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Author: mgoldenberg@debtcare.ca

  • Debt and Divorce: How to Handle Your Finances During a Divorce

    Debt and divorce. How to handle your finances during a divorce isn’t an easy task. Since approximately 38% of marriages end in divorce in Canada, it is no wonder that people want to know how to deal with their own debt and marital debt during divorce. This article will explain your options and comes from the office of a noted debt defense and bankruptcy lawyer in Philadelphia, PA.

    You Are Not Responsible for Your Spouse’s Debt

    Debt and divorceIf your spouse incurred individual debt before or during your marriage, you are not responsible for paying it. In other words, no creditor of your spouse can come after you for their debt.

     

    However, the court may reassign individual debt in the course of the divorce proceedings. For example, if one spouse incurred debt while supporting the other through education or training, the supported spouse may have to pay some of that debt.

     

    A problem arises if someone fails to pay debt per the court order. Then, a creditor will pursue the spouse whose name is on the lending contract. If this is you, it may be prudent to make the monthly minimum payments in order to maintain your good credit, while your lawyer assists you in getting compensation and forcing your ex to pay.

    You and Your Spouse are Jointly and Severally Liable for Marital Debt

    If you incurred debt jointly, you are each responsible for paying the whole amount. While this might not seem fair, creditors may pursue one or the other of you, or both of you, until the debt is paid.

     

    Here is where it can get sticky. The court may order one or the other to pay the joint debt, but if that person fails to pay, the creditor can pursue the other for payment. Look into refinancing joint debt in the name of the person who has accepted responsibility for paying the debt or the person who was ordered by the court to pay. This avoids problems for the other spouse in the future.

     

    For example, the marital home is commonly mortgaged jointly. If one or the other intends to remain in the home, it may be prudent to refinance the home in that person’s name.

    If Possible, Agree on How to Manage Joint Debt Before Divorce

    You both should pull your credit reports from Equifax and TransUnion and, if possible, discuss what debt appears on each. If the divorce is not amicable and you are unable to reach a preliminary agreement about your debt, know that eventually it will be settled but by the court, but in the meantime, things will get messy.

     

    You can take steps to protect yourself financially, such as removing your spouse’s name as an authorized user on any credit accounts, freezing joint accounts, and opening an individual account to deposit your income and pay your expenses.

    What if My Ex Files Bankruptcy?

    Unfortunately, it is common for one or both divorcing spouses to file bankruptcy due to the financial burden of establishing and maintaining two households on the same amount of income used to maintain their single marital household.

     

    If your former spouse files bankruptcy, they will be discharged of most unsecured debt, including any joint credit cards or personal loans, and maybe discharged of secured debt such as a mortgage or a car loan if they surrender the collateral in their bankruptcy case.

     

    What does this mean for you? If your spouse is discharged of any joint debt, the creditor will pursue you for payment even if the court ordered your ex to pay it in your divorce proceedings. Your only recourse at that point is to seek an order from the court for reimbursement for having to ultimately pay that debt.

     

    If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. Contact us, for a free consultation, by calling us on 1-888-890-0888 or visiting www.debtcare.ca.

     

    About the Author

    Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy foreclosure and bankruptcy lawyer in Philadelphia, PA, U.S.A.

  • Debt Consolidation 101 – Dealing with CRA Collection Action

    Have you recently received a phone call or a letter from the CRA regarding your existing debt?

    That’s because, as of September 2020, the CRA has resumed its debt collection activities. The CRA has confirmed that it is reconnecting with taxpayers to re-evaluate their respective financial situations and discuss debt repayment options.

    The CRA has also started requesting voluntary repayment of CERB from individuals who have received it but did not meet the eligibility criteria.

    While no legal actions are being taken (at this point), it is good to know about what actions can the CRA take and what options do you have.

    What Happens if You’re Unable to Pay?

    If you have received a notice from the CRA and are unable to repay the debt, CRA is authorized to take certain actions that can have serious financial and/or legal consequences for you.

    As these are unprecedented times and many Canadians are facing financial distress, the CRA has temporarily stopped legal actions.

    For when legal actions do resume, the CRA normally will not take legal action until 90 days after mailing you the notice of assessment or reassessment.

    If you do not make timely payments or agree on a repayment arrangement, the following actions can be taken:

    I. Wage Garnishment

    Wage garnishment is done when tax debt goes unpaid. The CRA uses your federal income, GST/HST credits, and/or income tax refunds to obtain the payments.

    II. Asset Liens

    It is also possible for the CRA to obtain a writ or memorial to seize and sell the assets you own. These include your properties, your vehicles, and other assets.

