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Category: Seek Financial Guidance

  • Rising Consumer Debt in Canada and the Need for Timely Personal Finance Management

    Rising Consumer Debt in Canada and the Need for Timely Personal Finance Management

    Consumer debt has been increasing over time in Canada.

    Even in 2020, due to a very resilient housing market and applications for new auto loans, total consumer debt went up by 3.8% to $2.041 trillion in the third quarter of the year!

    Equifax Canada shared in-depth insights, drawn from banks and other lenders, in its recent report.

    Some of the key findings included:

    • In Q3 2020, mortgage balances increased by 6.6% compared to the same time in 2019.
    • For the first time, the average new mortgage loan amount surpassed $300,000.
    • In Q3 2020, new auto loans were also up 11.7% compared to the same period in 2019.
    • Average credit card spending was almost back to the pre-COVID levels during this time period.
    • About 12% of new credit products in Q3 2020 were opened by consumers who had some form of deferral on their credit file.

    High levels of consumer debt are not sustainable in the long run because they lead to vulnerabilities not only for individuals but also for the economy as a whole.

    For instance, if you lose your job or are faced with an unexpected expenditure, it will become hard for you to manage your finances as you already have significant debts to pay off. Similarly, for the economy, as a whole, larger debts can create further problems during economic crises.

    This is why it is important to keep a track of your debt-to-income ratios.

    So, once you ascertain that you may need to work on your personal finance management, there are some strategies you can put into place.

    Four of these key strategies for reducing your debt and ultimately become debt-free are shared below:

    I.  Have a comprehensive budget in place. This enables you to monitor your monetary inflows and outflows. You are able to gauge how much total income you are receiving from different sources and how many expenses you have.

    II.  Start small. When it comes to debt reduction, a good way to continue reducing your debt is by taking small steps. This can be by opting for a more cost-effective cell phone plan, preparing home-cooked meals to avoid excessive outdoor dining, and cancelling subscriptions you don’t need.

    III.  Monitor your debts. This can help you identify high interest debts, such as credit cards, and ensure that you’re paying them off sooner or at least making the minimum required payments. If you have multiple types of debts and believe that repayment could be an issue in the future, you can look into consolidating your debts into a single payment.

    IV.  Save. It is important to save. You could either choose to invest in programs such as retirement saving plans or set aside a certain percentage of your salary for savings before you start spending and paying your bills.

    At DebtCare, we are committed to supporting you in financial planning and elimination of debt. We do this by working with you to identify where you should start, what steps you should take when you should take them, the best mix of options for you, and more.

    To date, we’ve helped thousands of Canadians fix their credit, lower their debt, and improve personal financial management. We can help you, too!

    Contact us today for a free consultation to start reducing your personal debt. Call 1-888-890-0888 or visit www.debtcare.ca.

  • What’s the ‘Right’ Debt-to-Income Ratio?

    When it comes to managing your personal finances, it is essential to keep a track of your debt-to-income ratio.

    This helps you keep an eye on your debt levels and take corrective measures if your debt seems to be going on an upward trajectory.

    This is particularly true during a global pandemic!

    So, what is the debt-to-income ratio?

    This ratio measures the amount of debt held by a person or household against the amount of disposable income they have.

    It can be calculated monthly or yearly. You just need to add up all your monthly debt payments and then divide them by your gross monthly income to arrive at the monthly ratio.

    Some of the common sources of income and debt are mentioned below:

    • Income

    a)  Total household income;
    b)  Child care benefits;
    c)  And retirement benefits.

    • Debt

    a)   Mortgage;
    b)  Other personal loans;
    c)  Vehicle loans;
    d)  Credit cards;
    e)  And monthly bills.

    A low debt-to-income ratio indicates that you have lesser debt and that’s almost always a good thing.

    Though, how bad is a high debt-to-income ratio?

    Well, an important thing to note is that higher levels of debt can make you financially vulnerable. For instance, if you lose your job or are faced with an unexpected expenditure, it will become hard for you to manage your finances as you already have significant debts to pay off.

    Similarly, high debt-to-income ratios are worrying for policymakers too. In June 2020, Statistics Canada reported that the household credit market debt as a proportion of household disposable income rose to 176.9%.

    High ratios are concerning because high levels of debt can reduce the economy’s ability to withstand economic shocks in the long-run.

    Coming back to personal debt, what is the best debt-to-income ratio?

