debtcare.ca

Author: mgoldenberg@debtcare.ca

  • The Only Ways to Stop a Wage Garnishment without Going to Court

    debtcare1A wage garnishment put in place to repay a creditor can be a terrible thing to deal with. The knowledge that a significant portion of your income is being taken from you before you even see it, money that would usually go towards paying for things you need, can be hard to swallow, and it can be tough to know where to turn for help.

    This blog deals with wage garnishments – those put in place to deal with civil debts such as credit cards, or loans, as well as tax debts. It does not apply to Family Responsibility debts and some unique types of debt. If you want to know more about how to get rid of a wage garnishment put in place to deal with the former, here is where you need to be.

    The easiest way to stop a wage garnishment, obviously, is to pay the debt. Sure, this may seem like a very simple solution, but if you can’t pay the debt, in full, it is a simple solution that really doesn’t help you. Don’t worry, all is not lost.

    Two additional ways that you can immediately stop a wage garnishment include a consumer proposal and bankruptcy.

    In a consumer proposal, you propose an amount that you are prepared to repay your creditor with a repayment term of usually 5 years. The moment the proposal is filed by a trustee, the garnishment stops. Once your creditors accept your proposal you begin repaying. A consumer proposal can be paid in full at any time. A consumer proposal also stops interest and can even reduce the amount of debt you owe.

    In a bankruptcy, a trustee, based on an income calculation, will determine if you have to pay into bankruptcy for 9 or 21 months. During this time you will make a monthly payment to the trustee for the term of the bankruptcy and that payment is based on your income. Generally higher income earners opt for consumer proposals because bankruptcy payments end up being higher. Once you complete your obligation to the trustee you become discharged from bankruptcy. The moment a bankruptcy is filed the wage garnishment stops, interest stops and your overall debt can even be reduced.

    It is important to note that, in either scenario, you will need the services of a licensed trustee in bankruptcy; but you do not want to go to the trustee directly because they represent your creditors and you may not get the best deal. A debt counsellor can help you prepare your information and structure relevant information so that the trustee makes an arrangement that is fair for both you and the creditors.

    Want to stop a wage garnishment or learn more about how a consumer proposal or bankruptcy can help you clear those debts?

    Call DebtCare Canada today at 1-888-890-0888.

     

  • 2016 Tax Penalties and Interest for Small Business Owners

     

    debt22The tax deadline for businesses has officially come and gone, and many business owners have dealt with the stress and can now relax for another year. However, if you are one those who’ve yet to file, for a variety of reasons, and know that you will owe money, you can expect to find tax penalties and interest applied when you do finally get around to filing.

    What are those penalties? Here is a breakdown of what you can expect as far as the Canada Revenue Agency’s tax penalties and interest, applied retroactively, to a tax debt.

    Interest. If you owe money after filing your 2015 taxes, compound daily interest is charged, retroactively from May 1, 2016, on any unpaid amounts owing. In addition, the CRA will charge you interest on the penalties for filing late (discussed below).

    It is important to note that, if you owe for previous tax years, compound daily interest will continue to be charged on those amounts as well. Any payments you make are first applied to amounts owing from previous years, to pay off the oldest debt first.

    Penalties. If you have not filed yet, and will owe for 2015, you can also expect a late-filing penalty. That penalty is 5% of your 2015 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

    Additionally, if you were charged a late-filing penalty on your return for 2012, 2013, or 2014 your late-filing penalty for 2015 could be as high as 10% of your 2015 balance, plus 2% of your 2015 balance owing for each full month your return is late, to a maximum of 20 months.

    Failure to Report Income Penalties. If you fail to file taxes, at all, or leave out income, it is considered a failure to report income. If you failed to report an amount on your return for 2015 and you also failed to report an amount on your return for 2012, 2013, or 2014, you may have to pay a federal and provincial/territorial repeated failure to report income penalty. If it is discovered that you did not report an amount of income of $500 or more for a tax year, it will be considered a failure to report income and you could face penalties equal to the lesser of:

    • 10% of the amount you failed to report on your return for 2015; 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.

