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  • What is a Good Budget and What is a Debt Service Ratio?

    The first step to building a positive financial future is to have a budget and to understand your debt service ratios. What is a debt service ratio? There are actually two kinds of debt service ratio. A debt service ratio is a measurement used by the bank to determine if your bills represent an acceptable proportion of your income.

    The two primary debt service ratios are your gross debt service ratio (GDS) and your total debt service ratio (TDS).

    Your gross debt service ratio represents your monthly house payment divided into your gross monthly income, expressed as a percentage. The maximum acceptable gross debt service ratio is 30%. With that said, 30% is the limit so if your GDS is 30% that is not really positive. A healthy budget should include a GDS that’s approx. 25%. If your GDS is more that 30% this is an indicator that your housing payments are too high.

    Your total debt service ratio represents your monthly housing payment plus your monthly payments to all loans and credit cards, divided into your gross monthly income and expressed as a percentage. The maximum total debt service ratio is 40%. With that said, 40% is the limit so if your TDS is 40% that is not really positive. A healthy budget should include a TDS that’s approx. 30%. If your TDS is more than 40% it is an indicator that either your housing payments or your payments of other debt are too high.

    GDS and TDS are two components of a budget. What is a good budget? A good budget involves reasonable housing payments and reasonable payments of debt and expenses with surplus income left over to contribute to savings. A good budget should factor in all of your expenses. One key to positive money management is awareness. There are three primary budget related factors that contribute to families that live paycheque to paycheque. The first is unrealistic housing payments, the second is over spending and the third is too much debt.

    When looking at your budget, consider what you spend on things like entertainment, food (especially take out and dining out) and shopping. These are the three most common places that wasteful spending occurs. Avoid credit cards and use cash as opposed to your debt card an effective way to be more aware of what you spend and to avoid incurring more debt. Set yourself a daily cash allowance that includes a weekly personal reward so following your budget is not all work with no play.

    Where debt is concerned, take a good hard look at how much you owe and how you are paying your creditors. If you are only able to make minimum payments or are finding it difficult to even make minimum monthly payments, this is a sign that you may be over-extended. Sitting down with a debt consultant is one good way to realistically review the debt that you owe and your budget to come up with a financial strategy to deal with debt and improve your financial situation. If you still have questions as to what it a good budget or about debt-servicing, debt consultants can generally answer those questions for you too.

    For more information about building a good budget and gaining a better understanding of your debt service ratios please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca

  • Wage Garnishments in Canada – How to Stop a Garnishment on Your Wages

    Thousands of Canadians have their wages garnished each year. In the past few years there have been more instances of individuals having their wages garnished because of the turbulent economy. Wage garnishments in Canada occur when one party believes that another party owes him or her money and pursues enforcement action.

    Wage garnishments in Canada are generally issued in one of three ways.

    The first most common reason a wage garnishment is issued is when a debt is owed to the government and the individual is unable to make a satisfactory, voluntary repayment arrangement. Some examples of this are: tax debt owed to The Canada Revenue Agency or The Minister of Finance or a debt owed to the Province and/or Federal Government for an unpaid student loan. If the government wants to place a garnishment on your wages, they don’t have to obtain a court order to do so. If you want to know how to stop a garnishment on your wages, the answer is pretty much black and white. You either have to make an acceptable voluntary repayment plan with the government so that they agree to lift the garnishment on your wages or participate in a Federal Government program to seek debt relief. Wage garnishments that are issued by the government can be applied at up to 100% of your wages.

    The second most common reason that a wage garnishment is issued is when one party sues another party in the Superior Court of Justice and is awarded judgement. Once awarded judgement he or she can apply to garnish the individual’s wages. A common occurrence is when an individual defaults on a debt to a creditor and then the creditor sues him or her in the Small Claims Court. When a wage garnishment is issued through the Small Claims Court in Ontario your wages can be garnished up to 20% of your net earnings. If you want to know how to stop a wage garnishment issued by the Superior Court you have three choices. Make a voluntary payment plan arrangement with the party who sued you where they agree to lift the wage garnishment, to make a motion to the Court offering a voluntary payment plan and asking that the wage garnishment be set aside, or by applying to a Federal Government program for debt relief.