    III. Third-Party Assessments

    In addition to garnishing wages and seizing assets, the CRA can hold a third party legally responsible to pay your tax debt. These include your spouse, business partner, or even a financial institution.

    Should You Look into Debt Consolidation?

    So, if you’re not able to make the payment and want to avoid further action from the CRA, is debt consolidation a good option?

    To answer this question, let’s define debt consolidation.

    Debt consolidation is when you obtain a new loan or sign-up for a program that helps ‘consolidate’ a number of smaller loans, debts, and/or bills into one, single monthly payment.

    There are a number of options you can look at depending on your situation. For instance, if you have equity in your home, you can obtain a second mortgage. This option offers low interest rates and preserves your credit.

    Obtaining a second mortgage, by leveraging your home equity, is a very practical solution that many homeowners in Canada opt for.

    Though, if a loan is not an option and you have multiple debt payments, you can look into a plan like a Consumer Proposal which can help you consolidate debt payments into one affordable monthly payment and ensure you are debt-free within 5 years.

    At DebtCare, we have created a debt repayment calculator that can help you quickly and easily estimate how you can be out of debt in five years or less!

    The Way Forward

    So, with so many debt consolidation options, which one is right for you? Financial consultants, like DebtCare Canada, can help you analyze all of your options, discuss various strategies for repayment, and bring together the resources you need to resolve your debt issues.

    Remember, when it comes to CRA debt, it is always good to have a proactive rather than a reactive approach.

    Contact us, for a free consultation, by calling us on 1-888-890-0888 or visiting www.debtcare.ca.

  • CERB Ineligibility and Repayment – Actions CRA Can Take in 2021

    If you have received a letter from the CRA regarding Canada Emergency Response Benefit (CERB) ineligibility – you’re not the only one.

    Many Canadians have received letters regarding repayment of CERB for one of the following reasons:

    • Collected CERB payments from both Service Canada and the CRA.
    • Did not meet the minimum income requirement.

    According to CTV News, 441,000 ‘educational’ letters were sent to Canadians by mid-December.

    So, if you have received a letter that states that you may not be eligible, it may be because the CRA has been unable to confirm your eligibility, possibly because you have not filed your taxes in 2019.

    If that’s not the case and you have filed your taxes, you might have to pay the benefit back.

    CERB Repayment and Eligibility

    The reason why there has been some confusion about eligibility is because of what is and what is not considered as ‘income’. For instance, the minimum employment or self-employment income required to be eligible for CERB ($5,000) is net income and not gross income.

    Additionally, the following sources of income are not considered as employment or self-employment income when it comes to CERB:

    • Pension income;
    • Student loans;
    • Employment Insurance payments;
    • Disability benefits;
    • Family support and social assistance payments;
    • Other benefits such as Canada Child Benefit (CCB);
    • And investment Income.

    So, if this criterion is not met, CRA is encouraging individuals to return the benefit they have claimed.

    The process for returning CERB is quite straightforward. If you applied for and received the CERB from the CRA and Service Canada, you can view step-by-step guidelines for repayment here.

    As of mid-December, according to Narcity, the CRA has received almost 1 million returns.

    What Action Can CRA Take?

    If you are unable to repay the benefit, the CRA requires you to contact them and make a payment arrangement.

    While CRA has taken a more relaxed approach to CERB repayments last year and informed individuals to repay the amount voluntarily, if the payments are not made, the CRA may take a tougher approach.

    While a stronger collection action has not been indicated at this point, once this amount gets added to your overall debt with the CRA, it can lead to the agency withholding benefits and credits, imposing penalties, as well as taking other legal actions.

    What Are Your Options? 

    So, when it comes to CERB repayment, you have the following options available to you:

    • Full repayment of the benefit.
    • Making repayment arrangements with the CRA.
    • If you’re unable to make payments and are dealing with additional debt, you can look into filing for bankruptcy or a consumer proposal. This is where a debt consolidation partner can help alleviate your debt burden.

    At DebtCare Canada, we are committed to helping you manage your debt and put strategies in place to become debt-free.

    If you are worried about CERB repayment or would like advice about debt management, you can contact us for a free consultation and an independent review of your financial situation.

    Reach out to us today at 1-888-890-0888 or visit www.debtcare.ca.

  • Credit Advice for the New Year: How to Get Out of Debt in 2021?

    Happy New Year!

    A new year is a new start. If you’ve faced some financial challenges last year, now is a good time to take some steps to rebuild your credit score and manage your debt.