    If you haven’t filed your taxes yet, mainly because you know that there will be a balance owing once you do, remember: it is not illegal to owe the CRA, but it is illegal not to file. There are solutions available to you, including federal government programs that can stop the tax man, stop collections, stop penalties and interest and even reduce your principal tax debt. You just need someone to help you understand how they work.

    For more about dealing with tax penalties and interest, or to get rid of that tax debt, please call DebtCare today at 1-888-890-0888.

     

  • Is Refinancing a First Mortgage the Best Choice?

    debt2When you are looking to refinance your home to pay off debts or to cover a big ticket purchase, you have many options. You can head to the bank for a personal loan or line of credit, can turn to your credit cards, or can think about using your home to finance. Today we cover the latter – refinancing a first mortgage – and whether it is the best choice.

    Refinancing your first mortgage can be a great way to pay off debt or obtain financing for a number of different projects, be it home renovations or your child’s education. Sometimes, however, it isn’t the best way.

    First things first – look at the amount you want to finance. If it is not that much ($30,000 or less is a good starting point), then it may not make sense to blend that debt into a first mortgage that is likely amortized over 20-25 years. That small amount will eventually mean a pile of interest when stretched over such a significant period of time.

    Additionally, before refinancing a first mortgage you should also look at the mortgage terms. For example, is it closed, or open with penalties? What are the penalties? What about closing costs – will these be significant if you refinance?

    You should factor all of the above as contributing costs to your borrowing more money. In the end, perhaps the cost to borrow is not too bad, in which case it might make sense to refinance. However, for such a small amount, that cost to borrow will usually end up being higher than you anticipated, and thus refinancing a first mortgage may not be the best bet.

    So, what other options exist as far as using your home? A second mortgage can make great sense because it doesn’t touch your first – there are no costs to refinance here. Also, usually closing costs on a second mortgage are lower. Although interest on a second mortgage may be higher, structuring it like a loan with a shorter amortization period means you’ll actually pay less interest in the long run.

    When it comes to paying off debt or financing big ticket items, your home is a valuable asset to take advantage of, especially if you have significant equity. Often a second mortgage makes sense, and when structured correctly, it can actually save you money.

    To find out more about refinancing a first mortgage or a second, please contact DebtCare today. We’ve got you covered: 1-888-890-0888.

     

  • Beware of Toronto Debt Consultants – What You Need to Know

    debt3Toronto debt consultants are great because they can help you get out of debt and get in between you and the trustees and banks to help you negotiate the best deal when financially restructuring. What is important to note, however, is that there are different types of debt consultants – and not all are created equal.

    As with any industry, you have to take care when vetting a service provider. Here is a checklist of things you can do to ensure that you are dealing with the right debt consultant.

    Start by questioning how you know about them? Did you see an advertisement for their services on a telephone pole, promising services for low rates and a really quick turnaround? It may be best to rethink that particular company as your ‘go-to’ solution.

    Google them. Do they come up? A reliable debt consultant will have a webpage that should come up on Google. If you can’t find anything, this is probably a good indication that their services are not up to par with some of their competitors.

    Look at their website. Does it look homemade or does it look as though they’ve spent time and resources building an attractive, engaging medium for customers to get a feel for their business?

    Look for reviews. Do they have any? Online reviews have become one of the best ways for customers to scope out potential service providers, so make use of them. A company that allows reviews to be posted offers transparency – they are not trying to hide anything.

    Check social media. How many followers does the company have? A well-respected, long-standing company will have well established social networks that boast a good following. This also suggests the company provides value over social media, something to take advantage of.

    Do they have an office you can go to? The ability to stop by and speak directly with your consultant is a great way to gain a better understanding and create a relationship built on trust.

    Most important: if they ask for money up front – run!! A reputable company should be able to recommend a service, solution and price before asking you for a deposit. Any company that requires full payment up front is likely scamming, so be very careful.

    There are many reliable Toronto debt consultants out there, but unfortunately there are also some less than savory ones too. It is the latter group that you need to watch out for, so use these indicators to better investigate those companies you hope will meet your financial needs.