    The third most common reason wage garnishments are issued is as a result of child support arrears. If you want to know how to stop a wage garnishment for child support arrears you have only one choice and that is to apply to the Court to have it removed. This can be very challenging to accomplish. A Federal Government program will not stop a wage garnishment for unpaid child support.

    The fastest most effective way to stop a wage garnishment is through a Federal Government program. The benefit achieved by leveraging a Federal Government program to stop a wage garnishment is that the garnishment will be stopped, interest will be frozen, in many cases you can have the principal amount of the debt that you owe reduced and make a voluntary monthly payment.

    Participating in a Federal Government program will require that you include all debt that you owe. If you have debt to other creditors like credit card providers, loan providers, unpaid cell phone bills etc., these debts will also be covered under the Federal Government program. This will mean that they too will have their interest frozen and in many cases the principal debt reduced. In the event that you had several debts you would make a single monthly payment under the Federal Government program.

    If you are having a financial problem and your wages are being garnished it could lead to increased financial hardship. You don’t have to suffer and there are options available.

    For more information about wage garnishments in Canada and how to stop a garnishment on your wages please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca.

  • What is a Trustee?

    What is a trustee? A trustee is a person who holds property, authority, or a position of trust or responsibility for the benefit of another. In the case of an “estate trustee” the trustee could be a company or an individual. An estate trustee in the case of an individual who dies or is incapacitated,  represents the deceased or the incapacitated individual.

    There are other types of trustees though in specific matters that have different responsibilities and are appointed by the government to administer an estate according to legislation.

    What is a trustee in bankruptcy? In Canada, a trustee in bankruptcy is an individual or a corporation licensed by the Superintendent of Bankruptcy to hold in trust and, subsequently, to distribute bankrupt’s property among the creditors in accordance with the Bankruptcy and Insolvency Act (BIA). The bankrupt and all other persons holding the bankrupt’s property must transfer the property to trustee until he or she can determined how the estate shall be administered. “Property” includes income and assets. The trustee may also assist individual in preparing and submitting a consumer proposal to creditors.

    Where an “estate” trustee would act to carry out the intent of the deceased or in the best interest of the incapacitated individual, a “bankruptcy” trustee acts in the best interest of the bankrupts creditors and it is his or her obligation to recover as much money from the estate as possible for the benefit of the creditors.

    In Canada, consumers and businesses often find themselves confused, pondering the question “what is a trustee?” and many get the impression that the trustee in bankruptcy represents their best interests. This is because so many trustees aggressively advertise to people who have financial problems. They do this because they aren’t profitable unless they have individuals and businesses approaching them to file for bankruptcy or to file consumer proposals. These advertisements often promote debt solutions, debt settlements and debt help. When you visit the trustee he or she will often only offer one of two choices: a bankruptcy or a consumer proposal. Inevitably the question is who does the “debt solution” benefit in the end?

    In the case of a bankruptcy the trustee is paid a “tariff” a “fee” from the proceeds of the bankrupt estate. In the case of a consumer proposal the trustee receives remuneration based on a percentage of the amount of the consumer proposal that he or she negotiates.

    When you visit the trustee he or she will require that you provide complete disclosure of your income and assets. If the trustee determines that a consumer proposal is the only legal remedy to your debt, he or she will then determine the amount of the consumer proposal based on your ability to make monthly payments over 4-5 years. For example, if you owe $20,000 and the trustee determines that you can afford to repay your creditors at 100 cents on the dollar, on a monthly basis over 5 years then the amount of the consumer proposal will be $20,000, 100% of the debt owed. If the bankruptcy trustee determined that you can only afford to repay $13,000 over 5 years then your consumer proposal would be 65% of the debt owed. The challenge is that the smaller the consumer proposal, the less remuneration to the trustee, which provides an incentive to the trustee to arrange larger proposals. In addition and as we mentioned earlier the trustee is required by law to secure the greatest amount of repayment possible for the benefit of your creditors.

