debtcare.ca

Author: mgoldenberg@debtcare.ca

  • Financial Focus: Wage Garnishments in Ontario

    debtcare1Nothing is worse than getting your wages garnished, and it seems as though this is happening with increased frequency – many Canadian individuals are facing wage garnishments in Ontario as a result of debts in collections, CRA tax debts, or Family Responsibility.

    No matter how you slice it, wage garnishments are brutal, and carry with them various personal and professional consequences. For example, not only will this type of collection action cause personal financial hardship, making bill payments incredibly difficult, it can also impact your professional life. Since wage garnishments are sent to employers, once your employer learns of your financial troubles, your reputation will be impacted, and this could have important and costly ramifications. Additionally, if you own your own business, it will be your clients that receive notice to garnish receivables, thereby impacting your reputation.

    Facts about wage garnishments in Ontario:

    • If you don’t pay your debts, your creditors can take you to court and obtain a court order to have your wages garnished. However, some creditors, the CRA as the most common one, don’t need a court order and can simply send out a Requirement To Pay notice and the deed is done.
    • Under the Ontario Wages Act, a creditor can garnish up to 50% of your gross wages, depending on the organization owed. The actual amount is determined by the court, but typically garnishments in Ontario are around 20%. That being said, if you are self-employed, and owe money to the CRA, a garnishment can get as high as 100% of your receivables.
    • Wage garnishments can be stopped. Some people assume that once a garnishment is in place, it will remain in place until a debt is paid in full. While this is one way to remove a garnishment, it is not the only one.
      • Negotiating a voluntary arrangement with a creditor is an option, although once a creditor has gone through the trouble of garnishing you they are not going to easily let go and may still demand payment in full.
      • Going to court is another option. Keep in mind that this can get expensive, especially if it is tax court. This is because in small claims court you may represent yourself, whereas in tax court you usually need a lawyer.
      • A third option is working with a debt counsellor on a consumer proposal. For many Canadians, this is the option that makes the most sense, often because it will not only stop a wage garnishment in its tracks, it will also freeze interest, consolidate all unsecured debts into one monthly payment, and will often result in a much smaller balance to be paid off.

    Wage garnishments in Ontario can quickly turn a financial issue into a financial nightmare. Once a creditor has leveraged this form of collection action, removal may be difficult, but it is not impossible.  You have options.

    For more about having a wage garnishment lifted, please contact DebtCare Canada today by calling 1-888-890-0888.

     

  • Faceoff – Canadian Bankruptcy Trustees vs. Canadian Debt Counsellors

    debtcareWhen you are struggling to make even the minimum monthly payments to bills, or worse, having to choose which bills to pay each month, it is probably time to consider professional financial help to get things back on track. But how can you best determine which route is the right one, and who you should elect to stand in your corner? We can help. Today’s topic: the financial faceoff – Canadian bankruptcy trustees vs. Canadian debt counsellors. Both can help you get out of debt – but not necessarily in the same way.

    Trustees

    A Canadian bankruptcy trustee is a court appointed officer, appointed by the Superintendent of Bankruptcy. Their role is to administer bankruptcies and consumer proposals – but to do so on behalf of the interests of all parties. They don’t represent you as the client, they represent both you and your creditors. This means that, since they are not your representative, they can use the confidential financial information you provide to them to get the best deal for your creditors. They are paid out of the estate in the case of bankruptcy, and out of your pocket in the case of a consumer proposal, so their paycheque is then determined by how much is paid by you to your creditors.

    Debt Counsellors

    Often bankruptcy trustees like to say that you don’t need to pay a debt counsellor, and can just go right to them. This is because if you do this they can control the filing – which is especially enticing in the case of consumer proposals, where, as mentioned above, the more you pay, the more they earn.

    Instead, debt counsellors are paid by YOU, they represent YOU and only YOU. They know insolvency inside and out and you can trust that any information you provide to them is not going to be used against you – you can tell them everything without fear of unanticipated consequences. The role of a debt counsellor is to structure your financial information, assist you in finding a good trustee, and to help you manage negotiations with a trustee.

    Both bankruptcy and consumer proposals represent important and viable solutions when debt becomes unmanageable. That being said, going right to a trustee and hoping for the most favourable outcome will often leave you disappointed.  Consider speaking with a debt counsellor first and having them negotiate a consumer proposal or bankruptcy on your behalf – NEVER go to a bankruptcy trustee unrepresented.

    For more about the difference between a Canadian bankruptcy trustee and a Canadian debt counsellor, please contact DebtCare Canada today at 1-888-890-0888.

