debtcare.ca

Author: mgoldenberg@debtcare.ca

  • Debts Deferred or Suspended? Read This…

    With the COVID-19 pandemic ongoing, many debts have been deferred or suspended.

    For instance, Canada’s big banks have been offering mortgage deferrals on a case-by-case basis. The Government of Canada has temporarily suspended federal student loan payments. Some credit card providers have offered deferrals on payments. Some car loan lenders and utility providers have also offered deferrals.

    But here’s the thing — deferral doesn’t necessarily mean erased. The payments will come due at some point. And what happens if you can’t afford to pay?

    The Truth About Deferred Debts

    The Toronto Star reported early on that some mortgage deferrals could cost you thousands of dollars more in the long-term. While some lenders are deferring the principal sum of the debt, they are continuing to charge interest.

    “Customers should understand that this is not mortgage forgiveness,” the Toronto Star reported a Canadian Bankers’ Association spokesperson saying.

    “Mortgage deferral means that payments are skipped for a defined period of time, during which interest which would otherwise be part of the deferred payments is added to the outstanding balance of the mortgage.”

    The same could be true of any loan deferrals or suspensions. It’s important to look at the fine print of your deferral and understand what is truly being put off — and when it will come due.

    For instance, when the deferral period ends, will you be required to pay a lump sum? Will the balance be added to the rest of your loan (creating larger monthly payments)? Will your loan period be suspended?

    You need to know the answer.

    You also need to know about any associated interest or fees applied to the deferral or suspension. This is not a time for surprises.

    While deferrals may be necessary for some right now, go into it with your eyes open and make a plan.

    You need to make a plan now to deal with debt when the payments come due.

    Step 1: Assess Your Debts – Even Deferred Ones

    The first step is to assess all of your debts — including those that have been deferred or suspended.

    You need to know exactly how much you owe and exactly when you will owe it. This is how you can start to assess your true ability to repay.

    Make a list and ensure you have answers about any deferral fine print, then tally up your monthly payments. Now you will have an idea of how much you will owe each month (even if it is on hold for now).

    Step 2: Track Where Your Money is Going

    When you know how much you will owe each month, you will have an idea of how much income is needed to pay it off. You can assess whether your pre-COVID-19 income would cover this amount, and if your current assistance will do the same.

    If you don’t have enough income, don’t panic. This is just for information purposes right now.

    To make a payment plan, you need to understand where your current funds are going. If your income has been reduced, this may be easier to assess as necessities like rent and groceries may be making up the bulk of your expenses.

    But it can also help to look at a month of pre-COVID-19 spending to see where your income normally goes — and how much you were saving each month before the crisis hit.

    From here, you will understand how much income you are putting towards debt payments already and how much you can realistically afford to contribute when your income is returned.

    Step 3: Make a Savings Plan

    In the previous step, you will have hopefully seen if you have any leeway in your budget to set aside savings for when payments come due.

    Even if you can only set aside a small amount, every little bit can help. However, if you do not have enough income to realistically pay off your debts — now or if your income is returned — it’s time to look at other measures.

    Step 4: Deal with Debt

    If debt payments have been taking up a large chunk of your budget even before COVID-19, you need to look at dealing with them for good.

    The solution can depend on the type of debt you are carrying. For instance, mortgage debt could be dealt with through a refinancing, if enough equity is available.

    Unsecured debts might be eligible for settlement, and if your income is reduced you could get a better settlement right now.

    Outstanding utility bills and the like could be handled through a debt consolidation loan or filing for insolvency — bankruptcy or consumer proposal.

    The key is to consult with a debt counsellor who can walk you through your options and make a plan that works for you.

    At DebtCare Canada, we provide just that — we offer free consultations to help Canadians get out of debt for good.

    Don’t wait until the COVID-19 crisis is over to make a plan for your debt. Deal with it now so you can ensure you come out the other side stronger.

    DebtCare Canada is available 100% remotely. We have helped thousands of Canadians deal with problem debt. Call 1-888-890-0888 or visit www.debtcare.ca to contact our debt counsellors.

  • New 2020 Income Tax Deadline: What This Means for You

    Normally, at this time of year, we would be reminding Canadians to have their income taxes filed by April 30. However, 2020 is a very different year — with a very different income tax deadline.

    Due to the novel coronavirus (COVID-19) pandemic, the Canadian government has extended the income tax deadline for the 2019/2020 year.

    Here’s what that means for you.