    It is for this reason that approaching a trustee directly to discuss your debt can be a risky proposition. In the past 5 years, this has spawned new industry: debt consulting. Debt consultants are familiar with the BIA and are able to evaluate your estate to help you determine which option is right for you and they can even negotiate on your behalf with bankruptcy trustees.

    This provides the insolvent person or debtor with a number of benefits.

    1.      Because the debt consultant is hired by the debtor, he or she represents the debtor`s best interests, not the creditors.

    2.      The debt consultant can interpret financial information and often negotiate a better deal than the consumer or business would have achieved had they visited the trustee directly.

    3.      The debt consultant can request evaluations of assets like homes and vehicles to ensure that the trustee does not over-estimate an asset resulting in you paying more in a consumer proposal or bankruptcy.

    4.      The debt consultant can work with you to come up with a financial plan to rebuild your credit and finances after a bankruptcy or a proposal.

    A bankruptcy or proposal offers many benefits and can provide a person who has a financial problem with immediate debt relief, including stopping collection action like a wage garnishment. Like anything else, researching a solution to a financial problem is truly “buyer beware” and if you are considering an avenue for debt relief like a bankruptcy or consumer proposal, we do not recommend that you do so unrepresented.

    For more information about a trustee in bankruptcy or if you are struggling with a financial problem please visit www.debtcare.ca or contact Michael Goldenberg at DebtCare Canada by calling 416 907-2582 for more information.

  • What is a Consumer Proposal in Canada? Pro’s and Con’s

    Individuals and businesses in Canada are very fortunate to have many options available to them should they run into financial problems. One option that many individuals and businesses with unmanageable debt choose is a consumer proposal.

    What is a consumer proposal in Canada? Well, a consumer proposal is a legal option mandated by the Federal Government. It enables consumers and businesses to settle debt at much less than they owe, freeze interest and make a single monthly payment that is disbursed to their creditors.

    Generally, a consumer proposal becomes an option when individuals or businesses are bringing in much less income than they were at the time they took out credit. This could occur due to job loss, disability, divorce, or loss of contracts or business. Another scenario where a person may consider a consumer proposal is when he or she has racked up a lot of debt and is only making minimum monthly payments with no reasonable ability to pay off the overall debt. The common denominator is that debt has become unmanageable and the individual or business that is in debt needs debt relief.

    The single biggest “con” as it relates to a consumer proposal is the myth that it will hurt an individual’s credit. A consumer proposal will remain on an individual’s credit report for 3 years from the date it is paid in full. This is a non-issue where the party has already begun defaulting on money owed to creditors because he will have likely already damaged his credit for a long period of time. When an item goes into default on an individual’s credit, it will remain there for 6 years from the date it is paid in full.

    Consumer proposals offer many “pros”. First, a consumer proposal provides debt relief. Once a consumer proposal has been accepted, all creditors must stop any enforcement action being taken. Enforcements actions like frozen bank accounts and wage garnishments will be stopped immediately.

    Second, a consumer proposal involves settling debt for less than what was originally owed. Third, consumer proposals enable the individual or business who files to make a single monthly payment that is much less than what they had been paying prior to filing the consumer proposal.

    Trustees in Bankruptcy administer consumer proposals. This can pose a challenge because trustees act for the creditors involved in the proposal, in addition to the individual or business who is filing it. They are compensated based on the size of the consumer proposal they negotiate. These two factors can often result in the individual or business filing the consumer proposal not getting the best deal.

    How do you know that a consumer proposal is the best option to deal with your financial problem? There is no easy answer to this question. The right answer to your financial problem will depend on your personal circumstances. Determining the right choice will involve a detailed review of your assets, liabilities and budget.