     

  • Back to School Blues? Consolidate Credit Cards and Stop the Interest

    The back to school season, particularly for parents, is often a very hectic time of year, especially with regard to finances. The need/desire for new school clothes, shoes and supplies often leaves parents with racked up credit cards once all is said and done – or rather, purchased. And often accompanying these credit card bills is the challenge of finding money to pay them off.

    Check out this infographic from BMO to see just what these costs add up to:

    debt1

    So, what options are available? Consolidating credit cards is a great way to reduce your debt – and often makes sense – but the type of consolidation depends on your own personal circumstances. Here are a few options that may be available to help you deal with that back to school debt.

    1. Home equity loan. By using the equity in your home, you can consolidate credit cards, thereby reducing interest and consolidating the various bills into one monthly payment. Of course, this is only possible if you own a home and have sufficient equity for this purpose. If you rent, or are without equity, this is probably not going to be a viable option for you.
    2. Consumer proposal. This is another great option, especially if your credit isn’t great or if you don’t have the security or equity for a loan. A consumer proposal will have some impacts on your credit in the short term, but this is balanced out by the fact that interest stops accumulating, there is, like a loan, just a single monthly payment, and in many cases the overall debt owing is reduced.
    3. Line of credit or loan from a lender. This is another good option, and can achieve the same things as a home equity loan: lower interest and one monthly payment. You will need to have good credit or security for this option. At the same time, this is often the most expensive option of all because it will involve higher interest than a home equity loan or a consumer proposal.

    Kids are expensive, and when back to school season rolls around, they can become even more so. Once those bills start coming in, don’t stress. Call DebtCare Canada to find out about how to consolidate credit cards and get rid of debt: 1-888-890-0888.

     

  • Ontario Bankruptcy Trustees – Who They Are and How They Advertise!

    debt careDebt consolidation, get out of debt, debt relief: it is hard to turn on the radio or television these days and not hear one or all of these phrases. Why? Because so many Canadians are facing financial challenges thanks to the ease with which credit is granted coupled with high (credit card) interest. The temptation to pay on credit can quickly lead to getting in over your head, and then struggling to find a solution.

    When it comes down to it, the question is, who advertises these solutions and what do they do?
    Ontario bankruptcy trustees, more aggressively now than ever before, are advertising to the public that they offer the best solution for people facing financial woes. We disagree with much of the advertising we hear from many Ontario Bankruptcy Trustees. Why? Because we exist because of them!

    Ontario bankruptcy trustees promote financial solutions. However, if you choose the solutions offered, the Ontario bankruptcy trustee does not represent you. A bankruptcy trustee in Canada is a court appointed officer who administers estates when a bankruptcy or consumer proposal is filed. They do not represent you, they do not represent your creditors. They apply rules set out in the Bankruptcy and Insolvency Act. The trustee is required to represent the best interests of all parties (and this includes their own financial interests).

    What does this mean? Well, trustees are paid a tariff out of the proceeds of your bankruptcy or consumer proposal. In the case of bankruptcy the fee is fixed, whereas with a consumer proposal the fee grows with the amount of the proposal.

    Some things to know:
    • Trustees advertise to you, despite the fact that they don’t represent you – this is because without you, they have no business.
    • In the case of bankruptcy, finding surplus income means that they can extend your bankruptcy and collect larger tariffs because the bankruptcy is being administered for a longer period of time.
    • In the case of consumer proposals, convincing you to propose a higher amount to your creditors will result in the collection of more fees – and thus is a major priority for them.

    Now, of course a few bad apples shouldn’t spoil the whole bunch, and we don’t mean to say that all trustees are shady. Many trustees in bankruptcy are reputable and do business above board – but the few that don’t can do a lot of damage. There are just too many conflicts of interest and the law needs to go further in terms of requiring trustees to state in their advertising that while they are promoting a service they don’t represent you.

    A consumer proposal or bankruptcy is often a really good financial solution for someone backed into a corner. These allow for one monthly payment, can reduce debt, stop interest, and stop collections. Just keep in mind, just as you wouldn’t go to a meeting at the CRA without your accountant, you shouldn’t go to a trustee without your own independent financial representation.

    Financial counsellors who specialize in bankruptcy and proposals can structure the numbers, review your information, make recommendations, and bring a proposal forward to a trustee on your behalf- protecting you throughout the entire process.

    DebtCare Canada represents your best interests – yours and yours alone. Call us today BEFORE contacting a trustee: 1-888-890-0888.

