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Category: Consumer Proposal

  • What to Do if You Have a Large Tax Debt That You Can’t Pay

    Many of us have been there; sitting with a major tax debt with no foreseeable way to pay it off. This is a common and incredibly stressful situation to find yourself in. The Canada Revenue Agency is ruthless, and when money is owed, you can’t ignore the issue. This week we discuss what you can do if the CRA is knocking on the door and you don’t have a way to pay.

    First of all, what will the CRA do if you can’t pay? The CRA isn’t interested in considering why you can’t pay. Instead, they will take enforcement action as soon as they feel it is prudent. This may include a wage garnishment, a frozen bank account or even a property lien. These are serious actions that can cause significant stress financially.

    Furthermore, the CRA does not require a court order to levy such enforcement action, nor are they required to notify you prior to putting one (or all) in place.

    So, what can you do to deal with a large tax debt if you don’t have the funds to pay it in its entirety?

    One option you may want to explore is taking advantage of the equity you have in your home. If you own your home and have paid off a significant amount, this may be easily done. However, if you don’t own your home, don’t have significant equity or have bad credit, this option likely won’t be open to you. Also, if the CRA has placed a lien on your home as a result of the tax debt, your ability to take this route is greatly reduced.

    Obtaining a personal loan may also be an option. This way you can break down the large debt into manageable monthly payments. However, as with accessing home equity, if you have bad credit you may not quality or will only qualify at a very high rate of interest.

    A consumer proposal or bankruptcy may be another option. These two represent an important option for those with debts aside from the tax debt. Both of these options can not only lower the overall debt, you can also stop worrying about interest accumulating. Both will also stop any current enforcement action the CRA (or any creditor) has taken against you.

    The best thing to do if you have a large tax debt is to formulate a plan. A good financial consultant, hired by you – not your banker or a trustee – can help by looking in depth at your finances and examining the different scenarios that are available to deal with your tax debt.

    A skilled financial consultant should understand financing options such as mortgages and lines of credit, insolvency (proposals and bankruptcies) and also CRA policy. They should be able to help you plan and administer the decided upon solution. You can also count on them to remain in your corner, protecting your interests throughout the entire process.

    If you have a large tax debt and can’t pay, time is not on your side. The longer you wait to deal with it the more leverage the CRA gains.

    Don’t wait. Call DebtCare today at 1-888-890-0888.

     

  • What is the Difference Between a Consumer Proposal and Bankruptcy?

    Often we have clients come to us with financial troubles looking for advice regarding the difference between a consumer proposal and bankruptcy. While both are very valuable resources when it comes to dealing with debt that has spiraled out of control, there are significant – and important – distinctions between the two. Today we discuss those differences.

    What is a consumer proposal? A consumer proposal is a process by which you put forth a proposal to your creditors presenting, based primarily on your income, an amount to be repaid on a debt over a period of typically 5 years. This amount is often far less than the current debt owed. All creditors must be included in the proposal and a majority must accept. Once accepted, you begin making a single monthly payment to your trustee which is then distributed to your creditors.

    The benefits of a consumer proposal are numerous. Firstly, as mentioned, the amount to be repaid is often far lower than what you actually owe. Additionally, when a consumer proposal is filed, interest stops accumulating and your creditors are required to stop taking collection action against you. This means that any wage garnishments and frozen bank accounts must be lifted.

    What is a bankruptcy? Unlike a consumer proposal where you propose an amount to your creditors, when you file for bankruptcy, you enter into a legal contract to assign (surrender) everything you own to a trustee in exchange for the elimination of your debts. In bankruptcy, you are not paying against an agreed amount – rather the number of months you have to pay is based on your income. For a first time bankrupt this is typically 9 or 21 months. Once you’ve completed the payment schedule and the terms of your bankruptcy, you are discharged and your bankruptcy is essentially done.

