debtcare.ca

Category: Blog

  • Who Does a Bankruptcy Trustee Represent?

    While bankruptcies and consumer proposals are two common practices for Canadians looking to deal with problematic debts, they can also be somewhat confusing or misunderstood. One of the most common misconceptions comes with regard to who a bankruptcy trustee represents. This blog aims to clear the confusion.

    In the simplest terms, a personal bankruptcy in Canada is a legal process whereby a bankruptcy trustee is appointed to administer your estate and distribute any assets to your creditors. With a consumer proposal, a financial calculation is done based on your income and assets and a proposal is put forth to your creditors based on a sum that you would pay back. In this case, a trustee administers the proposal with your creditors.

    While it may sound, in both circumstances, as though they represent you, the reality is more complex.

    A trustee is a legally appointed official, regulated by the government. They are required to represent all parties involved, namely the debtor and the various creditors. This means that, while the trustee does represent you, they are also required, by law, to represent your creditors as well. Their job is to administer your estate to ensure all parties are satisfied.

    Another issue arises with regard to payment, specifically in the case of a consumer proposal. With a consumer proposal, since a bankruptcy trustee is paid based on the size of the proposal (the total sum to be repaid), there is some motivation to obtain a higher payout from you.

    Since a bankruptcy trustee is the only person who can legally administer a bankruptcy or consumer proposal in Ontario, you can’t remove them from the equation. However, you can obtain your own representation to help you work through the process, a person who will help protect you and your assets. A financial consultant can examine your current financial circumstances, determine, in consultation with you, your financial abilities as far as repayment, and help structure the negotiation with the trustee to ensure the best possible deal. Furthermore, working with a financial consultant will give you access to the trustees they’ve worked with in the past, ones they know to be trustworthy.

    Our aim here is not to disparage bankruptcy trustees. There are many reputable, trustworthy trustees out there willing to do their best to achieve a satisfactory solution for all involved. However, it is always smart to have your own representation. Just as you would never head to trial without a lawyer, the same should be said for this financial situation.

    If you’re considering bankruptcy as a debt solution, DebtCare is the best place to start.

    Call us today for a free consultation to discuss your options: 1 (888) 890-0888.

     

     

  • Happy Canada Day from DebtCare

    Happy 150th Birthday Canada!

    Enjoy the Canada Day celebrations with family and friends, check out some fireworks and fill up on some great food! All the best on this momentous national occasion!

  • Demographic Shift? Worsening Income Inequality in Ontario Leading to Higher Rates of Insolvency

    Bankruptcy has, for decades, proven to be an incredibly important resource for those Canadians struggling to meet their monthly obligations, and for good reason. It provides a fresh start when things have become too difficult to handle, providing significant relief from overwhelming debts and reducing the overall amount a person is required to repay.

    That being said, worsening income inequality is making bankruptcy far more common a solution for certain segments of the population. Insolvency rates in Ontario are rising. The economy is making it more and more difficult for those in certain situations to meet rising costs. Who is filing most often? Seniors, millennials and single parents.

    According to a study reviewed by the Globe and Mail, seniors over the age of 60 account for 12% of insolvency filings, whereas those under 30 account for 14%. Single parents were also disproportionately represented in the findings. While single-parent families account for about a fifth of Canadian families, they represent 43% of households with dependents who file.

    For millennials, student loans are a big part of the problem, as is the tough job market. Tuition costs have risen across the country, making it harder and harder for the average Canadian student to obtain a diploma or degree without some debt following them off campus. According to Statistics Canada, the average full-time undergraduate student is paying nearly $6,400 in tuition for the 2016-2017 school year, compared to about $4,400 a decade ago. That’s a big difference. Where is the money coming from? Most often from student loans.

    For seniors, or those looking ahead to retirement, debt is rising (and thus the number of bankruptcies), often thanks to a desire to help their children enter this incredibly turbulent housing market or pay for those sky-high tuition fees.

    Another problem for both millennials and single parents struggling to make ends meet is the dreaded payday loan. With advertisements claiming loans for as little as $1, many heads are turned in the belief that payday loans are the answer for quick cash. However, these have proven to be quite devastating because they quickly become almost impossible to pay off.