    While there is no specific number and everyone’s situation is different, it is advisable to keep your debt-to-income ratio below 40%. If the number you calculate is higher than this, it is prudent to get rid of high-interest debt such as credit cards and work towards reducing other types of debt.

    Also, it matters what type of debt you have accumulated over time.

    If your debt is primarily due to a mortgage, on a property that has high equity, that is better than having a debt that’s not backed by an asset.

    If you are unsure of how to manage your debt or are contemplating how to consolidate your debt, a personal debt management plan could be helpful. Working with a debt consultant can enable you to create a tailored plan that helps you gain better control of your finances and maintain a healthy debt-to-income ratio.

    We offer a free consultation to explore what options are available to you.

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

  • Holiday Financial Planning… Steps to Start 2020 on a Strong Financial Footing

    The holiday season is an expensive time for many! Between gifts, decorations, parties, and travel, the costs (and credit card charges) can quickly add up. To keep your budget and debt in check, holiday financial planning is a must.

    According to PwC Canada, the average Canadian consumer will spend $1,593 during the 2019 season — up 1.9% from 2018. That number increases with the type of shopping consumers choose to do. The average online-only shopper plans to spend $1,053 while the average multi-channel shopper (in-store and online) plans to spend $1,726.

    And that is just on shopping costs alone. This doesn’t factor in travel expenses, décor, food, and beyond.

    Overall, PwC reports, 17% of Canadian consumers are worried about credit card debt. Millennials and Gen Z are even more concerned: 22% and 24% respectively think too much debt might build up.

    Going into the new year with debt — especially high-interest credit card debt — is stressful. You need a plan to pay off your holiday purchases and leave 2019 on better financial footing than you started the year with!

    Holiday financial planning is the key to both preventing overspending during the holidays and making 2020 your most successful financial year yet. Here’s how to go about it.

    Assess Your Budget

    A budget is important for planning your holiday spending. Knowing how much you can afford to spend will help determine what you spend it on!

    • If you have a regular monthly budget, review how much you can realistically set aside for your holiday expenses.
    • If you don’t have a regular monthly budget, review your past month of spending. How much income have you brought in and what savings are left over?
    • Are there any areas in your budget or spending habits you could trim back on for your holiday spending?
    • Decide on the figure you are comfortable spending this season and that you are able to comfortably repay into 2020.

    Plan Your Holiday Spend

    • Make a list of everyone you are shopping for, food-related items, decorations, travel plans, and other expenses you will encounter this season.
    • Estimate how much you plan to spend per list item. Even just the act of doing this can be illuminating!
    • At this point you may see that you have planned for more than is in your budget estimate.

    If you’ve found that you plan to spend more than you can afford, you can try to either reduce what you plan to spend (looking for ways to save money) or you can go back to your budget and look for more wiggle room. To that end…

    Clean Up Your Debt

    One of the biggest hijackers of your budget is debt payments. If you owe money, you know just how much the interest payments alone can take out of your monthly budget. And even if it’s only a little bit, why not use that money for something else?

    Consolidating your debt can free up room in your budget for holiday spending and start you on the right financial footing for the new year. If “get out of debt” is your New Year’s resolution, you’ll already be a step ahead.

    Don’t Finance Your Holiday Spending 

    If you’ve found that you plan to spend more than you have, you might be tempted to make up the difference with financing — credit cards, lines of interest, a payday loan, and so on.

    Don’t do this! If you don’t have the income available now or won’t be able to pay off the expenses in full in the next month, it can create a stressful financial future. While you might profit in the short-term, you’ll have to make up the difference in the long-term. This can lead to lingering debt and credit score issues that you’ll still be trying to fix next holiday season.

    Instead, look for ways to make the holidays great on a budget. Your financial future will thank you!

    DebtCare Canada helps our clients with holiday financial planning, debt consolidation, budget planning, money saving, and more.

    Contact us for a free consultation to set yourself for success during the holidays and beyond. Call 1-888-890-0888 or visit www.debtcare.ca.

  • How is a Trustee in Bankruptcy Different from a Debt Counsellor?

    If you’ve been considering debt consolidation, you may have heard the terms “trustee in bankruptcy” and “debt counsellor.” But do you know the difference?

    They’re far from the same thing. Here’s what you need to know.

    Trustee in Bankruptcy

    Also known as a Bankruptcy Trustee or Licensed Insolvency Trustee (LIT).