    At DebtCare, we pride ourselves on being experienced and respected in the industry.

    Call us today to find out more about how we can help you. 1-888-890-0888.

     

  • Back to Basics: Collection Agency Harassment and Your Rights

    debt1When you have debts that you are unable to pay, your creditors will not just sit back and wait for you to find the money. Creditors have resources available to them to retrieve what is owed, and most will take advantage of them within a very short period of time. The most common is a collection agency – a company that intervenes on your creditor’s behalf to recover money owed. Unfortunately, even though these agencies are regulated, collection agency harassment is quite common.

    Here are some things you may not know:

    • As soon as your account goes to a collection agency, you must be notified in writing.
    • Once you receive this letter, if possible, pay the amount that you owe.
    • If you are unable to pay it all at once, contact the agency and explain – don’t just hope the issue will go away on its own.
    • If you reach an agreement with the agency, get it in writing.
    • Never send cash. Make sure that you obtain a receipt for your payment from the agency.

    This is often an oversimplification of the entire process, and since collection agencies are aggressive, their tactics to get you to pay are often intimidating and stress-inducing.

    That being said, you have rights. Knowing them is important.

    Each province has its own set of regulations pertaining to collection agencies. You can visit the Office of Consumer Affairs to find out more about your own province here: https://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/h_ca02149.html.  These regulations are put in place to protect you – and any breach is a violation of these regulations.

    In Ontario, for example, a collection agency can’t:

    • contact you on a Sunday, except between 1 pm and 5 pm
    • contact you on any other day of the week between 9 pm and 7 am
    • contact you on a holiday
    • use threatening, profane, intimidating or coercive language
    • use undue, excessive or unreasonable pressure or harass you
    • charge you any fees

    If you feel as though a collection agency is not adhering to these rules, you have the right to defend yourself and speak out.

    If you’re drowning in debt, dealing with collection calls that, although adhering to the regulations, are causing you to lose sleep at night, and you don’t know where to turn, it might be time to seek out some help.

    Did you know DebtCare offers a credit repair program?

    We can help stop the collection calls and get your debt cleared up. Call us today to find out about your options: 1-888-890-0888.

     

  • HST Input Tax Credit Alert: If You’re Behind Filing, 4 Years is Your Limit

    debt11If you own your own business, you know that your HST input tax credit can be a valuable resource financially. As a GST/HST registrant, the ability to recover the GST/HST you paid or owe on purchases and expenses related to your commercial activities by claiming input tax credits can be a big help, especially when you owe a tax debt.

    That being said, many business owners fall behind filing their HST returns for a variety of reasons, most often disorganization, lost receipts, or even the knowledge that a debt will be owed and the funds to pay are unavailable.

    What most business owners are unaware of, however, is that after 4 years you can’t claim input tax credits. Since these can reduce your overall tax debt, it is important to file within this limited timeframe to reap the benefits of this resource.

    As mentioned, one of the most common reasons individuals hold off claiming the HST input tax credit is because they know they will have to pay. If you are in this position, and are worried that even if you take into account input tax credits, you still can’t pay, then you have to look at the other options available for payment.

    Why not just leave it unfiled? Well, HST is trust money so the Canada Revenue Agency is that much more aggressive when it comes to collecting. They will want to be paid in full right away, or over a very short term.

    What you can do:

    Do you have the ability to pay in full, or over a 6-month term? If so, then you don’t have a problem. Negotiate a payment plan and wipe the debt clean.

    Do you own a home with equity? If so, perhaps using that equity to refinance and get a mortgage to pay the tax debt makes the most sense. A second mortgage, structured more like a loan than a mortgage with an amortization period of 20-25 years, can mean a small monthly payment that settles the debt and gets the CRA off your back.

    However, if the answer to these questions is no, you may want to talk to a financial counsellor about government programs that you can leverage to protect yourself from CRA enforcement while they negotiate a payment arrangement you can afford.