    New Income Tax Deadlines

    The new deadlines for 2020 are:

    For individuals:

    • Filing date for 2019 tax year: June 1, 2020 (extended from April 30, 2020)
    • Payment date for 2019 tax year: September 1, 2020 (extended from April 30, 2020)

    For self-employed:

    • Self-employed tax filing deadline: June 15, 2020 (unchanged)
    • Self-employed payment date for 2019 tax year: September 1, 2020 (extended from April 30)

    For corporations:

    • Filing date for current tax year: June 1, 2020 (applies to corporations that would otherwise have a filing due date after March 18 and before June 1, 2020)
    • Payment date for current tax year: September 1, 2020 (applies to balances and instalments under Part 1 of the Income Tax Act due on or after March 18 and before September 1, 2020)

    See the full list of updated filing deadlines and payment dates on the Canada Revenue Agency (CRA) website: https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/covid-19-filing-payment-dates.html

    Late-Filing Penalties and Interest

    While the income tax deadlines and payment dates are set, the CRA has also offered some relief for those who are unable to file a return or make a payment by the deadlines because of COVID-19. Taxpayers can request the cancellation of penalty and interest charged to their account, the CRA says.

    “Penalties and interest will not be charged if the new deadlines that the government has announced to tax-filing and payments are met,” the CRA states.

    What Does This Mean for You?

    • More time to file your income tax return and make your payment.
    • However, the return will still need to be filed on time.
    • Although taxpayers can request the cancellation of penalties and interest charged to their accounts, that is only if you meet the deadlines — so don’t delay filing.
    • If you owe, the principal amount will still need to be paid by September 1. If you cannot pay, start thinking about your options sooner rather than later.

    Although the income tax deadlines have been extended and there is some relief available, taxes owed have not been waived. This means that you will need to pay what you owe in full — ideally by the payment deadline of September 1.

    If you will not be able to pay by September 1, don’t ignore the situation. Instead, take action now by seeking out debt help. A debt counsellor, like DebtCare Canada, will help you make a plan to deal with your income tax during the COVID-19 pandemic and beyond.

    We can also help resolve a CRA back tax problem if you are sitting on past due returns that weren’t filed because you owe and can’t pay.

    Don’t delay. Get in touch today before the Canadian income tax deadline to go over your options. We are fully functional 100% remotely during the COVID-19 pandemic. Call or text “Help” to 1-888-890-0888 or visit www.debtcare.ca.

  • Bank of Canada Interest Rate Decreases and Coronavirus in Canada

    Over the past month, the Bank of Canada interest rate has dropped to the lowest it has been since July of 2017 — 0.25%.

    Is this a good thing? A negative? And what does it mean for your finances — especially during the novel coronavirus (COVID-19) pandemic? We’re answering all these questions and more.

    Canadian Interest Rate Decrease: March 2020 to April 2020

    From March 4, 2020 to April 15, 2020, the Canadian interest rate has dropped significantly.

    Before March 4, it was at 1.75% — the highest it reached since the Bank of Canada (BOC) began increasing it in July of 2017.

    However, on March 4, the interest rate dropped to 1.25% — due to threat of the coronavirus.

    The next BOC announcement was scheduled for April 15. But between March 4 and April 15, the BOC made two emergency changes to the interest rate as the impact of the coronavirus became direr.

    On March 13, the BOC dropped the interest rate to 0.75%.

    On March 27, they further decreased it to 0.25%.

    The BOC maintained 0.25% on April 15 and noted that this is the lower bound — indicating the rate is not likely to go any lower. (By comparison, some other countries have interest rates of 0% or even a negative percentage.)

    With interest rates the lowest they are likely to get, what does this mean for you?

    Managing Credit During the COVID-19 Pandemic

    Lower interest rates traditionally make it easier to secure access to credit. And that was the intent of the BOC in lowering them during this time — to help Canadian consumers and businesses have access to credit to weather the storm.

    However, the COVID-19 pandemic is a truly unprecedented situation, and there are some things to keep in mind if you’re considering taking on more credit during this time.

    1. Not all lenders — and credit — are the same

    When it comes to securing a loan in Canada, not all lenders are the same. A loan from a bank or a reputable private lender might look very different from a payday loan, for example.

    Similarly, not all credit is good credit. If you are taking on a loan, make sure that it is from a lender that reports to the Canadian credit bureaus so good payment habits can be tracked and used to fix credit, if needed.

    And credit isn’t the only consideration to make when taking on a loan. You also have to look at your ability to repay it. For instance, if you take on a new credit card, you are responsible for paying the balance each month — and this could vary depending on how much you use it. However, a secured loan may have a fixed payment plan that can make it easier to budget for.

    1. Some lenders might be increasing rates to mitigate risk

    The other consideration with interest rates is that just because the Bank of Canada key interest rate is lower, it doesn’t mean that all lenders have lowered rates.