    Financial consultants and debt counsellors who routinely arrange consumer proposals will be able to perform this review and because you pay them, you will be assured that you are receiving impartial advice and not a sales pitch. It may end up that a consumer proposal isn’t the best choice for you.

    For more information about this article topic “What is a Consumer Proposal in Canada” or to receive a review of your financial situation contact Michael Goldenberg at DebtCare Canada by calling 416 907 2582 or visit www.debtcare.ca

  • Debt Consolidation Options in Ontario – We List the Different Types of Debt Consolidations

    In Ontario, when consumers or businesses finds themselves in financial trouble there are a number of financial options available to help deal with their debt. In this article, we list the different types of debt consolidation to help you understand which options are available to you if you are having problems managing your debt.

    Debt consolidation option number one – use your home to consolidate debt. If you have some equity in your home, it is a very effective choice for consolidating debt. Refinancing your first mortgage, taking out a second mortgage or a home equity line of credit will enable you to obtain low  interest financing to consolidate your debt. Mortgages enable you to amortize your monthly payments so you will often have more flexibility when negotiating the amount of those payments.

    Debt consolidation option number two – an unsecured loan or line of credit. Where this option is concerned, do lots of research. There are finance companies that offer unsecured consolidation loans at sky-high interest rates. Interest rates that are higher than what you may be paying on your credit cards. They may try to sell you on the benefit of a single monthly payment, which may be lower than what you are paying now – but this could cost you big time in the long run. If you cannot pay your minimum monthly payments any longer and your bank does not approve you for a prime rate loan or line of credit to consolidate your debt, take time to think about your choices before jumping into a high interest consolidation loan with a finance company.

    Debt consolidation option number three – credit counselling. Credit counselling agencies are not for profit organizations who obtain funding from the big banks. They will offer you a single monthly payment and pay your debts on your behalf. While you may think that you have received a debt consolidation loan because you are making a single monthly payment, this is not a consolidation loan. Your creditors will receive significantly less than what you owe and these credit counselling programs will cause major damage to your credit report. The repayment could be over 5-6 years and the credit counselling program will be reported on your credit report for 3 years from the date it is paid in full.

    Debt consolidation option number four – consumer proposals. Like credit counselling this is not a consolidation loan but many trustees in bankruptcy promote them as though they are because they involve a single monthly payment lower than what you have been paying on a monthly basis. They are a better choice than a credit counselling program because, if negotiated properly, they can significantly reduce the overall amount of debt that you owe. Like credit counselling, a consumer proposal will stay on your credit report for 3 years from the date it is paid in full, however, they do often offer shorter repayment terms. They also offer you protection from your creditors and will stop a wage garnishment or other enforcement option because they are federally mandated whereas credit counselling is not.

    How do you know which debt consolidation option is the right one for you? For starters, consider a debt consolidation the same way you would a big ticket purchase. This truly is an example of buyer beware, because when you go to a bank, finance company, credit counselling agency or Bankruptcy Trustee, their objective will be to sell you their products and services. When working with a financial consultant or debt counsellor you can determine the right option and obtain professional guidance to secure the best outcome.

    For more information about debt consolidation options in Ontario or to obtain advice with respect to your personal financial situation contact Michael Goldenberg at DebtCare Canada by calling 416 907 2582 or visit www.debtcare.ca

  • Why do Debt Counsellors Charge a Fee for Debt Help in Ontario?

    Debt counsellors are not “not for profit” credit counselling agencies and are actually a form of financial consultant. This often gets misconstrued because credit counselling agencies promote debt help in Ontario; what is not known is the fact that they are largely funded by the major banks and are often not the right choice if you are struggling with a financial problem.

    Debt counsellors represent individuals and businesses that have problems managing their debt. They do charge a nominal fee for their services because they are not funded by anyone else. They represent you exclusively in whatever choice you make, as it relates to strategizing a way out of debt.