    A series of small changes are all you need to bring your credit back on track! Here are some suggested actions you can take:

    1. Get an updated credit report to get a better understanding of your current financial standing.
    2. Create a budget for your expenses and ensure that you’re keeping a close track of your expenditures. This will help you trim down unnecessary spending and identify opportunities for savings.
    3. Always make more than the minimum monthly payments on your credit cards.
    4. In case you have multiple credit cards, try to keep your cards at only 50% of their credit limits or try to pay off and cancel some of these cards.
    5. Settle collection debts and send credit reporting agencies proof of any major developments like paying off a major account or a settlement to ensure that your report is up-to-date.
    6. Lastly, try to avoid taking on additional debt.

    The key to improving your credit score is keeping a close eye on your overall debt and ensuring that you’re paying down each creditor one by one.

    However, if your debt is unmanageable and you’re not able to make these payments, you don’t have to be stressed out. There are other alternatives that you can consider. For instance:

    • If you have equity in your home, you can leverage it to deal with your debt. As interest rates are quite low at the moment, it is worth considering refinancing options.
    • You can also look into a second mortgage. These mortgages are provided on the basis of equity and not your credit and income. So, if your credit is bruised or you are self-employed, this may be a good option for you.
    • Even if there isn’t enough equity to refinance, you can always rely on government-approved debt settlement programs, such as a consumer proposal. It is a proposal made to your creditors, where your creditors agree to accept a single payment representing a percentage of your overall debt, that you repay monthly, normally over a term of 5 years.

    No matter what your financial situation is, you can count on us for credit advice and debt consolidation solutions. Contact us today for a free consultation and start your journey to becoming debt-free! Call or text 1-888-890-0888 or visit www.debtcare.ca.

  • Happy Holidays from DebtCare Canada!

    Happy Holidays from all of us at DebtCare Canada!

    2020 has been a difficult year for most of us. It has taught us that it is important to surround ourselves with our loved ones and focus on things that really matter – like our physical and mental well-being.

    As the year draws to a close, we reinforce our commitment to helping and supporting those around us.

    We hope you enjoy this well-deserved break and holiday festivities with your family and friends.

    See you in 2021!

  • Restaurant Industry Hit Hard By COVID-19 – Financing Options for Restaurant Owners

    COVID-19 has severely impacted the hospitality and restaurant industries – with smaller, more entrepreneurial ventures being hit the hardest.

    A report released by Dalhousie University shares that tnhe Canadian hospitality industry could lose up to $20 billion in revenue next year.

    This is because, in addition to a global pandemic, people’s habits have changed too. Many Canadians are working from home and making food at home – this has reduced restaurant visits and deliveries.

    As a restaurant owner, you’re probably relying heavily on deliveries and online ordering at this point. Even though most Canadian provinces are now in later stages of reopening, if your restaurant is open, you might still not be operating at maximum capacity to meet the physical distancing guidelines.

    Winter also adds another layer of complexity to your operations.

    When it comes to financing for your restaurant, you may have managed to keep things going through savings or additional loans. For instance, many small businesses have received the $40,000 interest-free small business loan from the government which has to be repaid on or before December 31, 2022.

    If you’re still struggling to stay in business, trying to think of what you can do to survive, or are worried about restaurant equipment financing – financial restructuring may be the answer.

    Decreasing debt payments and reducing the overall debt and interest are some things you can take into consideration to find relief. As creditors are a lot more flexible, when it comes to negotiations, then they were Pre-COVID-19, this is a good time to consider debt management options.

    Though, if the situation is difficult at the moment or you don’t see the demand for your food business recovering, you might be thinking of closing down your business.

    If that’s the case, financial restructuring is an even bigger consideration because you will need to find ways to protect your assets, gauge which debts in the business carry personal liability, and create a plan to deal with the debts of today and tomorrow.

    Should you just opt for bankruptcy?

    Bankruptcy may not be a very easy way out. It can be expensive and can have personal implications if the debt carries director’s liability – such as unpaid source deductions and GST/HST liabilities.

    Another issue with bankruptcies is that the trustee involved does not represent you. They are impartial court appointed officers, who have to look out for both your and your creditors’ interests. While you can call them for help, they do not actually represent you.

    This is where debt consultants, like DebtCare, come in.

    We represent you. We look at your business’s financial information and come up with scenarios to help you assess the impact of different forms of financial restructuring on your business.

    While working with a debt consultant, you are free to ask questions and these won’t impact your case – unlike with a trustee who will add your answers to the record. Once information is shared, you can’t retract it.

    There are options other than insolvency and there is support for you.