    Completing the terms of your bankruptcy means more than just paying monthly – it is also means participating in credit counselling and disclosing all extra income you receive. If you receive more income during your bankruptcy than what was provided at the time you filed, you may be subject to additional surplus income, meaning you will have to make additional payments in your bankruptcy.

    The benefits of bankruptcy are, as with a consumer proposal, numerous. You’re required to make only a single monthly payment, interest stops accumulating and your creditors must remove all enforcement action currently levied against you.

    Which option is best for you? As with any major financial decision, the answer to this question depends on your current financial situation. A main consideration is how much you earn as well as what assets you have. A financial consultant will be able to review your finances and recommend the solution that is best suited for your personal circumstances.

    One final note. Both a consumer proposal and bankruptcy must be administered by a trustee in bankruptcy, but be forewarned. While this individual does represent you, they also represent your creditors, meaning your interests are not protected. You are best served by speaking first with a financial consultant, someone who can protect you and negotiate on your behalf. At DebtCare, we stand in you corner.

    Protect yourself by calling us first. 1-888-890-0888.

     

  • Does CRA Collections Need a Court Order to Take Enforcement Action?

    When you owe money to the Canada Revenue Agency, it is very different from owing money to a regular creditor, but at the same time very similar. While a regular creditor can indeed take measures to collect the debt, the same measures taken by the CRA, CRA collections doesn’t need to follow the same route. A regular collections agency has to take certain steps before taking enforcement action against you, most notably obtaining a court order. CRA collections does not.

    That’s right; CRA collections can levy enforcement action, including freezing your bank account, garnishing your wages, even placing a lien on your home, without first acquiring court approval.

    Furthermore, they don’t need to make you aware of the enforcement action.

    Once CRA collections has taken enforcement action, the only way to have it removed (other than paying the debt in its entirety) is through a consumer proposal or bankruptcy.

    In a consumer proposal, a proposal is made to your creditors – in this case the CRA – based on a calculation of your debt, income and expenses. If the CRA accepts the proposal, you make a single monthly payment and interest is stopped. As soon as the consumer proposal is filed, enforcement action is stopped. In many cases, not only will the consumer proposal stop enforcement action and interest, it may also reduce the overall amount of your tax debt. Often repayment of a consumer proposal takes 5 years – a much longer period of time (and thus lower monthly payments) than the CRA would accept had you called to negotiate directly with them.

    In the case of a bankruptcy, the process is different. You do not make a proposal to the CRA. In a bankruptcy (first time), an income calculation is done and a reasonable monthly payment amount is established. Once filed, you will pay monthly for 9 or 21 months, depending on your income. Once you have completed the terms of the bankruptcy – paying monthly, disclosing all income, paying any surplus income, participating in credit counselling – you will receive your discharge and can begin rebuilding your credit. As with a consumer proposal, as soon as the CRA is notified of your bankruptcy, collection action will stop.

    While both a consumer proposal and bankruptcy are administered by a trustee in bankruptcy, we don’t recommend going directly to a bankruptcy trustee. The trustee is not your representative alone and anything disclosed to them will also be shared with the CRA. The best approach is to speak with a financial consultant first, one who can manage this process and can be trusted to keep your financial information confidential as you formulate a plan.

    At DebtCare, we can help you develop a strategy to protect yourself. Call us first: 1-888-890-0888.

     

  • Dealing with Holiday Debt in 1-2-3

    The holiday season is officially behind us and that means kids are back at school, the parties are over, and the decorations have been taken down. It also means that the holiday bills are on their way if they haven’t already arrived. We all want to give our families a great holiday, and often that means shelling out a significant amount of money on gifts and food and everything else required for the perfect holiday, but this desire can also result in significant financial stress. Today we talk dealing with holiday debt.

    When ready cash is unavailable, many families turn to their credit to manage shortfalls over the holidays. This can result in an endless stream of credit card bills come January – credit card bills that can quickly become difficult to handle, especially when you consider the rate at which interest accumulates, particularly when you’re only making minimum payments.