    When you visit a debt counsellor to get debt help in Ontario, she will review all of your financial information. This includes your income, assets, liabilities and budget. She will provide you with many scenarios for you to choose from, all designed to help you deal with your debt. These scenarios could include a new budget, a debt consolidation, a debt settlement, consumer proposal or, where necessary, a bankruptcy.

    Due to the fact that they do not administer bankruptcies and consumer proposals  the way Bankruptcy Trustees do, they will not recommend bankruptcy or a consumer proposal as an option unless it is absolutely necessary. Bankruptcy Trustees only make money if you file a bankruptcy or consumer proposal. In the case of a bankruptcy, they are paid a tariff out of the proceeds of the bankruptcy. In the case of a consumer proposal, they are paid a percentage of the consumer proposal. If you qualify for a consumer proposal or bankruptcy, they will arrange it for you; however, that doesn’t necessarily mean it is the best choice for you. It means that it is the only choice they can offer you based on the tools they have available to them.

    Debt counsellors charge a fee for debt help in Ontario because they will do a considerable amount of work while representing you and ensuring that you make the right choice for your situation. Bankruptcy Trustees do not represent you; they are officers appointed by the Superintendent of Bankruptcy to administer bankruptcies and consumer proposals. Their mandate is to administer a bankruptcy, ensuring that the creditor receives as much money as possible. While they may appear to represent you, because you sign your final paperwork with them and grant them legal status, they in fact are acting in the best interest of your creditors.

    This brings us to the next reason that debt counsellors charge a fee for debt help in Ontario. If it happens that a consumer proposal is the best choice for you, there are two major reasons that you benefit from being represented by a debt counsellor:

    1.       In the case of a consumer proposal, the Bankruptcy Trustee gets paid based on a percentage of the consumer proposal that they arrange for you. The more they can negotiate for you to repay your creditors, the more money they will earn. This means that you may not always end up with the best deal. A debt counsellor will help to negotiate lower consumer proposals in many cases. Lower than what you would have been offered had you gone to a Bankruptcy Trustee directly, which could save you thousands!

    2.       A Bankruptcy Trustee will almost always try to get you to file a consumer proposal, even if you also qualify for bankruptcy. In a bankruptcy, your creditors receive much less money and so does the Trustee. If they present you with a consumer proposal as an option, as opposed to a bankruptcy, they make more money. The problem is that if in fact you are insolvent, you will inevitably end up having problems making the payments required by the consumer proposal. The payments will last for a much longer length of time when compared to a bankruptcy.

    At the end of the day, if your debt has become unmanageable, it makes complete sense to obtain a financial opinion and even representation from an unbiased party. One who understands the world of finance in depth, thereby ensuring that you make responsible financial choices that protect your wallet.

    If you would like more information about why debt counsellors charge a fee for debt help in Ontario or if you are struggling financially, please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca

  • What is a Bankruptcy Trustee in Ontario and What is Their Role in a Debt Restructuring?

    A Bankruptcy Trustee in Ontario plays an important role when it comes to debt restructuring. Bankruptcy Trustees across Canada are appointed by the Superintendent of Bankruptcy to oversee bankruptcy and consumer proposal filings in Ontario.

    It is important to understand what a bankruptcy trustee in Ontario is and what his role is with regard to debt restructuring before going to see one directly. The most significant fact that you need to be aware of is that the trustee administers the estate of the debtor as its legal representative, but his financial incentive when a bankruptcy or consumer proposal is filed is to maximize the return to the creditors.

    What does this mean to you? Well, when you go to see the Bankruptcy Trustee to make a full financial disclosure, it is no different than going to your creditor to make a financial disclosure. Keep in mind; the role of the Bankruptcy Trustee is to obtain the greatest possible amount of money from you, all to the benefit of your creditors.