    For instance, analysts have noted that rates for new mortgages are actually going up, not down.

    This is because of the risk that lenders must take on during this time. With so many Canadians out of work or on the cusp of being out of work (the Bank of Canada noted that more than 1 million people lost their jobs in March), lenders may fear that clients will lose their income and not be able to repay their loans – so they set a higher interest rate.

    1. Only take on credit you can afford

    Just because you can access more credit doesn’t necessarily mean that you should.

    This is an especially tough situation because with the ongoing COVID-19 pandemic, if you have lost income, credit can seem like the only way to bridge the gap. But you could be doing long-term damage to both your credit score and your finances.

    While credit can help in the short-term, you need a plan to pay it off. Relying on debt to pay your bills isn’t sustainable.

    If it feels like the only choice that you have, there might be another way. Contact a debt counsellor for a free consultation to explore other options.

    1. Make wise use of credit

    If you do decide to take on more credit, do so with your eyes open and with a purpose in mind.

    Lower interest rates can make this a good time to deal with your debt and create more flexibility in your budget.

    For instance, a debt consolidation loan could take care of your unsecured debts.

    If you have lost income, you may be able to get a better settlement deal for any existing debts now, vs. waiting for your paycheque to return. This is because debt settlements are generally based on income.

    Make lower interest rates work for you — not the other way around.

    Read the full text of the April 15 Bank of Canada announcement here: https://www.bankofcanada.ca/2020/04/fad-press-release-2020-04-15/

    The next BOC announcement is scheduled for June 3, 2020.

    Have questions about managing your debt during COVID-19 and beyond? DebtCare Canada is here for you – 100% remotely. We are fully operational with service by phone or online.

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

  • What To Do If You Can’t Pay Your Rent or Mortgage

    With the development of the novel coronavirus (COVID-19) pandemic, many Canadians are struggling to pay their bills — including rent or mortgage payments.

    An Angus-Reid survey showed that 1 in 3 Canadians worry they’ll miss a rent or mortgage payment due to COVID-19.

    A survey from the Canadian Federation of Small Businesses found that 23% of 9,000 respondents couldn’t pay their rent or mortgage on April 1.

    While some banks and lenders are offering mortgage deferrals, this is on a case-by-case basis and isn’t always a perfect solution. The Toronto Star reported that interest may continue to be charged. One Canadian told the Star that he could defer his mortgage payments for six months but would end up owing thousands of dollars more in interest over the course of his loan.

    Tenants don’t necessarily have even this assistance available. While there is some emergency financial relief coming from the federal and provincial governments in Canada, it may not be enough to pay rent in full, especially for those who live in more expensive cities.

    What can you do if you’re in this position? There isn’t an easy answer, but there are some options that could potentially help.

    For Mortgage Holders

    For those who own their own home, there are several options to consider.

    Talk to your lender

    First, if you haven’t done so already, you can speak to your mortgage lender about options for relief during this time. While not all assistance is beneficial in the long-term — as the Toronto Star reported — it’s possible your lender will be able to offer a better option.

    If you are in a pinch and the only option is to take a deferral in the short-run with more interest in the long-term, it may make sense for you to take this offer and make a plan for the additional interest payments. Since you know that it will be coming, you can set aside funds for the payments once you are back on solid financial footing.

    However, there are other options you can consider as well.

    Refinancing your mortgage

    With lowered Canadian interest rates, it could be possible for mortgage holders to refinance their mortgages at a lower rate or at a variable-rate (vs. a fixed-rate mortgage where your payments always stay the same). If you have the equity available, you could refinance for a lower rate and use the difference to cover your payments in the interim.

    You could also be eligible for a home equity line of credit, which could free up some funds in the short-term.

    Learn more about mortgage refinancing: https://debtcare.ca/pros-cons-refinancing-your-mortgage-renewal/

    Dealing with debt and other financial obligations 

    Another option is to look beyond your mortgage and rent to your other payments. What else are you obligated to pay?

    For instance, many Canadians carry a large amount of high-interest credit card debt. Trying to make credit card payments and your mortgage payments with a drop in income could be even more difficult.

    Take a look at your other expenses and ask what can be done to lower your overall debt. Can you cancel subscriptions or find savings in other parts of your budget? Other lenders are offering relief during this time, too. Even if you can’t get a break on your mortgage, you may be able to settle other debts to make up the difference.

    You can also consider other measures, such as debt consolidation or even filing for insolvency – bankruptcy or consumer proposal. While it is not always possible to keep your home when you do this, that isn’t always the case. Talk to a debt counsellor who can help you figure out what risk there is to your current residence.