    Thinking about how you will get on top of all these bills? Here are some consolidation options that can help when it comes to dealing with holiday debt:

    • A loan. If you have good credit, a loan can help to merge all of those high interest debts into one, manageable monthly payment. However, if you have bruised credit or a great deal of debt, a loan will be difficult to obtain and thus may not be the best option. Additionally, if a loan is on the table even with bruised credit or a mountain of debt, you may be looking at an interest rate of 20-30%, which may be even higher than the ones you currently have.
    • Refinancing your home. If you have equity in your home, refinancing your home can be a great choice for dealing with holiday debt. Refinancing your home will often result in lower interest rates and more flexible repayment terms.
    • Government programs. There are programs made available by the government to help reduce debt and consolidate those numerous payments into one single payment. These programs will also mean freezing interest. The ability to take advantage of these programs largely depends on your personal financial circumstances and reasonable ability to repay your debt.
    • An example of a government program is a consumer proposal. A consumer proposal is an intelligent method for dealing with holiday debt. A consumer proposal involves filing a proposal with all of your creditors, who then need to accept it. Once accepted, your debt may be reduced and all payments are combined into one monthly payment.

    Prior to making a decision, the best approach is to have a financial assessment completed by a financial consultant who can look at your finances and help to arrange the most effective option.

    Don’t let the thought of dealing with holiday debt keep you from making plans for the new year.

    Call DebtCare today at 1-888-890-0888 – we can help.

     

  • Going Debt Free: Consumer Proposals in 1-2-3

    A consumer proposal is a legal avenue for dealing with debt. Over the last few years, this has become a very popular option for Canadians looking to deal with financial challenges. Today, in an effort to help you better understand this option, we get back to the basics with consumer proposals. Read on to learn more.

    Firstly, what exactly is a consumer proposal? It starts with a proposal to your creditors based on an amount that you can reasonably pay back. This amount is based on a trustee’s assessment of your financial information.

    The majority of your creditors must accept the proposal, and proposals have a very high success rate if structured properly. If accepted, you then begin to make single, monthly payments to a trustee for a term of 4-5 years. As soon as the proposal is filed, any enforcement action against you will be stopped, interest stops and often the proposal will involve you repaying less money to your creditors than the total debt initially owed.

    While the term of the proposal may be 4-5 years, the consumer proposal can actually be paid in full at any time. This is a great benefit. Over time, many individuals experience financial positioning changes and once paid in full the consumer proposal will be removed from your credit in 3 years which means that you can rebuild quickly. This is important, as a consumer proposal will negatively impact your credit. However, if you’ve decided that a proposal is the best course of action to deal with your debts, your credit has likely already taken a hit.

    Who can administer a consumer proposal? Only a trustee in bankruptcy has the ability to file a consumer proposal. That being said, while it must be administered by a trustee, most people negotiate their consumer proposals through an independent financial consultant. Why? Because in a proposal the trustee represents both you and your creditors – so their role is to get your creditors as much money as possible in the proposal. Seems like a bit of a conflict of interest, no? We agree, especially because the trustee makes a percentage of whatever the settlement is – the more you pay, the more the trustee gets paid. That’s why we suggest seeking out your own independent advice before speaking with a trustee.

    At DebtCare, we can offer the advice you need to best protect yourself in a consumer proposal. Have questions or want to find out more about the benefits or get started?

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

     

  • How to Stop a CRA Wage Garnishment Before the Holidays

    The Canada Revenue Agency (CRA) does not take a break during the holidays. If you owea tax debt and have not yet made arrangements to pay the debt, don’t think you’re safe from enforcement action just because it’s the “most wonderful time of the year.” The CRA is aggressive and to them it matters little if it’s May or December. To help you out, today we cover how to stop a wage garnishment before the holidays.

    Whether the CRA has already levied a wage garnishment or you are concerned that one may be headed your way, here are some things you need to know.