    With income inequality continuing to make it harder for certain demographic groups to live without debt, bankruptcy represents an important debt solution that can narrow the gap. If you’re looking to take advantage, just remember to speak with a financial consultant first to secure your own representation, before heading to a trustee in bankruptcy. Since bankruptcy trustees represent both you and your creditors, it is best to have someone with you who has your back.

    At DebtCare, you are our first and only concern. If you’re looking for more information about bankruptcy, please get in touch with us today: 1 (888) 890-0888.

     

  • How to Stop a CRA Wage Garnishment

    With the tax season behind us, those sitting with tax debts may be concerned about payment plans and what actions the Canada Revenue Agency might take to obtain money owed. A CRA wage garnishment is a very common form of enforcement action. If you’re concerned about a possible garnishment, or are currently trying to have one removed, read on.

    The CRA does not need a court order to obtain a wage garnishment. They do not even need to warn you when one is being initiated. They can garnish up to 50% of employment income and 100% of other income, such as contracts and pension income, simply by sending a letter to your employer or clients (if you are self-employed).

    Once a CRA wage garnishment is in place, it becomes even harder to negotiate with the CRA. Often the only way they will agree to remove it is by receiving payment in full.

    If this is not feasible, don’t worry, you have other options.

    To get a garnishment lifted, you may want to consider bankruptcy or a consumer proposal. Once either is filed, the garnishment will be stopped immediately.

    In the case of a consumer proposal, your creditors must accept it to move forward, so if the proposal is not accepted, the garnishment can be re-initiated. However, a strong, well-positioned proposal will most often be accepted.

    In a bankruptcy, a wage garnishment will be stopped, period. There is no need for creditors to accept anything. Once the paperwork has been filed, all enforcement action must cease.

    Knowing which option is best for you depends on your personal circumstances – your income, assets, family composition, debts and more. Discussing your situation with an experienced financial consultant is the most effective way to determine which option will serve you best, both in the short-term and over time.

    Tax debts can’t be ignored – they won’t just disappear on their own, and the CRA can be incredibly aggressive when it comes to collecting. The most important thing that you can do when you have a tax debt is look for a solution as soon as possible. Waiting may just find you struggling to make ends meet. A wage garnishment can be embarrassing and can seriously impact your ability to continue meeting your monthly financial obligations.

    If you are stressed about a current or probable CRA wage garnishment, DebtCare can help. We have years of experience helping Canadians with such problems.

    Call us today for a free consultation: 1 (888) 890-0888.

     

  • How Much is Enough Debt to Warrant a Consumer Proposal?

    Consumer ProposalConsumer Proposal 101 – How Much is Enough Debt to Warrant a Consumer Proposal?

    For those struggling with debt, a consumer proposal represents a very valuable debt solution. If you’ve been thinking about taking advantage of such a solution, there are a few things you may want to know, and this week our goal is to help answer those questions.

    Firstly, to file a consumer proposal in Canada, you must meet the following qualifications:

    • Be an individual (not a business)
    • Be unable to pay your debts
    • Your total debts must not exceed $250k (not including the mortgage on your principal residence)
    • Be able to show that you can pay back the proposal on a monthly basis
    • You can’t be an undischarged bankrupt or in an existing consumer proposal

    When it comes to how much debt is enough to warrant a consumer proposal, there is no established minimum, but people don’t generally file a consumer proposal unless they owe $8000 or more.

    The decision to file a consumer proposal should be less about the total amount of your debt and more about your ability to honour your monthly obligations.

    For example, some people who are honouring their monthly payments of debt choose to file a consumer proposal because they can only manage minimum payments and with interest there is no way that they will ever be able to pay off all their debts.

    How does a consumer proposal work?

    To start, your finances will need to be reviewed and a sum will be arrived at based on a financial calculation of what you can afford monthly. Based on this, a sum that would be distributed to your creditors would be proposed to those creditors as a full and final arrangement.

    If the sum is accepted by your creditors, your proposal moves forward.