    For Renters

    Renters don’t have quite the same options as mortgage holders, as they are typically negotiating with a landlord versus a lender. While many across the country are calling for a rent freeze, nothing has been announced yet. However, there are still opportunities that keep you protected.

    Talk to your landlord

    If you haven’t already done so, talk to your landlord about options for deferring or pausing rent payments. While you can’t negotiate the mortgage payments, they may be able to (see options above).

    Even if they are reluctant, some landlords in Canada have accepted half the rent payment instead of the rent in full.

    If your landlord is not open to negotiation, you will need to look to other assistance.

    Look into provincial rent assistance

    While not every province has announced rent relief for tenants, some have released measures.

    According to CTV News, the B.C. government is providing up to $500 as a rent rebate to those who have experienced a significant drop in their income due to the outbreak.

    In Ontario, New Brunswick, and Nova Scotia, landlords are not allowed to evict tenants. However, this doesn’t necessarily mean they can’t hand out eviction notices, as reported by Toronto.com. In Ontario, for example, landlords can still give out eviction notices, but Landlord Tenant Board (LTB) — the body that enforces eviction orders — hearings are on hold for the time being.

    Prince Edward Island also announced a temporary rental assistance benefit of $1,000 per household for a three month period. Eligible candidates will receive $500 in the first month and $250 the following two months.

    Deal with debt

    Similar to mortgage holders, look beyond your rent payments to see where you can cut costs in other areas.

    If you are making payments to an unsecured line of credit, for instance, perhaps that debt could be settled and the funds freed up for rent payments. If you can negotiate other payments — such as your car insurance — you can put all possible resources towards making your rent payments in the meantime.

    If your income has been reduced, it can actually be better for debt settlements as they are often based on income — so you may be able to get a better deal now than when your income returns.

    Speak to a debt counsellor to explore your options in full. A qualified counsellor can help pick the best option for you.

    In Conclusion

    This is a difficult, unprecedented situation and there aren’t any easy answers.

    However, it can be made easier with assistance. At DebtCare Canada, we have helped thousands of Canadians reduce and restructure their debt, access financial help, and more.

    We are open fully remotely during the COVID-19 pandemic. If you’re struggling with mortgage or rent payments or other bills, please get in touch so we can help you find a way through.

    Call: 1-888-890-0888
    Text: “Help” to 1-888-890-0888
    Fill out an online contact form or learn more: www.debtcare.ca.

  • Get Debt Help Without Leaving the House – Here’s How

    In the past, before the novel coronavirus (COVID-19) people might have gone to see a financial consultant in person for debt help or otherwise, but with social distancing in effect, that is not advised right now unless absolutely essential.

    However, debt help is more necessary than ever right now. The impact of COVID-19 has left many Canadians out of work and struggling to pay bills.

    A report from the Canadian Centre for Policy Alternatives warns the unemployment rate could rise to 13.5%, the highest level since the Second World War.

    In one week, more than 500,000 Canadians applied for employment insurance (EI). The government is also expecting more than 4 million applicants for the recently announced Canada Emergency Response Benefit (CERB).

    While some government help is available — such as emergency caregiver assistance and a wage subsidy for eligible employers — these programs are still rolling out and there may be a waiting period to receive funds. And for many, the assistance provided may not be enough to get by.

    Dealing with Debt to Free Up Finances

    Debt payments take up a large chunk of Canadian budgets. According to Equifax Canada, the average Canadian carries $72,950 in debt. $23,800 of that is non-mortgage debt (which includes credit cards, loans and lines of credit).

    Even carrying a little bit of debt can stretch your budget, especially when your income is reduced. Do you want to be putting your limited income towards credit card payments?

    When every penny counts, it’s better to make that money work for you — instead of using it to repay past expenses.

    The time to deal with debt is now, particularly if you have been laid off or your income has been affected by COVID-19 or otherwise.

    While everyone is frightened and worried (and rightfully so), the current situation and loss of income will allow people to get much lower deals on their debts as their income has been reduced. Most creditors will be accepting any reasonable offer.

    If you wait until your income has returned, the opportunity to have your debt reduced to the same extent will be gone.

    How to Get Debt Help Online

    The key to getting debt help online — without leaving your house — is knowing what you are looking for.

    You want to find:

    • A debt consultant that has an established reputation (meaning you can trust their services — this is especially important when you cannot visit their offices due to social distancing).
    • A debt consultant that works in your part of the country or nationally.
    • A debt consultant set up for remote access — with social distancing, you shouldn’t have to go into an office.
    • A debt consultant that will review all your options.