    If you are stressed about the financing for your restaurant, you can reach out to us for a free consultation and guidance. Call us on 1-888-890-0888 or visit www.debtcare.ca.

  • Should I Refinance My Mortgage in Response to the Low Interest Rates?

    You may be thinking of refinancing your mortgage given that the interest rates are unprecedentedly low.

    Refinancing your mortgage can help you preserve your credit score by using the equity in your home to consolidate high interest debt.

    This is often a great option because not only can you reduce interest, you can also reduce your overall monthly payments.

    Here’s a list of pros and cons that will help determine if mortgage refinancing is the right option for you!

    Should I refinance my mortgage? How exactly should I go about refinancing? Would the changes in mortgage regulations impact me?

    These are questions that a lot of people, who are considering refinancing, are wondering about. The answer is actually not that complicated – it simply means that you have to reach outside of the CMHC lender pool.

    Recently, CMHC changed its underwriting policies for new applications for insured mortgages.

    Though, the rules haven’t changed for refinancing, reaching outside the CMHC lender pool can provide you better refinancing options.

    Basically, CMHC is a high ratio insurance that banks are required to have on high ratio mortgages. High ratio mortgages are those where mortgage financing above 75% of the value of your property is required.

    The good news is that there are many lenders who extend mortgage financing to you and don’t require CMHC insurance. In fact, they can extend the financing for 80% of your home’s value (or even higher if you have good credit).

    There are quite a few trust companies, mortgage investment companies, credit unions, finance companies, private lenders, and even insurance companies that offer mortgage refinancing options.

    The prevalence of these lenders may not be that obvious to you because many don’t deal directly with the public and exclusively lend through brokers.

    Each broker has a market of consumers that they cater to and lenders who they work with to provide specialized financial products. For example, if the goal is to purchase a home, a broker who specializes in purchase mortgages is advantageous. Similarly, a broker who specializes in debt consolidation and restructuring is the right choice for someone who wants to consolidate debt.

    The trick is choosing the right broker to help you manage your financial restructuring.

    You’d be surprised to see how many different types of mortgages and refinancing options are available on the market (for people with all types of credit and income) – many of which don’t require CMHC.

    At DebtCare, we specialize in helping people with financial problems. We have an extensive network of higher risk lenders, who can help you save your home, when banks may not be able to.

    In addition to mortgage refinancing, we can help present you all other options you have to ensure that you can effectively manage your debt. If you’re looking into refinancing options or want to speak to a debt consultant, contact us today for a free consultation. Call 1-888-890-0888 or visit www.debtcare.ca

  • Debt Management Plan – Restructure Finances as You Prepare to Change Careers

    If you’re thinking of switching careers … you’re not alone.

    A survey commissioned by Amazon, and published on the CNN website, shares that 61% of job seekers surveyed are looking for a job in a new industry because of the pandemic.

    COVID-19 has given us an introspection opportunity. It has given us time to review our career choices and examine if there is something better out there.

    While some people are questioning if they were even on the right career path, to begin with, others are looking into continuing their education.

    What has changed?

    The way we work has changed too. For instance, work from home policies were previously being implemented by only a handful of companies. Now, companies are beginning to see that work from home can indeed be implemented even in a Post-COVID-19 world.

    HR professionals are championing it because it has improved work-life balance, many employees are happy that they don’t have to commute long distances, and companies are realizing that they may not need huge office spaces after all!

    Similarly, when it comes to industries, some are doing better than others. For instance, healthcare, essential retail, and information technology firms continue to hire despite a global pandemic.

    Though, many jobs in retail, hospitality, travel, manufacturing, and tourism have disappeared.

    Why is it important to restructure your finances?

    If you’re considering a career transition or perhaps even going back to school, it is important to have a financial plan in place.

    Following your dreams and taking a leap of faith can be difficult if you have debt and financial concerns bothering you.

    This is particularly true if you’ve lost your job and already have debt to pay off. If your bills keep accumulating and you’re not able to pay them off, this can impact your credit score.

    So, when opting to start a new career, reviewing and restructuring your finances and debt can help you gain peace of mind. Your debt management plan should include:

    • A detailed budget.
    • A plan to avoid taking on more unnecessary debt, such as charging expenses to your credit card.
    • Consolidating debt payments and paying off high-interest debt.

    You can also use our online debt repayment calculator, to easily calculate how you can be out of debt within five years!

    How can we help?

    Getting your finances in order can be challenging particularly when you have to focus on a career transition.

    This is where credit advice from a financial consultant can help.