    • Doesn’t represent you.
    • Has to act for the creditors.
    • If you reveal information to them, like an unclaimed asset in a bankruptcy, they are obligated to tell your creditors.
    • A trustee can only offer you a consumer proposal or bankruptcy, not other debt consolidation options, like a loan or home equity products.
    • They are paid based on the amount you declare in your bankruptcy or consumer proposal.

    Debt Counsellor

    • Is paid by you to present debt management options.
    • They will look at the whole picture and present all financial options —including loans, home equity products, consumer proposals, bankruptcy, and beyond.
    • They protect your information and answer your questions confidentially.
    • If you do need to file for a consumer proposal or bankruptcy, a debt counsellor will prepare, structure, and propose the best solution for you to your trustee on your behalf.

    If you decide to file for a consumer proposal or for bankruptcy, you will need to work with a trustee as they are the only professionals in Canada who can file for either one.

    However, even if you do decide to go for one of those options, it is still to your benefit to consult a debt counsellor first, and during, the process.

    A trustee is more like a referee — someone who is the middleman between you and your creditors. They are not necessarily on your creditors’ side, but they’re not on your side, either. They are obligated to follow the rules and report anything out of bounds that they discover.

    As we mentioned above, a trustee is also paid based on the amount that you file in your bankruptcy or consumer proposal so often it is in their interest to try to make that amount higher so they are paid more.

    A debt counsellor, on the other hand, is 100% in your corner. They will represent you and only you. You can count on them for confidential advice and to be your advocate when working with a trustee.

    At DebtCare Canada, our debt counsellors offer free consultations to help decide the best debt management plan for you. We will examine every option available and if it comes to filing for a consumer proposal or for bankruptcy, we are on your side.

    Contact us today. Call 1-888-890-0888 or visit www.debtcare.ca.

  • Debt Relief in Canada Blog Series Part 1 – Is a Consumer Proposal the Answer?

    Debt relief in Canada is a subject that is constantly in the news for many reasons, whether it is the government reporting on the fact that Canadians are carrying historically high levels of debt, reporting on debt reduction companies and what to watch out for, reporting on changes to CMHC lending guidelines to stop those who are loaded with debt from buying homes that they really can’t afford, and more…

    Unfortunately, most people who have too much debt don’t realize that they have a problem until managing minimum payments starts to become challenging, resulting in a debt problem turning into a debt emergency. There are many options for debt relief in Canada, but each one is different, and the right one for you will really depend on your own personal circumstances.

    Making a consumer proposal is one option for debt relief in Canada, but the question is: is a consumer proposal the answer?

    A consumer proposal is a type of proposal that is made to your creditors and is administered by a bankruptcy trustee who represents both you and the creditors that are included in your consumer proposal. Consumer proposals are crafted based on your ability to repay your debt realistically. Consumer proposals are repaid monthly, usually over a period of 3-4 years. With that being said, a consumer proposal can be paid off sooner if your financial situation changes. Consumer proposals are removed from your Equifax credit report 3 years from the date that they are paid in full, which provides a further incentive for those who are in a consumer proposal to pay it off early. Because consumer proposals allow you to make a single monthly payment that fits within your budget and enables you to rebuild your credit faster, consumer proposals are a very popular option for debt relief in Canada.

    Since consumer proposals are based on your ability to make a monthly payment and not on your total debt load, oftentimes consumers can reduce their overall debt through a consumer proposal. In a simple, very general example, if your total unsecured debt is $20000 and you can afford to pay $200 per/month for 5 years based on your budget and the consumer proposal guidelines, the total value of the consumer proposal would be $12000, meaning you would reduce your debt by $8000. Each case is different, and your consumer proposal must be fair to your creditors as they have a say as to whether or not they will accept it.

    When you make a consumer proposal, your creditors will receive your consumer proposal by mail and have 45 days to respond and vote as to whether they accept or reject your proposal. If a creditor does not respond to the consumer proposal within 45 days, they lose the ability to vote and the proposal is considered accepted. In addition, if the majority of your creditors accept the consumer proposal, it will be approved.

    Consumer proposals are suited to individuals who have higher incomes, as they are subject to surplus income in bankruptcy.  When a consumer has surplus income his or her payment in bankruptcy will be much higher and this is what makes a consumer proposal a more attractive option for a higher income earner. Consumer proposals are also better suited to an individual who has some secured creditors and to someone who has the ability to repay a good portion of his or her debt but simply cannot manage the contractual payments that they currently have with creditors.