    We can only speak to our services at DebtCare Canada, but we provide exactly that. We’ve helped thousands of Canadians deal with their debt and get their finances back on track.

    We act solely in your interest to ensure that you get the best possible results by utilizing federal government programs and other financial solutions to help you deal with your debt with dignity.

    Our reputation is trusted and secure. We operate nationally and remain fully functional during the COVID-19 pandemic through remote operations.

    How to Contact DebtCare Canada Remotely:

    We know this is a stressful time and we want to assure you that DebtCare is here for you. If you are struggling, please reach out. 

    You can also follow us for regular information related to dealing with your finances during COVID-19 and beyond. DebtCare is on Twitter, Facebook, and LinkedIn.

    Learn more about our services at https://debtcare.ca/.

  • COVID-19 Income and Debt Help for Canadians

    The past two weeks have been a non-stop train of breaking news as Canada copes with the novel coronavirus, COVID-19.

    This public health pandemic is affecting many across the country — both medically and financially.

    In order to “flatten the curve” and reduce the risk of infection, many businesses and public services have been suspended, including in some provinces:

    • Public and private school closures.
    • Daycare closures.
    • Eat-in restaurant closures (take-out and delivery are still available).
    • Temporary closure of non-essential businesses, such as clothing retailers.
    • Temporary closure of public event spaces, such as movie theatres.
    • The list goes on…

    While all of these measures are meant to reduce COVID-19 risk and pressure on our healthcare systems, it has created another challenge: financial difficulties.

    Many Canadians are now out of work, or unable to work due to the need for childcare or caring for those who are ill. While some are working from home, not everyone has that opportunity.

    Businesses are also feeling the loss of income, and some have had to lay off employees temporarily.

    While public safety is essential, there is no denying the challenge this has had on the Canadian economy — and that’s where emergency relief comes in.

    Emergency Response Package

    On March 18, 2020, Prime Minister Justin Trudeau announced an economic aid package of $82 billion. This includes:

    • A temporary boost to Canada Child Benefit payments.
    • A new Emergency Care Benefit of up to $900 biweekly, up to 15 weeks, to provide income support to workers who have to stay home and don’t qualify for paid sick leave or employment insurance (EI). This includes those who are self-employed.
    • A new Emergency Support Benefit to provide up to $5 billion in support to workers who are not eligible for EI and who are facing unemployment.
    • A six-month, interest-free reprieve on student loan payments.
    • The income tax deadline has been extended to June 1, 2020 and taxpayers can defer tax payments until August 31.
    • And more.

    Mortgage Payments Deferrals

    The Big 6 Banks announced on March 17 and 18 that they are taking measures to support customers on a case-by-case basis to provide solutions, including up to a six-month payment deferral for mortgages and the opportunity for relief on other credit products.

    This is meant to help those who are facing challenges due to COVID-19, such as pay disruption, childcare disruption, or illness.

    Customers are encouraged to reach out to their lenders to ask what assistance there is for them.

    Bank of Canada Interest Rate

    On March 13, 2020, the Bank of Canada announced an emergency interest rate cut to 0.75% — the lowest that it has been since 2017.

    “It is clear that the spread of the coronavirus is having serious consequences for Canadian families, and for Canada’s economy,” the Bank said.

    The next Canadian interest rate announcement is scheduled for April 15, 2020. Economists are predicting the interest rate will be cut again.

    The lower interest rate means that credit is easier to secure — and is especially helpful for variable-rate debts, such as variable-rate mortgages, credit cards, or unsecured lines of credit.

    Putting It All Together — and Dealing with Debt

    Let’s talk for a moment about the impact of all of this. While these are good measures temporarily, we must acknowledge that they are not necessarily long-term solutions.

    For people relying on a certain amount of income to meet their bills, $900 biweekly is likely not enough to cover their expenses.

    And then there is the matter of deferrals — whether that be deferring mortgage payments, student loans, income tax payment, or otherwise.

    These payments will still need to be made eventually. Some of the details have yet to be confirmed, but consumers need to be aware that these payments are not just disappearing. These methods are meant to give you time to get the money together, when hopefully the economy is recovered, along with public health.

    But (and there is a big but) the money will still be owed. You will still need to find the funds.

    If you are currently earning less than you usually make due to COVID-19, or have a hard time meeting your bills regardless, other measures may need to be taken to get your finances on track.

    These might include:

    • Creating a budget and tracking expenses.
    • Avoiding taking on more unnecessary debt, such as charging expenses to your credit card.
    • Consolidating debt payments and paying off high-interest debt.
    • Filing for insolvencies, such as bankruptcy or consumer proposal.

