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Category: DebtCare

  • Canadian Tax Consultants: Do You Have a Debt Relief Partner to Support Your Tax Clients Who are in Trouble?

    It is not uncommon to find out that your client is facing financial troubles – particularly during the time of a global pandemic.

    In fact, many independent professionals and tax specialists including personal tax accountants, tax preparers, bookkeepers, financial advisors, lawyers, and estate planners are amongst the first to learn that their client is facing financial turmoil.

    It can be a challenging situation when you are preparing a client’s books and your client reveals that they have a huge debt and no means to pay it off.

    Or, when your client is being audited and you know that the outcome will not be favourable.

    Where the CRA collections team is involved, the situation can get trickier. The CRA is relentless and when your client tries to manage their problem on their own – it can make matters worse.

    For instance, the CRA will look for financial disclosure that may lead your client to disclose where they work as well as their bank and asset details. Perhaps the CRA accepts a temporary arrangement – but the moment it is up, they can move forward with wage garnishments, freezing of bank accounts, and liens on the property.

    Today, an average Canadian owes $1.58 per dollar of disposable income.

    This debt is likely to increase when mortgage deferrals end, the government’s relief measures are withdrawn, and the CRA’s collection action resumes.

    This is the calm before a massive storm – would you agree?

    This is why it is great to have a partner in your corner who can independently represent your client and work with them to resolve their financial challenges.

    By providing your clients access to debt consolidation programs and opportunities for debt reduction, you are not only helping them navigate their financial challenges but are also strengthening your long-term relationships.

    This same level of service may not be received if you send your client to a trustee, this is because they offer insolvency as their service and your client will be counselled on that basis.

    Similarly, if you send your client to a bad credit lender who only offers high-interest products or a mortgage broker who only arranges mortgages, your client will only receive advice in those specific areas.

    At DebtCare, we provide access to many financial options and debt consolidation programs. We take on a consultatory role where the client pays for our consultation and after working with their financial profile, we guide them down the best path.

    This includes aligning all professionals that will be needed. Whether it is securing financing from a lender or working with a trustee to facilitate a consumer proposal, we can help.

    To learn more about our services for Canadian tax consultants, call or text us on 1-888-890-0888 or visit www.debtcare.ca.

     

  • Does a Lower Interest Rate Really Mean That You Should Borrow More?

    As the economy is beginning to show signs of recovery and the physical distancing rules are being eased, various benefits and deferrals mandated by the government are also ending. With the buffer being removed, it is crucial for you to evaluate your financial position to ensure that you’re prepared to handle your debt payments.

    For instance, the Canada Revenue Agency’s tax filing deadline for 2019 individual income tax returns is now September 30. Individuals who are not able to make payments by this date will likely face late-filing penalties.

    Similarly, over 700,000 households who had been given the benefit of deferring mortgage payments, will soon have to resume these payments.

    Basically, all the payments that were temporarily deferred will be due at some point.

    Interest rate update

    Today, the Bank of Canada issued a press release announcing its decision to keep the interest rate at 0.25%. The interest rate is currently being kept on the lower side to enable individuals and businesses to have access to better credit deals during these unprecedented times.

    While it may seem enticing to explore borrowing options, given that the interest rate is low, you should proceed with caution.

    Even though the BOC interest rate is lower, it doesn’t mean that all lenders will offer a low rate, especially to those individuals who already have debt to pay off. Also, additional credit can help in the short-term, but it is not sustainable, and you will eventually need a plan to pay it off.

    Long term planning is the key to eliminating debt!

    What’s the recommended course of action?

    It is important to start getting your finances back on track. Some of the things you can do to keep your finances in check are:

    • Reviewing all your liabilities and paying off high-interest debt.
    • Creating a budget and tracking expenses.
    • Avoiding unnecessary debt such as credit card expenses, until absolutely necessary.

    Following these steps will help you anticipate and address any future issues such as a lien on your property. If you feel that you need additional support, reach out to credit counseling services to assist in consolidating debt payments or filing for insolvencies.