    For more information about options for debt relief in Canada or to see if you qualify for a consumer proposal please call DebtCare at 416-903-4000 or visit www.debtcare.ca.

  • How to Get Tax Relief from Back Taxes

    Back taxes can be a nightmare and if you have back taxes, there is no doubt that you could use tax relief. Trying to get tax relief from the CRA directly is very difficult. There are financial programs available through DebtCare Canada to achieve tax relief on your back taxes. In this short video, Michael Goldenberg, president of DebtCare Canada, discusses how you can get tax relief from your back taxes. This is a must see!

    If you would like more information about how to get tax relief from your back taxes contact DebtCare at 416-907-2582 or visit www.debtcare.ca.

     

  • Taxpayer Relief in Canada – Do I Qualify

    If you have a tax problem in Canada, repercussions with the Canada Revenue Agency can be severe. If you filed your income taxes late or committed an infraction under the Canadian Income Tax Act, like failing to disclose income or writing off expenses that you weren’t entitled to, the Canada Revenue Agency has incredible power to punish you. By far the most common weapon that they use to punish you is your pocket book.

    When an income tax return is filed late and the CRA assesses what you owe, or a previously filed return is re-assessed and new monies are owed, the CRA will add interest and penalties to the amount of the tax debt that you owe. Often times, when an individual has a tax debt, the amount that they owe will double in size once the interest and penalties are calculated.

    Sometimes individuals have personal circumstances that led to their tax problem which is why taxpayer relief in Canada exists. Taxpayer relief in Canada is a formal program offered by the Canada Revenue Agency where the CRA can agree to cancel all or part of the interest and penalties. You can qualify under the Taxpayer relief program in Canada for one of the following reasons:

    A natural disaster like a fire or flood. For example, you misstated expenses resulting in an inaccurate return filing because your basement flooded and all of your receipts were destroyed

    1. Extreme financial hardship
    2. A documented personal issue like a medical problem or death in the family
    3. An error on the part of the CRA

    The only challenge with the Taxpayer relief program in Canada is that it is a long and complicated process and very few applications under this program are granted. To hire a professional to make an application under this program could cost you thousands. In addition, the CRA will not reduce the principal tax debt owed. The CRA does not offer any program that will reduce the principal tax debt that is owed.

    Before considering making an application under the Taxpayer relief program in Canada you may want to first look at the principal amount of the tax debt you owe and whether you can afford to pay it off at all. Often people who owe a large tax debt are not even in a position to pay it, regardless of whether or not they receive interest and penalty relief under the Taxpayer relief program in Canada.

    The longer you stretch out the time that you have a tax problem, the worse the tax problem will become. If the application under the Taxpayer relief program in Canada is denied, you will owe further interest that will have accumulated through the application period. The CRA will also continue to try to collect on the principal tax debt owed.

    There are other financial programs available that will freeze the interest on the tax debt that you owe and can even eliminate or reduce interest, penalties and the principal tax debt that you owe. These programs can also stop CRA collection action and provide you with immediate relief. These programs are not available through the Canada Revenue Agency, however you may access them through a financial consultant who works with people who have debt problems.

    For more information about the Taxpayer relief program in Canada or if you have a tax problem and need financial guidance or debt relief please visit www.debtcare.ca or call 416-907-2582.

  • What Does A Trustee Do?

    If you have financial problems and have thought about consulting a trustee in bankruptcy, you may be curious about the role that they play in helping you deal with your financial problems, and may be asking yourself “what does a trustee do anyway?”

    The first thing to know is that a trustee in bankruptcy does not represent you. You may have seen advertisements by trustees that make it seem as though they want to help you. What does a trustee do? Well, they are a court appointed officer that administers bankruptcies and consumer proposals. They have an obligation to act in the best interest of both you and your creditors.

    Let’s look at a bankruptcy as an example. When you visit a trustee to file for bankruptcy they review all of your household income, debt and other financial details and then advise you on what your monthly payment in bankruptcy will be. You make your monthly payment to the trustee in bankruptcy each month. If you have assets or surplus income for example, what does the trustee do? They will ensure that they collect equity in those assets or surplus income for the benefit of your creditors. They are not there to protect your income and assets, they are simply administrators of the bankruptcy process. If they can collect more money through your estate for your creditors, they will.