    Take the time now to make a plan for your finances during the COVID-19 pandemic. If you are on the brink, contact a debt counsellor today.

    Debt can weigh down your lifestyle, particularly when money is tight. If you have $10,000 in credit card debt, those payments can take away from your ability to pay the mortgage or rent, buy groceries, or pay utility bills. When every dollar counts, you don’t want any more than necessary going towards your debt payment.

    At DebtCare Canada, we remain available by phone, text, or online across the country. We will talk through your financial options with you and help you find the best path forward for your unique situation during the COVID-19 pandemic or otherwise.

    Contact us for a free consultation. Call or text “Help” to 1-888-890-0888 or visit www.debtcare.ca.

  • A Message from DebtCare Canada About COVID-19

    March 16, 2020

    As the novel coronavirus (COVID-19) pandemic continues to evolve, we know this is a stressful time for many, especially if your business, income, or family is affected by the pandemic.

    As such, we wanted to reach out to our customers about how DebtCare Canada is responding to the situation and to share available resources.

    At DebtCare, we are following all public health guidelines and policies. As always, our debt relief, credit repair, and loan and mortgage services are available remotely coast-to-coast across Canada through:

    If you are struggling with your finances or managing debt during this time, please know that we are available and can help evaluate your options.

    For up-to-date information about COVID-19, please visit https://www.canada.ca/en/public-health/services/diseases/2019-novel-coronavirus-infection.html.

    The health and well-being of our clients and staff is our highest priority. Our thoughts are with everyone affected by COVID-19.

    Michael Goldenberg
    President, DebtCare Canada

  • Consumer Proposal vs. Bankruptcy – We Break It Down

    Consumer proposal vs. bankruptcy – what is the difference, and which one is the best choice for you? If you want to find out the answer, read on!

    For Canadians struggling with debt, both filing for a consumer proposal and filing for bankruptcy can be a way out. But how can you tell which one is right for your situation? We’re breaking it down.

    We’ll look at:

    • What is a consumer proposal?
    • What is bankruptcy?
    • Consumer proposal vs. bankruptcy – main differences
    • Bankruptcy or consumer proposal – which one is best for you?

    Consumer Proposal

    A consumer proposal is a form of insolvency filing where you make a settlement offer to your creditors. That’s where the name comes from — it is a proposal to creditors from you, the consumer.

    In your proposal, you offer to settle your debts for less than you owe, but more than your creditors would receive if you filed for bankruptcy, instead.

    The majority of your creditors must accept your proposal for it to be approved.

    Generally in a consumer proposal, your assets are not sold off to pay your debts. 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 might consider another type of proposal, or filing for bankruptcy. You also must be able to demonstrate your ability to repay a portion of your debt.

    Bankruptcy

    In personal bankruptcy, you assign your assets in exchange for the elimination of your debts. Every province has certain exceptions for what you can keep but, depending on the amount of debt you owe, some assets may be sold.

    You can file for bankruptcy if you owe at least $1,000 and are not able to pay your debts. Bankruptcy only deals with secured debts, such as personal loans, credit cards, and tax debt. It doesn’t erase most secured loans, such as a car loan or mortgage, although those assets may be repossessed if you cannot meet those payments.

    To be discharged from a bankruptcy, you must meet a schedule of payments, set out by a Licensed Insolvency Trustee.

    Consumer Proposal vs. Bankruptcy – Main Differences

    Filing for a consumer proposal and for bankruptcy are two different things. The main differences are:

    • In a consumer proposal, you can only file if you owe less than $250,000 in non-mortgage debt. In a personal bankruptcy, there is no limit.
    • A consumer proposal must be accepted by the majority of your creditors. A bankruptcy does not need approval.
    • Filing for a consumer proposal leaves you with an R9 rating on your credit report while you are in the proposal; it is upgraded to an R7 once it is paid off. The R7 stays on your credit report for three years after completion.
    • Filing for bankruptcy leaves you with an R9 credit rating while in the bankruptcy and for seven years after it is discharged (it is never upgraded to a better rating throughout that time).
    • A consumer proposal generally does not affect your secured assets, like your mortgage or car – although this depends on your personal situation.
    • A consumer proposal allows you to rebuild credit faster, particularly if you pay it off quickly.

    Bankruptcy or Consumer Proposal – Which One is Best for You?

    Whether you choose to file for bankruptcy or for a consumer proposal can depend on your circumstances.

    Questions to consider include:

    • How much total debt are you carrying?
    • How much unsecured debt are you carrying?
    • How much are your secured assets worth?
    • Can you demonstrate the ability to repay a portion of your debt?