    Working with a financial consultant, like DebtCare, can help you come up with a plan to reduce debt; enabling you to have a fresh financial start to match your new career trajectory.

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

  • Now is the Time to File a Consumer Proposal – How Our Client Reduced $100,000+ Debt to $12,000

    In today’s uncertain environment, creditors are more flexible than ever.

    If you’re facing financial distress, now is the time to consider filing a consumer proposal and making an offer to your creditors to settle your debts for less than what you owe.

    In most cases, you can even keep your home and ensure that your assets remain untouched!

    Client Success Story – Reducing $100,000+ Debt to $12,000

    If you’re wondering if this works, we are sharing a client success story to show you what is possible.

    One of our clients, from Vancouver, is a self-employed professional who owed money to CRA after being reassessed.

    His total debt was over $100,000. After an evaluation, it was ascertained that he owed $65,000 to the CRA in personal income tax and GST and had credit card debt exceeding $44,000.

    With COVID-19 disrupting his earnings, he was relying on the CERB payments being made to him.

    As there was no home equity to pay off debts, he was wondering if he should just opt for a $1,800 bankruptcy to start over.

    We worked with him to help him evaluate all his options and developed a proposal.

    Taking advantage of the current climate, we helped him reduce his debt to $12,000. He is now able to pay this debt back within 5 years at 0% interest!

    Will a Consumer Proposal Pay Off Debt?

    So yes, a consumer proposal can help you pay off your debt. It can also stop any collection action and protect your assets.

    Though it does impact your credit rating temporarily, two years after your proposal is paid in full, your credit score can bounce back if you’re taking steps to ensure that you’re making timely payments.

    It is important to note that a consumer proposal is only available for unsecured, non-mortgage debts between $8,000 to $250,000. If you are carrying more debt than that, you may have to consider another type of proposal or file for bankruptcy. You can learn more about the differences between consumer proposals and bankruptcies here.

    Deciding what works for you, depends on your circumstances. The answer is based on some of these questions:

    • How much total debt do you have?
    • How much unsecured debt are you carrying?
    • What’s the worth of your assets?
    • Are you able to repay a portion of your debt?

    At DebtCare, we will help you answer these questions and help you develop an action plan to reduce and ultimately eliminate your debt.

    Contact us today for a free consultation and an independent review of your financial situation. Call us on 1-888-890-0888 or visit www.debtcare.ca.

  • Canadian Tax Consultants: Do You Have a Debt Relief Partner to Support Your Tax Clients Who are in Trouble?

    It is not uncommon to find out that your client is facing financial troubles – particularly during the time of a global pandemic.

    In fact, many independent professionals and tax specialists including personal tax accountants, tax preparers, bookkeepers, financial advisors, lawyers, and estate planners are amongst the first to learn that their client is facing financial turmoil.

    It can be a challenging situation when you are preparing a client’s books and your client reveals that they have a huge debt and no means to pay it off.

    Or, when your client is being audited and you know that the outcome will not be favourable.

    Where the CRA collections team is involved, the situation can get trickier. The CRA is relentless and when your client tries to manage their problem on their own – it can make matters worse.

    For instance, the CRA will look for financial disclosure that may lead your client to disclose where they work as well as their bank and asset details. Perhaps the CRA accepts a temporary arrangement – but the moment it is up, they can move forward with wage garnishments, freezing of bank accounts, and liens on the property.

    Today, an average Canadian owes $1.58 per dollar of disposable income.

    This debt is likely to increase when mortgage deferrals end, the government’s relief measures are withdrawn, and the CRA’s collection action resumes.

    This is the calm before a massive storm – would you agree?

    This is why it is great to have a partner in your corner who can independently represent your client and work with them to resolve their financial challenges.

    By providing your clients access to debt consolidation programs and opportunities for debt reduction, you are not only helping them navigate their financial challenges but are also strengthening your long-term relationships.

    This same level of service may not be received if you send your client to a trustee, this is because they offer insolvency as their service and your client will be counselled on that basis.

    Similarly, if you send your client to a bad credit lender who only offers high-interest products or a mortgage broker who only arranges mortgages, your client will only receive advice in those specific areas.

    At DebtCare, we provide access to many financial options and debt consolidation programs. We take on a consultatory role where the client pays for our consultation and after working with their financial profile, we guide them down the best path.

    This includes aligning all professionals that will be needed. Whether it is securing financing from a lender or working with a trustee to facilitate a consumer proposal, we can help.

    To learn more about our services for Canadian tax consultants, call or text us on 1-888-890-0888 or visit www.debtcare.ca.