    Firstly, the CRA can garnish up to 50% of employment income and up to 100% of other types of income, such as your pension. Additionally, unlike other creditors, they do not need a court order to do so; they simply send a notice to your employer and your employer is legally obliged to comply.

    Think you’ll have fair warning? Think again. The CRA does not need to provide you with notice of an upcoming wage garnishment.

    Once a wage garnishment is in place, the CRA becomes even more difficult to negotiate with.  So, knowing this, what are your options?

    Obviously the best option is to pay the tax debt. After all, the whole point of a CRA wage garnishment is to obtain the funds owed by you.

    If you can’t pay the debt, you may consider heading to tax court. Keep in mind that this is a very expensive option and the success rates are quite low. You will also need to retain the services of a lawyer and could be looking at several months before your case is heard.

    Another option is a consumer proposal. This is a negotiated settlement with your creditors (the CRA included) that stops the garnishment as soon as it is filed. It also stops interest and may reduce the total debt load that you are currently carrying. Like a consumer proposal, bankruptcy is another option to stop a CRA wage garnishment. Both of these need to be arranged by a trustee in bankruptcy, but be sure to acquire your own representation rather than going directly to a trustee.

    If you own your own home, refinancing may be another viable option to pay the tax debt. This will often reduce the amount of interest you are paying and will stop a garnishment. You will need to have decent credit though.

    All of the above are good options for dealing with a CRA wage garnishment. Which option is right for you? The best way to determine that is to speak with a financial consultant who knows about CRA tax debts and has the resources to help you negotiate.

    Want to see that wage garnishment lifted? Call DebtCare today at 1-888-890-0888.

     

     

     

     

  • Debt Consolidation Before or After the Holidays: When is the Right Time to Consolidate?

    shutterstock_524105263-1The holidays are fast approaching, and for many Canadian families, that means several weeks of juggling finances and using credit to finance holiday spending. This usually leads to financial stress, which can really put a damper on the seasonal festivities. This year, get a head start with a debt consolidation.

    When is the right time to consolidate? It is always best to start the New Year on fresh footing. If 2016 was a year where you accumulated a lot of debt, there are solutions – these solutions vary depending on the amount of debt you have and your personal circumstances. Know that any number of these solutions can help you deal with that stress from holiday spending.

    What options are available?

    Many people choose to use their home equity to refinance a first mortgage or take out a second mortgage to consolidate debt. This can provide a low monthly payment and involve interest rates far lower than what you are likely paying for credit cards. This is a very viable option that won’t have an overall negative impact on your credit score.

    What if you don’t have a home, or own a home but have no equity and are struggling to manage your payments? Or, what if you don’t have the credit necessary to obtain a traditional loan from a financial institution for a regular debt consolidation?

    Another option to consolidate debt is a consumer proposal. While a consumer proposal is not a traditional debt consolidation and does badly impact your credit score, it does involve a single, monthly payment that covers all of your debts (excluding your mortgage).

    In a consumer proposal, a settlement is negotiated with your creditors. If the majority of your creditors accept the settlement, there are many benefits:

    • A single, monthly payment and prefixed repayment term
    • Interest stops
    • In many cases your debt is reduced and your monthly payment is far less than what you were paying to your creditors
    • If your creditors have commenced enforcement action against you, such as freezing your bank account or garnishing your wages – this action will stop as soon as the proposal has been signed

    It can be difficult when facing financial challenges to know the right solution. A debt consolidation – whether through traditional channels or through a consumer proposal – is a great way to get things sorted out.

    The best thing you can do is work with a financial consultant who is independent and represents you. They can look at all of your financial information, present options and negotiate the solution that best suits your unique situation.

    At DebtCare, we can sit with you and discuss all of your options. Don’t let holiday spending stress you out. Get your finances figured out before the New Year and start 2017 off on the right foot.