    What’s the right solution?

    There is no one size fits all approach. Especially during these times.

    The solution usually depends 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 outstanding utility bills could be handled through a debt consolidation loan.

    The key is to consult with a debt counsellor who can walk you through your options and make a plan that’s tailored according to your requirements.

    At DebtCare Canada, we have helped thousands of Canadians reduce and restructure their debt. If you’re struggling with mortgage, rent payments, or any other bills, please get in touch so we can help you find a way through.

    Contact us by calling or texting 1-888-890-0888 or visit www.debtcare.ca to learn more about our credit counselling services.

    You can also find out more about our financial solutions here: https://debtcare.ca/financial-products/

    The next BOC announcement is scheduled for October 28, 2020.

  • Homeowners: How to Cut $25,000 of Debt Down to a Minimum Payment of $320.00 Per Month?

    With the COVID-19 pandemic affecting the overall income of most households, it is wise to re-evaluate your financial plans to ensure that you’re able to pay your debt and retain your assets. This is particularly useful if you’re anticipating additional expenditure or a decline in your monthly income.

    If you are looking for ways to reduce your overall debt or restructure your monthly payments, you can look into a home equity loan.

    Obtaining a second mortgage, by leveraging your home equity, is a very practical solution that many homeowners in Canada opt for.

    What is a second mortgage?

    As the name suggests, a second mortgage is an additional loan taken on a property that is already mortgaged. It is secured on the basis of your home equity.

    • Second mortgage is behind your first mortgage, so if you like your first mortgage rate or are currently locked into the first mortgage – a second mortgage enables you to unlock equity without any disruption to your first mortgage.
    • A second mortgage opens you up to more lenders – because second mortgages are smaller, there are more lenders offering them including private lenders.
    • Second mortgage lenders often lend based on equity and not your credit and income. So, if your credit is bruised or you are self-employed, you can still get the help you need.

    How much equity is needed to get a second mortgage?

    Lenders use a calculation called Loan to Value (LTV) ratio when deciding how much of your equity they will loan you. Generally:

    • If you have a strong income and decent credit you can borrow up to 80% of your home equity.
    • If you have poor credit, limited time on the job, or income that can’t be proved – then you can borrow up to 65%-75% of your home equity.

    While banks offer second mortgages – it is always best to go through a mortgage broker for this type of financing. This is because many lenders who offer second mortgages don’t lend to the public directly and only work through brokers. Some of the advantages of working with a broker include:

    • A broker is able to look at your financial profile and know immediately which lenders will work with you. This makes the approval process faster.
    • A broker has an in-depth understanding of the mortgage closing process where secondary financing is concerned and will be able to expedite your closing more efficiently.
    • Brokers who offer finance and debt consulting will be able to offer other financial solutions if, for some reason, you can’t get the mortgage.

    So, is a second mortgage right for you?

    At DebtCare Canada, we can help you evaluate your options and explore a variety of different solutions. There are a number of ways to deal with debt and it is vital to create a well-thought-out plan to eliminate your debt for good.

    Special situations, like the current pandemic, call for special resources. We have access to private mortgage lenders that don’t lend directly to the public and only work through brokers. Contact us today to discuss your options – including second mortgages, home equity loans, HELOCs, and more.

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

  • Pros and Cons of Refinancing Your Mortgage to Get Out of Debt

    Mortgage refinancing is a popular way to get out of debt, but is it the right option for you?

    During the ongoing COVID-19 pandemic, you may be looking for ways to reduce your debt load. If you own a home, you can use available equity to pay down your debts. Read on for the pros and cons.

    Pros

    • Refinancing your mortgage allows you to put debts into one payment.

    This can give you more freedom in your budget as you will have a fixed payment on a fixed schedule — so you will know exactly what you owe and when.

    This is an effective way to quickly deal with high-interest debt while managing your budget.

    • It lets you keep your house (unlike some cases of filing for insolvency).

    In some cases, filing for bankruptcy or a consumer proposal puts your assets — like your house — at risk.