    Consumer proposals are also administered by trustees in bankruptcy. When you visit a bankruptcy trustee directly to discuss a consumer proposal, they will assess your income, debt, assets and other personal household and financial information. What does a trustee do next? They will suggest an amount of a consumer proposal that they believe will be accepted by your creditors. This does not always result in the best deal for you, and if you visit a trustee directly you will have little to no negotiating power because they are simply administering your consumer proposal, so what they present to you is what they will be prepared to go forward with. They are not there to get you the best deal.

    Do you do your taxes without the help of an accountant? Not likely. If you were charged with a crime would you defend yourself without a lawyer? Probably not. Dealing with a trustee in bankruptcy is no different; you should not do so unrepresented.

    Having independent financial representation when considering a consumer proposal or bankruptcy is crucial because it enables you to have your personal and financial information reviewed by a professional who represents and is hired by you and who understands bankruptcies and consumer proposals. They can vet your personal and financial information, identify any issues before a trustee is made aware of them, and help you come up with a proposal to present to the trustee that you can live with.

    Do not answer the question “what does a trustee do” the hard way. Filing a bankruptcy or consumer proposal is an official process. Once you have committed to either one of these processes there is no turning back, so it is important to do everything in your power to ensure that you enter into the process with all of the necessary information. The more informed you are, the better financial arrangements you will be able to make, which will save you thousands.

    If you have more questions about this article “What does a trustee do?” or if you need representation in a consumer proposal or a bankruptcy please visit www.debtcare.ca or call 416-907-2582.

  • Debt Consolidation Companies in Canada

    DebtCare Canada is a financial consulting company in Canada that helps Canadians consolidate debt and achieve financial relief. Before contacting debt consolidation companies, consider DebtCare. Watch this short video where Michael Goldenberg, president of DebtCare Canada, discusses the services and solutions offered by debt consolidation companies in Canada including DebtCare Canada.

    If you need more information about debt consolidation companies in Canada or need a debt consolidation, please contact DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • Divorce and Debt – A Match Made in…

    Divorce and debt, debt and divorce; the two really go hand-in-hand. Debt and financial problems are one of the leading causes of divorce in Canada. When couples divorce and debt is present one or both parties can find themselves in severe financial turmoil.

    Divorce and debt are a toxic combination because when couples divorce they can no longer share living expenses and each will have new living expenses in addition to monthly payments on debt. In a divorce, the higher income earner may end up having to take more responsibility over the debt. In other cases, the lesser income earner may agree to take responsibility for the debt in order to gain assets such as the home. One party may end up having to make spousal or child support payments. Whichever way you look at, getting divorced is expensive and both parties can end up with serious financial consequences.

    If you are getting a divorce and debt is present, seeking financial guidance will be very important. The financial guidance you need may vary.

    Perhaps you are not the spouse who was responsible for the monthly household bills. Learning how to manage a budget will be important if you want to come out of your divorce with your credit and finances intact. Budgeting is eye opening because it reveals exactly how much money you spend each month and on what, as well as how much disposable income you have left once your bills are paid. Budgeting can reveal potential future financial problems that you may face before they emerge and become an emergency. Budgeting also plays a key role in ensuring that all payments to creditors get made on time each month.

    Perhaps you are exiting the marriage in debt. This is a trickier problem because if you have gone through a divorce and the debt that remains is unmanageable, this can impact not only your credit but also your quality of life. Even if you are able to manage your minimum monthly payments, the overall amount of debt may be too much to pay off in any reasonable amount of time. If this is the case, it may be time to come up with ideas to speed up the amount of time it takes you to get out of debt.

    The type of debt that you have and amount of debt that you have will play a major role in the type of financial solution that you choose to deal with your debt. Secured debt is different than unsecured debt, and even some secured debts can be managed as part of an overall financial plan that will get you out of debt. If you are struggling with debt after a divorce, your financial plan may include consolidating your monthly payments into one and freezing the interest on your credit products. The interest on some credit products, like high interest credit cards, can make them impossible to pay off. Once the interest is frozen, these debts become much easier to repay. Some financial programs also may involve reducing the overall principal of the debt that you owe.

    The best thing you can do in the aftermath of a divorce to deal with the debt that has resulted from the divorce is to seek financial guidance from a financial professional who can represent you in the restructuring of your debt to give you a fresh start.

    For more information about divorce and debt please visit www.debtcare.ca or call 416-907-2582.