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

     

  • Bankruptcy in Canada – Does Your Trustee Represent You?

    rsz_bankruptcy_in_canadaIf you are drowning in debt and considering a bankruptcy in Canada or a consumer proposal as a solution for debt relief, you may be thinking that the best approach is to go directly to a trustee. Many trustees advertise that they have a solution to your debt problem, and that is true, but are they acting as your representative? Therein lies the problem.

    Both a bankruptcy in Canada and a consumer proposal must be administered by a trustee – you can’t conduct or negotiate a bankruptcy on your own. Therefore, it is a common misconception that you should just go right to the trustee to get things started. We urge you to reconsider this path.

    Why? A trustee is a court appointed officer whose job is to act in your interest AND the interest of your creditors. That means that, although they do represent you, they also represent your creditors. You are not their priority – they are required to find an equitable solution that best suits all involved.

    Additionally, because you look at the trustee as your representative, you may share or present things to the trustee that will later be used against you or you may omit important information that will impact you later.

    For example, in a bankruptcy your monthly payment and the length of time you pay depend on an income calculation. If you err when providing information to the trustee, and the trustee later becomes aware of additional information, even after you have filed, the trustee can claim that you owe your creditors ‘surplus income’ and you will have to pay this money to the trustee before you can be discharged. This may also extend the amount of time you have to remain in the bankruptcy.

    This can get even more complicated when it comes to a consumer proposal. This is because, in a consumer proposal, the trustee is paid a percentage of the amount of the proposal. The more money your trustee can get for your creditors, the more money they receive. This scenario clearly does not place your best interests at the forefront.

    When you have a financial challenge, a bankruptcy or consumer proposal may be the solution – however, you are best served by speaking with a financial consultant who represents you before visiting a trustee. When you meet with a financial consultant who specializes in bankruptcy, that individual can help you structure your information to disclose what is relevant and can even propose the terms of your filing to the trustee. This is the best way to protect yourself.

    At DebtCare, we can help you get all of your information sorted before you speak with a trustee, protecting your interests the entire time.

    Give us a call today at 1-888-890-0888.

     

  • Consumer Proposal or Debt Consolidation – Which Makes More Sense?

    rsz_consumer_proposal_debt_consolidationIn our experience, for those looking to get rid of their debt, there is often a lot of confusion surrounding the various options available. With so many different types of debt solutions available, it can be difficult to determine which option is the best. Today, in the hopes of providing some clarification, we discuss two such options: the consumer proposal and debt consolidation.

    A consumer proposal is a negotiated settlement with your creditors. This means that you offer to repay a portion of your debts and your creditors agree in order to receive at least a portion of what is owed. There are several benefits to this option. In a consumer proposal, all debt is consolidated into a single, monthly payment, there is no interest and often the debt is reduced.  The downside here is that your credit will be impacted. That being said, if you are in a position to seek a consumer proposal, your credit has probably already been affected.

    With a debt consolidation, you borrow money to pay off all of your debt. You then repay whomever loaned you the money, with interest, with a single, monthly payment. For example, many people choose to leverage their homes by refinancing their first mortgage or taking out a second mortgage to consolidate debt. With a debt consolidation, the monthly payment will usually be larger than it would be in a consumer proposal (since you are paying back all of what is owed as well as interest), but your credit is less negatively impacted.

    Which option is best? We can’t accurately answer that question here. Every person’s situation is unique and your personal circumstances will dictate which option is best for you.

    Buyer beware – when you’re struggling with financial decisions such as these, it is best to speak with a financial consultant for guidance to eliminate potential issues.  Remember, if you go to a bankruptcy trustee, they will usually offer up a consumer proposal as the best answer because that is what they sell. If you go to a bank, they will offer a traditional consolidation because that is what they sell. A financial consultant can advise you on the best option and negotiate the process for you. There is nothing being sold, so the bias just is not there.

    At DebtCare, our goal is to help you get out of debt – that could mean a debt consolidation, a consumer proposal or any number of other options. Our priority is your financial security.

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