    With a mortgage refinancing, your home is safe so long as you meet your payments.

    • You could save money if you get a lower interest rate.

    If you refinance for a lower mortgage rate, you could save money on your monthly mortgage payments if you bought your home at a time when interest rates were higher.

    • It doesn’t harm your credit score (at least not immediately).

    When you file for bankruptcy or a consumer proposal, your credit score takes an immediate hit and you are left with a low rating for five-to-seven years.

    With mortgage refinancing, however, that doesn’t happen. In fact, if you are using the equity to pay off high-interest debts, like credit cards, your credit score could go up!

    The caveat here is that if you default on your mortgage or miss a payment, your long-term credit score could still be affected.

    Cons

    • It could restart your amortization schedule.

    If you were five years into a 25-year mortgage term and decided to refinance, your term would reset to 25 years. This means you would be paying your mortgage for an extra five years.

    While you would be paying mostly interest for the last five years, it will be longer until you are mortgage-free.

    • You might get a higher interest rate.

    Depending on when you bought your house, your mortgage rate could actually go up.

    • You will have less equity to access later.

    By taking out equity now, it may be harder to access later (at least through a refinancing) and you’ll have to wait for it to accumulate again.

    • It may not be possible if you’re carrying too much debt.

    Like getting a mortgage to begin with, you have to qualify for a refinancing. If you’ve lost your income, your credit score is low, or you’re carrying too much debt, you may not qualify.

    (If this is the case, talk to a debt counsellor – they can help you clean up your finances so you can qualify.)

    • You may have to pay closing costs.

    Mortgage refinancing typically comes with closing costs and other fees. These numbers could affect your decision.

    • If you’re breaking your current mortgage term, it might not make financial sense.

    Breaking your current term early can come with additional costs.

    If mortgage refinancing won’t work for you, there may be another option that does, such as taking out a second mortgage, a home equity line of credit (HELOC), or another debt consolidation method.

    Whatever method you choose — refinancing or not — the important thing to keep in mind is that it will work so long as you keep your finances under control. Debt consolidation isn’t an invitation to start buying more. You need to have a plan for how to manage your money after refinancing (or your chosen debt management method) too.

    At DebtCare Canada, we can help you do both — explore options to deal with debt and create a plan to stay debt-free for good.

    We offer first mortgages, second mortgages, HELOCs, and more.

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

  • Canadian Income Tax Filing Deadline Coming Up: What To Do If You Can’t Pay

    The new Canadian income tax filing deadline is coming up soon — on June 1, 2020.

    Is your return ready to file?

    Due to COVID-19, the income tax filing deadline was moved from the usual April 30 to June 1.

    If you owe, the deadline to pay has been moved to September 1, 2020.

    But can you get the money together in that time, or do you need extra assistance?

    Here’s everything you need to know.

    A) Don’t Delay Filing

    First, don’t delay filing your return. Even if you have lost your income due to COVID-19, you still need to file. If you miss the June 1 deadline and will owe, you may be charged a late-filing fee, which will only add to your final balance.

    It’s in your best interest to file by the June 1 deadline. If you will owe and can’t pay, read on…

    B)  If You Need To, Use the Three-Month Deferral Period to Gather Funds

    As we mentioned, this year you have three months to actually pay for what you owe. The deadline to pay your owed income tax return is September 1.

    Unlike in previous years, you will not be charged interest between the filing deadline of June 1 and the new payment deadline of September 1. So, if you need more time to collect what you owe, this break can give you that.

    But be sure that you will have the funds by September 1 (or sooner). If you can’t pay, you will be charged interest after September 1. Plus, if you don’t pay you will no longer receive any GST/HST credits or Canada child benefit payments from October 2020 forward and you’ll have to repay the estimated amounts that were issued to you starting in July 2020.

    If you won’t be able to pay, read on.

    C)  If You Know You Can’t Pay, Explore Your Options

    If you will not be able to pay by September 1, you need to act now.