  • Missed the Small Business Tax Deadline? Canadian Tax Penalties, Interest and Options!

    debtRunning a business is tough! Most small business owners are experts in their individual trades, but not necessarily experts in all aspects of business – or other businesses for that matter. For example, you may know how to unclog a toilet, or even install one, but you wouldn’t necessarily want to take on the task of outfitting the plumbing for an entire house. The same is often true when it comes to taxes; many small business owners are well versed in their own finances, but when it comes to their taxes, GST/HST and payroll deductions, etc., this can represent a whole different level of accounting know-how.

    When the small business tax deadline passes, there are always a significant number of individuals who have missed it. Most often, small business owners miss the deadline for 5 reasons:

    1. Unsure of when it was
    2. Procrastinated on hiring someone to come in and prepare the books and returns
    3. Think that money will be owed and are not sure how it will be paid
    4. Missing some type of information, proof of expenses are just one example, and so don’t think that their return can accurately be prepared
    5. Think they will not owe and thus the deadline is more of a guideline…

    If you are a sole proprietor or part of a partnership in Canada, the small business tax deadline was in June. We are now officially past that date, and so, if you have not filed, you’ve missed it.

    If you missed the deadline, the following are the financial penalties:

    • If it is your first time filing late the penalty is up to 5% of the amount owing plus 1% per month for up to 12 months.
    • If you filed late in any of the preceding 3 tax years the penalty is up to 10% of the amount owing and then 2% per month for up to 20 months.
    • Keep in mind that interest is back-dated to the tax year, and accrues on both the principal and penalties!

    If you missed the tax deadline, this is considered tax evasion and you could also be subject to criminal prosecution and further financial penalties. Owing money to CRA is not tax evasion, but failing to file is! One will lead to financial challenges, while the other could land you in court.

    Often, late filing and tax avoidance is due to an underlying financial problem and an inability to pay. If you missed the small business tax deadline the best course of action is:

    Step 1 – Get your books and returns prepared. If you don’t have receipts or other documentation, tell the accountant and they will tell you what you can and cannot include in the return.

    Step 2 – Once the return/returns are prepared you will have a better idea about what you owe and can use the numbers above to estimate penalties. Be realistic about your finances. Consider CRA debt, other debt you have and what assets you want to protect.

    Step 3 – Meet with a financial professional before you file to get a game plan in place for dealing with what you will owe to mitigate the blow-back of collection problems.

    If you are worried about filing late and considering not filing at all because of a looming tax debt, our advice is to file right away to avoid a tax evasion charge, then deal with the debt with professional financial help. Call DebtCare Canada at 1-888-890-0888.

  • Does a Consumer Proposal in Canada Stay on Your Credit for 7 Years?

    debt care1Many people choose a consumer proposal in Canada to get finances back on track. These represent a great debt relief option because you can settle your debt, often reduce the total balance to be repaid, freeze interest and consolidate the various monthly bills into one single, monthly payment.

    Of course, as with any debt relief solution, there are implications for your credit, and we are often asked what those implications are. Many individuals come to us with a fear that a consumer proposal will ruin their credit for the long term, and leave happy knowing that this isn’t actually the case. Often the pros far outweigh the cons, especially when you consider the fact that your credit is likely already not so stellar – coupled with the fact that a CP can save you thousands of dollars and stop self-serving creditors from continually harassing you.

    When it comes to consumer proposals, by far the question asked most often is “how long does it stay on my credit report?” The answer is fairly simple, but the length of time really depends of you. Many think that a CP is just like a bankruptcy – on your credit report for 6 years following the date of discharge – but this is not the case.

    In a nutshell, a proposal is on your credit for 3 years from the date it is paid off in full. The faster you pay off the proposal, the faster it is off your credit report.

    Here is a handy chart to help show you how to calculate how long a CP will be on your credit:

    Paid of immediately On your credit report for 3 years overall
    Paid off one year after filing On your credit report for 4 years overall
    Paid off two years after filing On your credit report for 5 years overall
    Paid off three years after filing On your credit report for 6 years overall
    Paid off four years after filing On your credit report for 7 years overall
    Paid off five years after filing On your credit report for 8 years overall

    A consumer proposal in Canada is not like bankruptcy where you have an ongoing obligation to your trustee pending a discharge. Once creditors agree to a proposal, it is binding and can be paid off at any time. Or, you can choose larger monthly payments to get it paid off faster – the choice is up to you and your own personal situation.

    Once you have negotiated a proposal and it has been accepted, start rebuilding your credit quickly with a secured credit card. This will help you establish good credit behaviour and show future lenders that you are committed to getting back on track.

    Also, make sure that you stay on top of your credit report. Ensure that the credit reporting agencies are aware that you have filed, and also that it has later been paid off – don’t just assume that they have been made aware. Consider sending letters of discharge through registered mail.