    It can difficult to answer these questions on your own. The best way to go about deciding which insolvency option is for you – or if there is an alternative debt consolidation method that may work – is by contacting a debt counsellor, such as DebtCare Canada, for a free consultation.

    Having an Advocate on Your Side

    Both a consumer proposal and bankruptcy must be filed through a Licensed Insolvency Trustee (LIT, or formerly known as a Trustee in Bankruptcy). However, if you’re filing for insolvency, it’s also important that you have an advocate on your side.

    While Licensed Insolvency Trustees administer the consumer proposal or bankruptcy, they are not equipped to be this advocate for you. A) They represent both you and the creditor, so they are not entirely on your side. And B) they earn their money based on the size of your filing.

    It’s best to have a debt counsellor – like our experts at DebtCare Canada – on your side during an insolvency filing to ensure you are represented at the table during the filing process. We can make sure you are protected and getting the best deal possible.

    At DebtCare, we will help you decide whether filing for bankruptcy or for a consumer proposal is right for you and be your advocate throughout the entire process. We perform an independent review of your financial situation and make practical recommendations that will work for you.

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

  • 2019 Tax Deadline Around the Corner – Let’s Review Current Penalties and Interest

    The Canada Revenue Agency (CRA) tax deadline for the 2019 tax year is coming up quickly. Are you prepared?

    The deadline to file your 2019 income tax is April 30, 2020.

    For self-employed tax filers, the deadline is June 15, 2020, however, it’s better to file by April 30 as you will be charged interest from May 1 to June 15.

    It’s critical to meet the CRA filing deadline to avoid late-filing penalties, interest, and collection action — even if you can’t pay.

    Here’s what you need to know about the 2019 tax filing deadline:

    CRA Interest

    One reason why you want to file on time and pay what you owe in full (or look into alternative options) is to avoid CRA interest charges.

    If you have a balance owing for 2019 and don’t pay it in full, the CRA can begin charging you daily compound interest on May 1, 2020. This includes any balance owing if the CRA reassesses your return.

    If you are charged penalties, such as a late-filing penalty, the CRA can also charge interest on this amount.

    If you have amounts owing from previous years, the CRA will continue to charge daily compound interest on those, too.

    CRA interest rates change every three months.

    CRA Late-Filing Penalty

    If you owe money to the CRA and miss the tax filing deadline of April 30, 2020 (or June 15, 2020 for sole proprietors) you can be charged a late-filing penalty.

    In 2019, this penalty was 5% of your 2018 balance owing, plus 1% of your balance owing for each full month your return is late, up to a maximum of 12 months.

    If you’ve been charged a late-filing penalty in the past three years, you could be charged even more for missing the April 30, 2020 deadline — 10% of your balance owing, plus 2% of your balance for each full month your return is late, up to a maximum of 20 months.

    This is why, even if you can’t pay your full balance, it’s still best to file your return on time.

    Repeated Failure to Report Income Penalty

    If you failed to report an amount on your return for the 2019 tax year and you also failed to report an amount on your return for 2016, 2017, or 2018, you may be charged a repeated failure to report income penalty.

    If 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.

    The federal and provincial or territorial penalties are each equal to the lesser of:

    • 10% of the amount you failed to report on your return for 2019.
    • 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.

    In some cases, if you voluntarily tell the CRA about an amount you failed to report, the CRA may waive these penalties. However, if you choose to go this route it is better to do so with an advocate on your side (like DebtCare!).

    False Statements or Omissions Penalty

    If you knowingly make a false statement or omission, or do so through gross negligence, you could be charged a penalty equal to the greater of:

    • $100
    • 50% of the understated tax and/or the overstated credits

    Again, in some cases, you can voluntarily tell the CRA about a false statement or omission and have the penalty waived. Again, it’s best to consult a debt counsellor first, such as DebtCare, before negotiating with the CRA.

    What To Do If You Owe Taxes But Can’t Pay

    As we’ve mentioned, if you know you will owe but can’t pay, it’s still important to file before the April 30, 2020 tax deadline.

    Don’t just hope that it will be overlooked or go away on its own – it won’t, and you’ll end up accruing more interest and penalties. In some cases, the CRA will waive the penalties or interest, but you will still owe the principal amount.

    Instead, make a plan for how you will pay what you owe.

    This could look like:

    • Making room in your budget to find the amount owing.
    • Taking out a personal loan that you can repay over a longer period and using the money to pay the CRA.
    • Consolidating debt.
    • Refinancing your mortgage.
    • And more.