    A debt consultant (like DebtCare Canada) will review your situation to help you find the best option for you. This might include:

    • Cleaning up other debts to free up money for your tax payment.
    • Accessing home equity to pay what you owe.
    • Filing for insolvency (bankruptcy or a consumer proposal).

    DebtCare also provides access to one of the only programs that can resolve a CRA back tax problem.

    In this program:

    • Your principal tax debt can often be reduced.
    • Interest and penalties immediately stop.
    • You are able to make a single monthly payment.

    Don’t wait to explore your choices. The sooner you start, the more options you will have.

    At DebtCare Canada, we offer a free consultation to deal with tax problems. Tax evasion is illegal. Get ahead of your tax issues.

    Contact us by calling or texting 1-888-890-0888 or visit www.debtcare.ca to learn more.

  • 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

  • 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.

  • CRA Auditing PayPal Business Recipients — What to Do If They Have Come After You

    Business owners, have you received income using PayPal? If so, the Canada Revenue Agency (CRA) may be contacting you for an audit.

    In November of 2017, PayPal was served with a Federal Court of Canada order to submit specific information to the CRA about PayPal Business account holders.

    PayPal had to give the CRA account details for businesses that sent or received payment via the service between January 1, 2014 and November 10, 2017.

    What does this mean for you?

    • If you’re a business that doesn’t use PayPal, you won’t be affected.
    • If you’re a business that has a PayPal Business account and used it for transactions between the above dates, you might be facing an audit.

    With the information from PayPal, the CRA is looking for business income that was not reported in annual filings.

    If you reported all of your income, including any from PayPal, and can prove it, then the audit would proceed as normal.

    But what if you received income via PayPal, but didn’t report it? That’s a different matter.

    If your business is audited and you know that you will owe, then you need to get a financial plan in place. Don’t ignore the problem!

    The CRA cares less about the fact that you didn’t report all of your income and more about closing their file. They can’t close their file if they don’t collect from you.

    If they can’t collect from you, they will turn to collection action – like a frozen bank account or issuing requirement to pay notices to your clients. This is why it’s best not to ignore the situation.

    Having a plan means putting measures in place to protect yourself once the debt is determined. One of the most important measures is figuring out how you will pay what you owe – or what you will do if you cannot pay.

    How to pay the CRA what you owe and stop collection action:

    • Pay the amount in full if you have the funds available.

    If you don’t have the funds available…

    In general, it is better to owe another financial agency than it is to owe the CRA. The CRA can take swift collection action with devastating consequences – and they are not required to give you notice.

    • If possible, consider taking out a loan to pay the CRA what you owe. Then pay back the other loan over a fixed schedule.
    • If you can’t take out a loan, can you refinance your mortgage?

    If you can’t take out a loan, refinance, or otherwise find the funds…

    • Negotiate with the CRA. In some cases, the CRA will agree to a payment schedule with you. However, this is a risky move and could further expose your business to collection action. And even in the best-case scenario, you will still owe the CRA – they will want their payment in full.
    • Part of their negotiation plan may still be to collect – such as sending out requirement to pay notices to business clients, which could harm your reputation.

    If negotiation isn’t viable…

    • File for a consumer proposal or bankruptcy.

    If you can’t pay in full, find the funds, or make an agreement, filing for insolvency will immediately stop CRA collection action. For many businesses, this is a far preferable alternative than having the CRA issue requirement to pay notices or freezing your bank account.

    The Bottom Line

    Whether your business is being audited by the CRA for a PayPal Business account or another reason, if you are found to owe and you can’t pay, you need a plan.

    Ignoring it won’t make the problem go away – and, in fact, will make it worse through collection action that can harm your finances and your reputation.

    When dealing with the CRA, it’s best to have an advocate on your side. At DebtCare Canada, we’ve helped thousands of Canadians deal with problem debt, including CRA tax debt. We offer access to one of the only programs that can resolve a CRA back tax problem.

    Contact us today to make a plan for your CRA business audit. Call 1-888-890-0888 or visit https://debtcare.ca/back-taxes/.