    Rather than being a credit rating killer, a consumer proposal is actually a great way to begin the process of getting your credit rating back on track. By consolidating all payments and reducing principal, you can get back on your feet, and don’t have to worry about long term impacts.

    For more about filing a consumer proposal in Canada, or to discuss other options for debt relief, call DebtCare Canada today at 1-888-890-0888.

  • Your Rights: Canada Revenue Agency Collections Policy

    debt careWith this year’s tax deadline long gone, for many individuals, the stress that comes with income tax filing is also long forgotten. However, if you are one of the many Canadians now stuck dealing with a tax debt, the stress may just be in its infancy, growing exponentially as the days pass and interest continues to accumulate. How well do you know the Canada Revenue Agency collections policy?

    Of course the Canada Revenue Agency has a right to their money, but that does not mean that you don’t have rights as a taxpayer. The CRA is a very powerful organization, and often that power means intimidation and fear – just know that you do have rights and can fight the CRA if you so choose.

    Taxpayer Bill of Rights. This is a set of rights established to protect the taxpayer when it comes to things like language, privacy, harassment, objections, etc. For example, if you feel as though you are being unfairly treated, you are able to file a formal complaint under the Bill of Rights. Intimidation is a tactic that often works, but largely because people are unaware that avenues for recourse exist.

    Here is a link to the CRA website and the Rights in their entirety:

    http://www.cra-arc.gc.ca/rights/.

    Additionally, when it comes to a tax debt, individuals are often not aware of the programs that exist to help fight CRA collection action, actions such as a wage garnishment, frozen bank account, or property lien. These collection actions can cause extreme financial hardship and getting them lifted can be a challenge. Some of these programs can also stop interest and penalties. For example, the Taxpayer Relief Program or even the Voluntary Disclosure Program may give you the chance to deal with what you believe are tax debts leveraged as a result of personal circumstances which prevented you from filing or impacted your ability to pay.

    Just remember, any negotiations you enter into directly with the CRA can have negative impacts long term; often in exchange for a repayment plan the CRA will require personal information, information that will later be used against you! The CRA will never voluntarily negotiate to reduce principal, and typically this can only be achieved through a consumer proposal or bankruptcy.

    If a CRA tax debt has you feeling anxious and overwhelmed, our advice is NOT to call directly to negotiate, but rather to speak first with a debt counsellor with the experience and knowledge that will help you protect yourself. Call DebtCare Canada today at 1-888-890-0888.

     

  • Filing a Consumer Proposal in Canada – Does it Make the Most Sense for You?

    shutterstock_53579857The frequency with which Canadians are filing consumer proposals in order to get back on solid financial ground has increased significantly in the last few years. The reason is fairly obvious; the ability to stop collection action, halt interest, combine all payments into one, and often to negotiate for a smaller repayment amount, make filing a consumer proposals in Canada a very attractive debt relief option.

    However, because a consumer proposal is a solution for dealing with financial problems, some assume that individuals on the lower end of the income scale with limited assets are the most likely candidates for a proposal. It is actually quite the opposite – often consumer proposals in Canada are filed by higher income earners.

    Why? A major factor is the fact that, a few years ago, bankruptcy laws in Canada changed.

    Higher income earners – Now there is an income and expense calculation (which is very low by the way) that looks at whether you earn more than a basic amount. If you do, 50% of any additional income is surplus income in a bankruptcy, so a higher income earner ends up having massive monthly payments. Also, if you have surplus income, you have to make monthly payments in bankruptcy for 20 months as opposed to 9 months (the limit if you are under the income/expense limit).

    Homeowners – Believe it or not, in bankruptcy and in consumer proposals, many people are able to keep their homes! In a bankruptcy though, home equity is considered surplus income and so 50% of that equity has to be repaid. Instead, many homeowners opt for a proposal because it is a negotiated settlement so there is room to negotiate that less equity be repaid.

    In a consumer proposal, you offer your creditors a sum that you will repay that covers all unsecured debt. As soon as a consumer proposal is filed, the creditors have a specified amount of time to accept or reject. Creditors who don’t answer are considered as accepting. As long as creditors representing 51% of the debt accept, the proposal goes through.

    If accepted, the person has to make a minimum payment equal to the amount of the proposal divided over 48 or 60 months. That said, a consumer proposal can be paid in full at any time which also makes it more attractive to higher income earners, especially those who get large annual bonuses.

    An additional reason for the attractiveness of a proposal is the impact it has on your credit rating. If paid off within 1 month to 3 years, a consumer proposal ends up being on your credit less time than a bankruptcy.