    At DebtCare, we have the knowledge and experience that makes settling that debt simple.

    Want to discuss all of your options? Call us today at 1-888-890-0888.

     

  • Get Out of Debt: Structure Your Second Mortgage as a Loan

    debt2When you’re struggling to meet your monthly payments and constantly stressing over those credit card bills, it may be difficult to move outside of that bubble and remember that, if you’re a homeowner with equity, you have a very valuable resource just sitting there. Many homeowners don’t realize that their homes are one of the least expensive ways out of debt. That is, depending on how you structure your loan.

    First mortgage refinancing to get out of debt: many people make the mistake of refinancing a first mortgage just to pay a small amount of debt. Since refinancing can mean fees and penalties, or an amortization period that takes you 20-25 years into the future, this isn’t exactly the most financially sound option.

    Using a home with significant equity can be a really smart way to get out of debt – and it doesn’t need to take you out of your financial comfort zone or take 20 years to pay off.

    You can actually structure a second mortgage as a loan and it can stand alone from your first mortgage – second mortgages have slightly higher rates but in the end you can end up paying less depending on how you structure your loan.

    For example, if you borrow $20,000 at 12% interest, your monthly payment based on a 5 year-amortization is less than $450 per month and the debt is completely paid off within 5 years! This means that you roll all of those smaller debts (with sky high interest rates) into one monthly payment, getting rid of all of the additional interest – and stress!

    However, where you can end up paying through the nose is when you structure that second mortgage and amortize your payments over 20-25 years. Here you are paying that same rate of interest for a much longer period of time – so although monthly payments are smaller, the end result is a much larger balance due to accumulated interest.

    When it comes to solutions to help you get out of debt, your home is a valuable asset – why not take advantage of it? Get rid of the credit card debt with a second mortgage – one monthly payment and far less interest. It just makes sense.

    If you don’t own your home, or don’t have much equity, obviously this isn’t really an option. That doesn’t mean solutions don’t exist. If you want to know what they are, we can help with that too.

    For more about how to use your home to get out of debt, or for other debt solutions, call DebtCare today. We can help: 1-888-890-0888.

     

  • In the News: Google to Ban Payday Loan Advertising

    debt2We’ve all heard the ads on the radio and seen the signs. Get money, fast, without a credit check. Payday loan companies are all over the place and people often see them as a quick fix for financial troubles – but buyer beware – payday loans are hazardous. They are probably one of the highest interest credit products out there!

    Not only are they problematic because of high interest rates, they can become incredibly difficult to pay off. If you can’t pay off the loan with your next paycheque, the situation can quickly snowball, leading to fees which quickly surpass the initial amount of the loan.

    Payday loans have become so troublesome that even Google is taking a stand, and a recent Global News report explains why: http://globalnews.ca/news/2697070/google-is-banning-payday-loan-ads/.

    According to the article, Google is making a move that “could have as much or even more impact on curtailing the industry than any move by politicians, as many payday loans start with a desperate person searching online for ways to make ends meet or cover an emergency.” Since most of a payday loan company’s business comes from online searches, that business may just decline a significant amount!

    As the search engine has done with several other categories, including counterfeit goods, hate speech, and tobacco products, effective July 13, Google will be banning all ads for loans due within 60 days and will also ban ads for loans with interest rates 36% or higher.

    If you currently have or have had payday loans and are reading this, then you probably agree that this is a step in the right direction! By not giving payday loan companies the chance to prey on the vulnerable, Google is doing their part to protect your financial future.

    If you are already in over your head with payday loans, DebtCare has solutions, no matter your situation.

    Stop stressing and regain control. Call us today at 1-888-890-0888.

     

  • Property Lien Alert: What You Need to Know if You’re a Homeowner and Owe CRA

    debt2If you filed your taxes on time in April, you’ve probably received your assessment. If you’re in the clear, or received a refund, great! However, if you owe the Canada Revenue Agency (CRA) and own your home, you need to be beware – a property lien may just be headed your way.