    Once accepted, your overall debt is often reduced, interest stops, collection action stops and you are left making a monthly payment over a term of often 4-5 years. A proposal can be paid in full at any time.

    Something to keep in mind is that proposals are administered by bankruptcy trustees, also known as Licensed Insolvency Trustees or LITs. While this individual represents you, they also represent your creditors – they have to do what they believe is best for both parties.

    It is always advantageous to first speak with a financial consultant who specializes in consumer proposals to understand the true scope of what you would be getting into, to better understand the pros and cons, and then structure the financial information to later be presented to the trustee. This way you are as protected as possible throughout the process.

    At DebtCare, your financial consultant works for you, not your creditors, resulting in the best deal for you! Want to find out more about how consumer proposals work?

    Get in touch today by calling 1 (888) 890-0888.

     

  • Paying Off OSAP: Student Loans, Consumer Proposals and You

    When you’ve studied tirelessly and spent years working towards that well-earned degree or diploma, the last thing you want to think about once you graduate is the debt that accumulated in your quest to obtain it. Unfortunately, student loans are unique in their formation, particularly OSAP loans, and so today we attempt to clear the waters. Today we’re talking student loans, consumer proposals, and how you can finally get yourself back on stable financial ground.

    As you’re no doubt aware, depending on the years spent in post-secondary academia and the amount of funding you borrowed in order to get that coveted piece of paper, student loan debts can become quite large. Typically, when you’re studying, and thus paying interest only, or, in the case of an OSAP loan, nothing at all, the debt may not seem like a big deal. However, once you graduate and are required to start paying it back, with interest, things can become very challenging, very quickly.

    A consumer proposal has become a very valuable resource for those looking for relief from debt that has grown to overwhelming proportions. Consumer proposals are great because, in addition to stopping interest and combining the various payments into one manageable monthly payment, a proposal typically results in an overall reduction of your total debt. However, there are certain things you need to know with regard to OSAP loans and consumer proposals.

    First things first: the only way to clear an OSAP loan if you have not been out of school for 7 years is to pay it in full. If that 7 year period has not passed yet, a consumer proposal (CP) won’t result in a reduction of that debt, and once the CP is over you’ll still be required to pay it. That being said, even if it isn’t reduced, a portion of your proposal payment will go to the OSAP loan in addition to your other creditors.

    On that note, if you are facing enforcement action as a result of the OSAP loan, a consumer proposal will stop it, even if you have not been out of school for 7 years. This is an important consideration if your wages are being garnished or your bank account has been frozen.

    On the other hand, if an OSAP loan is over 7 years old – meaning you’ve been out of school for 7+ years – you can include it in a consumer proposal. This means, in addition to the other debts you’ve accumulated, the overall OSAP loan will likely be reduced.

    So, to summarize, if collection action has commenced prior to the 7 year date, a consumer proposal will stop all enforcement action. You will be required to pay the loan in full, but you will have some relief, especially when your other creditors are included in the proposal. If you’ve been out of school for more than 7 years, you can include it as you would any other debt.

    At DebtCare, we know how difficult it can be to deal with student loans. Often a consumer proposal represents your greatest opportunity for relief. Want to discuss your options?

    Please get in touch with us today by calling 1 (888) 890-0888.

     

  • On the Cheap: Free or Cheap GTA Family Activities

    Summer is fast approaching and that means it is time to start planning those family activities and adventures. Yes, we know the summer can become really expensive, really quickly, when you add up all the things you want to do. If you’re looking for something to do that won’t cost an arm and a leg, we’ve compiled a list of fun and free or cheap GTA family activities you can do.