    Bankruptcy and consumer proposals have, to some extent, become an industry of their own in Ontario. The Bankruptcy Trustee is a court-appointed officer and is supposed to take a neutral role in your bankruptcy or consumer proposal filing; however, they are frequently advertising in the mainstream media as a safe place for you to go for counsel when struggling with debt. This could not be further from the truth.

    The truth is, visiting a Bankruptcy Trustee is no different than speaking to the CRA directly about your tax problem without representation from an accountant or a tax lawyer.

    When you go to a Bankruptcy Trustee, he or she will ask for complete financial disclosure with regard to your income, assets and liabilities. They will try to find as much income and liquidity as possible to drive up the amount of your bankruptcy or consumer proposal, all to the benefit of your creditors. We surmise that in some cases, also to the benefit of their own fees.

    Another challenge is that in many cases a consumer will unwittingly omit information when they file for bankruptcy. The Bankruptcy Trustee will often accept whatever information you provide based on your word. Once the bankruptcy or consumer proposal has been filed, the trustee will then engage in a rigorous and determined process to validate your disclosures. If the trustee finds additional income or assets, he or she will adjust the amount of money that you have to pay. In the case of a bankruptcy, what begins as a predetermined length of repayment may snowball into a seemingly endless repayment. You will not be able to get discharged until you have paid the Bankruptcy Trustee all of the money that the trustee believes you owe.

    Just as there are accountants and tax lawyers who represent people when they have a tax problem, there are financial consultants who can represent you if you have a debt problem. They can prepare your information, educate you about your choices, administer your paperwork and hold your hand through the process of a bankruptcy or consumer proposal, ensuring that you get a fair deal that protects you.

    For more information about Bankruptcy Trustees in Ontario, their role in a debt restructuring or to get representation in a bankruptcy or consumer proposal please contact Michael Goldenberg at DebtCare Canada by calling 416-907-2582 or visit www.debtcare.ca

  • DebtCare Canada at The Financial Technology Tradeshow

    We had a great time at The Financial Technology Tradeshow this past week. Thank you to everyone and it was a pleasure to connect with so many financial professionals. Here are our photos.

     

     

     

     

     

     

     

     

  • PRESS RELEASE – September 2011 – The WeCare Canada Initiative

    TORONTO SEPTEMBER 16, 2010 – DebtCare Canada, a Canadian financial consulting firm is announcing a new initiative, WeCare Canada, aimed to provide public education to help Canadians who struggle with debt.

    Through WeCare Canada, DebtCare Canada will be reaching into communities offering programs and resources to help families paralyzed by debt. DebtCare Canada offers families a wide range of tools and resources to deal with their debt. The solution could be a simple as a one-on-one counselling session with a Financial Counsellor and some re-budgeting. In more complex situations, individuals can gain help with financial restructuring and access to third party resources that may offer the solution to their financial problem.

    Through WeCare Canada, DebtCare Canada Financial Counsellors will be available to host “WeCare Days” at local community centres, places of worship and other agencies where the community congregates. On WeCare Days, The DebtCare Financial Advisor will offer free counselling sessions to individuals who chose to attend for help.

    In May of 2011 the Globe and Mail reported that based on Canada’s total household debt, that the average household debt per Canadian is $41,740. It is time that Canadians start to have a serious discussion about debt and the WeCare Canada initiative aims to start that discussion.

    As part of this announcement DebtCare is proud to announce that Karen Goldenberg has joined the DebtCare team as Director of Community Outreach. The former CEO of JVS Toronto, Karen brings extensive experience to the DebtCare Canada team having led successful private and non-profit charitable health, education and social service agencies. Karen will head up the WeCare Canada initiative with a mandate to build awareness of DebtCare’s continued mission to end the epidemic of personal over-indebtedness in Canada.

    If you would like more information about the WeCare Canada please contact Karen Goldenberg at 888-890-0888 to set up an appointment at your convenience. You can also visit www.debtcare.ca/wecarecanada or www.facebook.com/wecarecanada.