    A CRA property lien is a common type of enforcement action used to assist in the collection of a debt, just like a wage garnishment or a frozen bank account. The CRA can place a lien on your home at any time if a tax debt is not paid. Once the lien is in place, time is not on your side.

    How does the CRA find out you own your home?

    • Often you’ve told them! If, at any point, you called the CRA and attempted to reach a realistic settlement, you likely shared information about where you live, work, even where you bank. This is how most enforcement action commences – thanks to these phone calls.
    • An agent runs a property title search. The CRA has access to software which they can use to run a search with just your name or a suspected address and find out if you own the property. Using this method, it is even possible to determine roughly how much you owe on your mortgage and accordingly to determine your equity position.

    If you owe the CRA and can’t repay the full amount, as long as there isn’t a lien on your home, the CRA remains an unsecured creditor and you have several options.

    If you own your home, you can first explore mortgage options. If you have significant equity, great, a second mortgage might be the answer. However, if you owe the CRA far more than the equity you have in your home a consumer proposal may be a better option.

    In a consumer proposal, you offer the CRA a proposed sum that will be repaid over a term of 4-5 years. Interest is frozen and enforcement action such as wage garnishments and frozen bank accounts stop.

    However, if the CRA places a lien on your home your options become far more limited. Now the CRA is a secured creditor, and once this happens they have more protection in a consumer proposal or bankruptcy and become far harder to negotiate with.

    If you own a home, and owe the CRA consult a financial professional as soon as possible about your options. At DebtCare, we can look at your entire financial portfolio, give you options and even negotiate the option you choose to protect you and get you the best deal.

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

     

     

  • Consumer Proposal Vs. Second Mortgage – Which Makes More Sense

    debtcare2Clients often come to us seeking viable debt solutions, but are unsure what those debt solutions are. Most people are aware of some of the options available, but not all, and are sometimes surprised to learnthat accessing the equity in their homes through a second mortgage is a great way to get out of debt. Once they’ve learned this, their next question is which option makes the most sense – a consumer proposal or second mortgage financing?

    Let’s compare the two.

    Consumer proposal

    • Pros: Consolidates debt into one monthly payment
    • Sometimes reduces debt
    • Stops interest
    • Stops collection action
    • Cons: Credit is bruised for a short period

    Second Mortgage

    • Pros: Consolidates debt into one monthly payment
    • Stops collection action
    • Preserves credit
    • Cons: Interest bearing, debt will not be reduced unless settlements are made

    If there is significant equity in your home, an experienced financial professional will tell you that a consumer proposal is probably not the best way to go. In theory, if you have enough equity to obtain a second mortgage, that should be explored before filing a consumer proposal.

    Consumer proposals are negotiated and accepted based on your income, assets and ability to pay. If you have equity in assets that will be considered in your proposal.

    Wait, there is a third option which combines the two. If you have some home equity, you can leverage it to make an cash consumer proposal – this is where a proposal is negotiated for the amount to be paid in one lump sum. Here is an example: Sally owes $45,000 in debt and has the ability to get a $30,000 second mortgage. Sally could make cash proposal for $30,000 to settle the debt once and for all if all of her financial information makes sense within consumer proposal guidelines. This would clear the debt and allow her to rebuild her credit faster.

    Why? A mortgage preserves credit because the creditors are paid in full, whereas a consumer proposal reports to the credit report for 3 years from the date that it is paid in full. In the case of a cash consumer proposal, it would be paid in full when filed and so the proposal would cease to exist on the credit report 3 years from when filed – whereas bad credit can linger for 7 years or longer.

    If we’ve managed to make things a bit more complex than you’d originally envisioned, that is ok – it just means that you are now more aware of the options that exist and better prepared to make the best decision for your own situation.

    Our only advice is this: never go directly to a trustee, whatever your end decision. A trustee represents the creditor, not you and they actually earn more when you file a larger proposal. An independent financial consultant hired by you can structure your CP, save you big and protect you from the trustee and your creditors.

    DebtCare is an experienced financial consultant – one with your best interests in mind.

    Call us today to learn more about your options: 1 (888) 890-0888.