    Free or Cheap GTA Family Activities

    • Become one with nature. Head to the Allan Gardens and take your time winding through the flowers and plants. Admission and limited parking are free.
    • Head to the market. Check out the bustling St. Lawrence Market, the city’s largest market, fill your picnic basket with great local fare and enjoy the entertainment as you stroll through the stalls.
    • Get active. Head out to one of the many public parks in the city. Bring a ball and glove for some catch, a Frisbee or a good book.
    • Get your hands dirty. Head to Riverdale Farm in Cabbagetown. This 7.5-acre facility is a working farm, complete with cows, horses, sheep, pigs and chickens, vegetable gardens and a farmer you can chat with as he does his chores.
    • Head to the beach and cool down. Don’t want to rely on the A/C to keep cool? Head to one of the many beaches the city has to offer. Head to Cherry Beach or Bluffers Beach Park, lay down your towel or spark up a game of volleyball. If it gets too hot, just take a dip!
    • Channel your inner artist. Visit the Art Gallery of Ontario and peruse the permanent collection. Admission is free on Wednesday nights from 6 to 9 PM.
    • Get historical. There are a ton of great museums located throughout the GTA. Every Thursday between 5:00 and 8:00 PM, admission is pay-what-you-can at the Bata Shoe Museum. Shoes not your thing? Drop by the Toronto Police Museum and Discovery Centre and check out stuff like old weapons, uniforms, fingerprinting equipment, and a paddy wagon from 1914. Admission is free seven days a week, even on holidays.
    • Catch a free concert. Several different locations throughout the city offer free concerts and performances all summer long. The Canadian Opera Company, Yonge and Dundas Square, Harbourfront, and Mel Lastman Square are all great places for free entertainment.
    • Get your brew on. If you’re a fan of craft beer, take a free tour of the Amsterdam BrewHouse. Tours take place Monday to Thursday at 5:00 PM and on Fridays at 11:00 AM.

    Summer doesn’t have to break the bank. These free or cheap GTA family activities make it easy.

    If you’re looking for some help getting your finances in order to make summer more stress-free, DebtCare can help.

    Get in touch with us today by calling 1 (888) 890-0888.

     

  • Will a Creditor Actually Sue You When You Default on a Debt?

    We often have clients call us, when debt becomes unmanageable, asking if a creditor will actually sue if you default on a debt. While it may seem unlikely, it is, unfortunately, very common.

    A creditor may sue you themselves, hire a paralegal to cover it, or assign your account to collections, whereby the collection agency may sue you. If a judgement is secured against you, they can then take enforcement action to obtain the funds owed.

    Enforcement action may include a wage garnishment, a property lien or a frozen bank account.

    All of these are embarrassing and could have other consequences.

    A wage garnishment not only reduces your income (as the money is taken from the source to pay the debt), it also lets your employer know that you have a financial problem. This is particularly problematic for those in jobs where you have to be financially responsible. If you’re self-employed, the notice of garnishment is sent to your clients and intercepts their payments to you, letting them know that you’re financially in trouble. This can damage your reputation.

    A lien on property will effectively mean that you can’t refinance the asset and could mean additional fees and financial consequences to get the lien discharged when it is paid. It will also make the creditor a secured creditor, thus reducing financial options should you decide to file a consumer proposal or a bankruptcy.

    Not only will a frozen bank account result in an inability to access funds, it can damage your relationship with your bank. This may result in them choosing to suspend other credit products, make changes to your account (i.e. removing an overdraft), or deciding not to extend credit to you in the future.

    If a creditor is threatening to sue you, you need to take action now. Waiting will often just result in one of the above.

    If you find yourself worrying about such things, the first question to ask is why you are in this situation to begin with. Do you have financial challenges making it hard to pay your debt? Perhaps you just need a fresh start.

    A consumer proposal is a great way to consolidate debt and:

    • Stop collection action – even a lawsuit or enforcement action from a judgement (as long as it’s not a lien)
    • Stop interest
    • Reduce debt in most cases
    • Consolidate everything into a single monthly payment

    If you owe and your creditor is threatening to take you to court, don’t assume that this is an empty threat. Once legal action is initiated, you may find yourself in much deeper financial waters.

    At DebtCare, we can help you deal with your debt before it gets to this point, or, if it has already reached this point, help you stop that enforcement action.

    Call us today 1 (888) 890-0888.

     

  • What is a Licensed Insolvency Trustee (LIT)?