    If you truly cannot pay, nor can you access a personal or debt consolidation loan, you can stop CRA collection action by filing for bankruptcy or for a consumer proposal.

    Get A Head Start By Contacting a Debt Counsellor

    At DebtCare Canada, we provide access to one of the only programs that can resolve a CRA back tax problem.

    Whether it’s personal income tax, HST, or payroll, DebtCare Canada can help! Get ahead of your tax problem. Reach out to us for a free consultation by calling 1-888-890-0888 or learn more about our CRA Tax Debt program at https://debtcare.ca/back-taxes/.

  • Rebuild Your Credit in 2020 Using These Simple Steps

    Happy 2020! We’re just over a month into the new year. How are your resolutions going? If you’re anything like the majority of Canadians, they might have fallen by the wayside…

    A 2018 survey from Strava found that most New Year’s resolutions only last until the second Friday in January… In 2020, that was January 10.

    If your goals have been put on the backburner, please don’t beat yourself up. Recognize that it’s completely normal and the issue likely says more about the process than it does about you.

    In this blog, we’re looking at simple techniques to stick to your 2020 resolutions – specifically rebuilding your credit.

    Why do most New Year’s Resolutions fail?

    Some people say that resolutions never last. But the problem is often in the intention vs. the action. Many people enter the new year with big goals and big plans – that prove to be difficult to stick to.

    They try to do too much at once or only set vague goals (like save more money) without thinking about what the daily actions will be.

    There’s a better way. Through simple, clear, consistent action you can make big progress on your goals in a way that isn’t overwhelming.

    You can also pick goals that give you more bang for your buck. For instance, resolving to fix your credit is a great goal because in turn it:

    • Helps you plan your budget.
    • Creates awareness around your financial habits.
    • Deals with debt.
    • And has far-reaching consequences – it’s a goal that will serve you well into the future and can extend into other good financial habits.

    If you aren’t achieving your financial goals, ask yourself – how can I make those goals more achievable and realistic for my schedule?

    How to Rebuild Your Credit in Three Simple Steps

    Want to fix your credit this year? Here’s how to do it.

    Step One: Get your credit report

    To begin, you need to know where your credit currently stands. Request a copy of your credit report from one of the Canadian credit agencies – Equifax or TransUnion.

    When you know your score, you will know your starting point.

    Learn more about the credit score range: https://debtcare.ca/credit-reports-101-the-credit-score-range-and-you/

    Step Two: Get rid of debt that is harming your credit

    While there are several steps you can take to fix your credit, remember that we are focusing on the most impactful actions. You want to take the steps that are going to garner the most improvement in the simplest ways.

    For rebuilding your credit, that is getting rid of debt.

    When you’re carrying problem debt, it’s incredibly hard to rebuild your credit score even when you practice other good habits, like paying your bills on time and in full. That problem debt will still be dragging your score down.

    So, step two is finding a way to get rid of that debt.

    You could consider:

    • Making a settlement with your creditors.
    • Paying the debt in full (if you have the funds or can get them).
    • Consolidating debt through a debt consolidation loan.
    • Filing for a consumer proposal.
    • Filing for bankruptcy.

    Your method may vary and the method you choose may affect your credit score longer (for instance, filing for bankruptcy leaves you with an R9 credit rating) but the point here is to clear your problem debt through the best option for you.

    Learn more about debt consolidation options: https://debtcare.ca/your-2018-debt-consolidation-options/

    Step Three: Deal with debt that has already gone into default

    Beyond current debt that you’re carrying (and hopefully dealt with in step two), you might also have old debts that were never paid – these are called default debts.

    And while they may be in the past, they can still be dragging your credit score down.

    Your credit report will reveal whether you have default debts. Some of the same methods used in step two can help deal with it — such as a settlement with the creditor or filing for a consumer proposal or bankruptcy (depending on the type of debt).

    It’s also a good idea to talk to a debt counsellor to find the best way to deal with any default debts. They can assess your situation and offer advice on what methods are best for your situation.

    Learn more about what happens when you default on debt: https://debtcare.ca/will-a-creditor-actually-sue-you-when-you-default-on-a-debt/

    Moving Forward

    Once your old debts are taken care of, new credit habits will be much more impactful. Focus on building good habits, such as always paying your bills on time and in full and not taking on more credit than you can afford.

    This mindset will help take your 2020 credit repair resolution and make it a life-long behaviour.

    What’s your financial resolution for 2020? Share with us on social media. DebtCare is on Twitter, Facebook, and LinkedIn.

    Contact us for help with rebuilding your credit or achieving your other financial goals. We’ve helped thousands of Canadians get out of debt, fix their credit score, and more.

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