be $195,542.
However, this is no longer the reality. Let’s look at what all those figures would be if the mortgage rate was 5%. The monthly mortgage payment would be $1,349 a month. That’s a huge increase in monthly payments — more than 30%. After five years, the balance would be $205,315. Meaning, with the rise in rates, almost $10,000 over the next five years will go to interest versus principal compared to the 2.3% rate scenario.
When you add in other expenses and debt repayment, averaging another $300 to $400 per month can be insurmountable to some families, especially if you are also trying to pay down other debt. If these numbers worry you, you may want to look at options to help you manage.
You could go straight to your bank and ask about the products they have on offer. But will the bank offer you products that are in your best interest? What about your credit history and current debt load? Will these stand up to the bank’s stringent lending guidelines? It may be time to consider talking to an independent financial professional who can show you a few different options. Perhaps tackling your debt, especially if it has itself become unmanageable, is the best first step.
Current home mortgage rates may continue to go up – economists predict a rise of 1.5 or even 2% by 2018. If you have concerns about your finances and how interest rates could impact your ability to purchase a home or pay down existing debt, call DebtCare right away to learn how we can help you choose the option that’s best for you.
We’re always here to help: 1 (888) 890-0888.
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More Regulations Needed for Payday Loan Companies
You see them on almost every street, in every strip mall, and all over the internet. You hear about them on the radio and see their commercials on television all the time. Payday loan companies are, despite the constant bad press, booming in Canada. While they claim to help those who think they have very few financial options, what they are actually doing is making that individual’s financial situation worse!Payday loans are dangerous – there is no doubt about it.
A payday loan is a short-term, high-interest loan that’s advertised as a convenient option to make up a financial shortfall between paycheques. However, what they don’t advertise is that, when you take out a payday loan, you usually end up getting more pain than you bargained for.
Various news outlets have continued to warn consumers about the dangers of payday loans and push for change within the industry, and the changes are starting to come.
According to the Toronto Star, back in January the Ontario government made moves to help consumers being preyed upon by payday lenders. New regulations “lowered the cost of a payday loan from $21 to $18 charged on a $100 loan.” However, as noted, “while an $18 fee on $100 of borrowed money may seem like a manageable sum, when annualized the interest rates these payday lenders are charging is 469 per cent.”
The city of Hamilton has also stepped up, becoming the first region in Ontario to regulate payday lenders in a major way. Now, payday loan companies in Hamilton are required to “pay a licensing fee, post the annualized interest rates they are charging (compared to the chartered bank’s rate of interest), and require staff at payday loan outlets to provide city-sanctioned information on credit counselling services.”
These are definitely steps in the right direction. Still, those fees and interest rates can quickly add up, making repayment very difficult.
If you’re one of the thousands of Canadians currently trying to figure out a way to climb out of a hole created by a continuous renewal of a payday loan, we can help. Stop struggling. We can sit down with you and work out a strategy to get those payday loans off the table and help you create a budget to better meet your monthly financial obligations.
At DebtCare, your financial success is our goal – and that means eliminating the need for and the issues caused by payday loans.
Get in touch with us today by calling 1 (888) 890-0888.
Source: Toronto Star, “Time for Ontario to ban predatory payday loan operators: Opinion,” https://www.thestar.com/opinion/commentary/2017/03/03/time-for-ontario-to-ban-predatory-payday-loan-operators-opinion.html.