  • Bankruptcy and Consumer Proposals Rise as Consumer Debt Reaches Record Limits

    Are you struggling with consumer debt? If so, you’re not alone.

    According to BNN Bloomberg, the average Canadian household owes $1.76 for $1 of annual disposable income. The same household devotes $0.15 of every disposable dollar to making principal and interest payments on debt, which is a record high.

    BNN Bloomberg also noted that when you add together consumer credit, mortgage, and non-mortgage debt, Canadians are carrying $2.28 trillion in credit market debt.

    What’s more, beyond just carrying debt, they’re paying the price. The number of insolvencies – bankruptcies and consumer proposals – filed by consumers in 2019 increased from the year before.

    While the numbers for the final quarter of 2019 have not been released yet, as of Q3 2019, Canadian insolvency filings were up to 34,708 — up more than 4,000 over Q3 2018. Of that, the number of bankruptcies rose slightly (from 13,549 to 13,757) and the number of consumer proposal filings rose substantially, going from 16,764 to 20,951.

    Why are more Canadians going into debt?

    According to a survey from Manulife, two in five Canadians believe they will never be debt-free.

    There are many reasons Canadians might currently be struggling with debt. Housing prices are continuing to rise, especially in larger cities like Toronto and Vancouver.

    While interest rates have stayed the same for the past year, the added spikes in 2017 and 2018 still didn’t help for those carrying debt. Some have also speculated that it’s too easy for Canadians to gain access to credit – and spend more than they can afford to pay back.

    For others, job insecurity can be part of it – not enough income to make ends meet. They might be facing job loss, working in a precarious employment situation (like the gig economy) with inconsistent income, or simply not earning enough to afford high housing prices.

    Poor credit habits can hurt your finances, too. While paying only the minimum balance on your credit cards can seem like a good idea, it can actually mean more debt in the long-term.

    Sometimes the moments leading up to major debt troubles are insidious. What can start as a seemingly harmless action can snowball into a much bigger problem.

    What exactly does struggling with debt look like? It could include:

    • Being unable to pay all your bills in full and on time each month.
    • Making only the minimum payments each month.
    • Being unable to make even the minimum payments.
    • Having more debt than income.
    • Always taking out another loan to pay off your old debts, getting into an unsustainable cycle.
    • Relying on credit to pay all your bills because you don’t have enough funds in your bank account.
    • Consistently being unable to afford the items you need to achieve a daily quality of life – pay for groceries, afford your rent, and so on.
    • Living paycheque to paycheque without knowing how you would afford an emergency.
    • And more…

    This might vary depending on your exact circumstances, but any of these could be a precursor to bigger problems down the road.

    How to deal with debt before major damage is done

    The sooner you realize you have a debt issue, the more likely you are to resolve it before major damage is done to your quality of living.

    When you file for insolvency, your credit score takes a big hit. While this is sometimes the best option, and it is possible to recover over time, if you tackle your finances early you minimize the need for this type of action.

    Some steps you can take to resolve problem debt include:

    • Creating a realistic budget and looking for ways to reduce your current expenses, then putting the savings towards paying off your debt.
    • Honestly assessing where your money is currently going and eliminating wasteful spending.
    • Practicing good financial habits, like always paying your bills on time and in full.
    • Not relying on credit. While some use of credit is good for your credit score, you don’t want to be using it because you don’t have the money elsewhere.
    • If you have an income problem, looking for ways to earn more – either through asking for a raise, finding a new job, or getting a part-time job.
    • Seeking out debt consolidation methods, such as mortgage refinancing.

    While filing for insolvency is one option, it’s not the only option – especially if you tackle the problem early.

    In 2020, make your resolution to figure out your finances for good. Debt freedom is possible with a little planning. There’s no point feeling bad about the circumstances that got you into debt. Instead, realize you’re not alone and focus on finding the way out.

    That’s where we come in. At DebtCare Canada, we will assess your situation and make recommendations to deal with debt. We’ll go over your options and create a realistic plan for success.

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