    When you’re researching your options for getting control of your debt, you may find yourself confused by the vast array of terms out there – both for the options and the people who provide and manage them. This week, in an effort to clear some of the confusion, we are covering one crucial term – Licensed Insolvency Trustee.

    A Licensed Insolvency Trustee (LIT) is a federally regulated professional who provides advice and services to those with debt problems. They are authorized to administer government-regulated proceedings, such as consumer proposals and bankruptcies.

    Often, when individuals start thinking about their options for dealing with problem debt, a bankruptcy trustee or Licensed Insolvency Trustee is the first person who comes to mind. However, there is the misconception that a trustee represents you. While a trustee does represent your interests, they are also representing your creditors’ interests. Their role is to negotiate a satisfactory arrangement for all involved.

    Therein lies the problem. Once you provide information to your trustee, under the assumption that it is private, the trustee will then structure your bankruptcy accordingly (this is what they are required to do). Any information you provide is fair game and will be used to get the largest payout for your creditors. Furthermore, in the case of a consumer proposal, your Licensed Insolvency Trustee is paid based on the size of the proposal. This means that a larger proposal amount equals more revenue for them – there is no incentive to get you the best deal.

    If you are struggling financially and are considering a consumer proposal or bankruptcy to help you regain control, the best thing you can do is speak with a financial consultant with experience helping people deal with problem debt.

    Such a person, hired by you to represent you and only you, will review and structure your financial information based on that review and a realistic plan that you can afford. They will then present a solution to a trustee they know and trust, one they’ve had past dealings with, and co-ordinate the process and help you throughout.

    When you’re drowning in debt, there are many benefits to bankruptcy or a consumer proposal. Both represent an important resource, you just need to be sure that the person standing beside you is actually concerned about your financial welfare.

    At DebtCare, we know how best to protect you. Instead of heading straight to a Licensed Insolvency Trustee.

    Call us first. We represent you. 1 (888) 890-0888.

     

  • Dealing with Income Tax Debt – What Happens if You Owe?

    The income tax filing deadline is April 30th, and that means, if you owe a tax debt to the Canada Revenue Agency (CRA), you may be wondering what happens when you owe and how long you’ve got before the CRA will start asking for their money.

    Firstly, failing to file is never a good idea, even if you know you will owe. Failing to file will result in penalties and interest, as well as possible enforcement action. These add up quickly. If you haven’t filed yet, try to do so soon.

    Furthermore, not filing may be considered tax evasion. At the very least, you may be notionally assessed, meaning the government will estimate your income and then assess penalties and interest. The worst-case scenario, if you choose not to file, is that you could be prosecuted.

    If you file and owe a tax debt, you’re in a better position because you won’t have those added penalties and you won’t face prosecution. However, the CRA won’t wait for years to pass before attempting to collect. We have seen taxpayers’ accounts frozen within the current tax year. For example, one taxpayer filed on time, owed $3000, and had their account frozen the following January.

    A tax debt is a financial problem that should be addressed quickly – you can’t wait around hoping for the best. There really is no ‘best’ here.

    The CRA will want to be paid in full. Agents are not interested in making negotiated settlements or agreeing to long-term payment plans. That just isn’t how they operate, no matter how dire your situation is. If you don’t have the money on hand to pay in full, here are some of your financial options:

    • If you have good credit, you may want to consider obtaining a line of credit or loan from the bank. This option will rely on your ability to repay that debt, but on more reasonable terms. However, if you are already loaded with debt, it may not be the best solution because the interest is higher on unsecured credit.
    • Use home equity to finance the tax debt. This is typically the lowest interest option but you will need a home and some equity to take this route.
    • A consumer proposal. This is a no-interest option that will offer a low monthly payment and will sometimes even reduce your amount of total debt. There are some implications to credit to be considered, but if you’re already drowning in debt it could represent the best financial option overall.

    The best way to deal with a tax debt you can’t pay in full is to speak with a financial consultant who understands all of your available options. Don’t go directly to the CRA as this will result in far fewer possible choices and things could become even more problematic as far as repayment.

    At DebtCare, we can walk you through all of your options and get that tax debt off the table.

    Call us today for a free consultation: 1 (888) 890-0888.