    If you are struggling with debts and the threat of collection action, call DebtCare Canada today. Filing a consumer proposal may just make the most sense for you! 1-888-890-0888.

  • You Can Stop a Wage Garnishment in Ontario – Here Are Your Options!

    wage garnishment in OntarioWage garnishments impact thousands of people every day – and can come as a most unpleasant surprise for those individuals.

    Beyond the financial implications, a wage garnishment in Ontario can have serious consequences in other areas of your life. For example, if you work for someone else, once that individual receives a Notice of Garnishment regarding the wage garnishment, they will be fully aware of your financial problem and thus may view you in a different light. Responsibility and reliability may be questioned, and any company that required a credit check upon hiring may take this new information into consideration.

    If you work for yourself, especially with a small company, your reputation is important, but if your clients are receiving letters telling them to submit payment directly to the court, this could tarnish that reputation. The hassle may cause those clients to look elsewhere in the future.

    Once a garnishment is in place, is paying it off the only option? Perhaps not.  A wage garnishment in Ontario can often be stopped but this largely depends on who issued it.

    Here are a few of the most common types of wage garnishments in Ontario:

    1. Issued through the court – someone sued you, got a judgement and is enforcing it. Generally this can mean a loss of up to 20% of your earnings, and can only be stopped by paying the debt or making an arrangement with a creditor, by court motion, or by arranging a bankruptcy or consumer proposal with a debt counsellor.
    2. Issued by the CRA – the CRA does not need a court order, and can garnish up to 50% of your wages. If you are self-employed or on a pension this could be up to 100%. A CRA wage garnishment can only be stopped by: CRA’s consent or an arrangement, by arranging a bankruptcy or consumer proposal with a debt counsellor, or by taking CRA to tax court (the most expensive route). A CRA wage garnishment is particularly nasty….
    3. Issued by Family Responsibility – the only way to deal with one of these is to pay it in full or go back to court – there is no other option.
    4. Issued because of EI overpayment or by government after receiving money under false pretense – this can be complicated and these are instances where it is difficult to get protection. Like the CRA, this does not require a court order and if fraud is involved it can get tricky.

    When you are facing a garnishment of your wages, no matter the source, your best bet is to speak with a debt counsellor. The solution to your financial problem will largely depend on your personal circumstances, but ignoring the garnishment should never be an option.

    Avoid the embarrassment and financial hardship of a wage garnishment in Ontario by calling DebtCare Canada today at 1-888-890-0888.

  • Rebuilding Credit: Bad Credit Rating Doesn’t Always Just Disappear After a Few Years

    rebuilding credit pngIt is a very common misconception that bad credit just “disappears” once debts are paid and your credit behaviour improves. However, past credit activity doesn’t just evaporate into thin air with a few months (even a few years) of good behaviour. Rebuilding credit takes some work.

    For example, if you file for bankruptcy in January of year one, pay on time, every month, and are discharged in January of year 3, that bankruptcy will remain on your report for 6 years following the date of discharge (January of year 9) – not from the time that you declared.

    When it comes to consumer proposals, these stay on for 3 years following payment in full, as does any credit counselling.

    Periods of inactivity can also impact your credit rating. For example, if a lender assigns debt to collections, this results in activity, and negative activity at that. However, if you don’t have any activity, this is not necessarily a good thing either.

    When it comes to activity, a tip is to continually use credit and to repay that credit on time, all the time. A secured credit card is a good way to do this without being tempted to start relying on credit again or getting back in over your head.

    So, if you have bad credit and want to clean it up, here are a few steps you can take to get the process started:

    • Step 1 – Get your credit report and see what it says. These are available online from both Equifax and TransUnion. Some lenders use one, whereas some look at both.
    • Step 2 – Deal with the bad credit debt on your credit report by paying it off. Better yet, settle it for far less than you owe with a consumer proposal to stop interest and reduce overall amounts.
    • Step 3 – Document EVERYTHING. Any time you settle a debt, get a letter re: settlements and arrangements and copies of proof of your action. It can take some time for these payments to register, but keep on top of it.
    • Step 4 – Make sure the credit reporting agency knows these debts have been paid – don’t count on your lender to tell them. Send the above noted documents via registered mail to ensure they reach their intended destination.
    • Step 5 – Begin the process of rebuilding. Consider a secured credit card to show you are committed to maintaining positive history.

    When it comes right down to it, the only way to improve a poor credit rating is to pay your debts and allow time to pass to show that your payment habits have improved.

    For more information about how to rebuild your credit effectively, call DebtCare Canada today at 1-888-890-0888.