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Tag: consumer proposal

  • Who Represents You in a Consumer Proposal?

    For many Canadians drowning in debt, a consumer proposal is a very valuable resource. The ability to reduce the amount of debt you owe, reduce interest and combine all payments into a single monthly payment you can afford, are all really significant benefits. That being said, a consumer proposal is a complex legal process, one that must be administered by a trustee in bankruptcy, so the question remains, who represents you in a consumer proposal?

    Often people are confused when it comes to this question. After all, trustees often market their services as a solution to your debt problems, and since you’ve enlisted their services, it would seem a safe assumption that they represent you. And that isn’t necessarily an incorrect assumption. A trustee does in fact represent you in a consumer proposal. The problem is, they also represent your creditors.

    When administering a consumer proposal, a trustee is required to be an impartial party, presenting the best solution for you and a fair option for your creditors. The issue with this is that trustees are paid based on a percentage of your proposal, so the bigger the proposal, the more they earn. This creates a major conflict of interest when it comes to protecting you!

    When you first meet with a trustee, they will ask you to provide information about yourself and your finances. Entering this meeting assuming the trustee is representing you and you alone can result in you providing information not necessary for the administration of the consumer proposal. This information may then be used to obtain a larger amount for your creditors, and thus a larger paycheque for your trustee.

    Going to a trustee without representation is like going to court without a lawyer. Most, we would argue, would see this as a rather dangerous idea, and thus is one we would advise against. It is the same with a consumer proposal. You want your own representation when considering a consumer proposal – representation to provide protection for you and your financial assets without having to also worry about your creditors.

    The point of this blog is not to argue that trustees cannot be trusted. Most can, but government regulation requires them to be fair to all parties, which naturally results in issues. The point is to inform you of the dangers of calling a trustee before securing your own representation.

    Our advice is to speak with a financial consultant who can protect you, one hired by you to represent you so there are no repercussions in telling them everything. They can negotiate your consumer proposal with a trustee so that the deal proposed is likely to be successful.

    At DebtCare, we have longstanding relationships with several trustees and can protect you throughout the process.

    Contact us today before contacting a trustee directly. 1-888-890-0888.

     

  • 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.

     

  • CRA Wage Garnishments – What You Need to Know

    cra wage garnishments dcA few weeks ago we dedicated a blog to Canada Revenue Agency tax problems and how to approach a tax debt before attempting to make a payment arrangement. This week we follow that up with a discussion of what to do once the CRA has levied enforcement action against you, specifically in reference to a wage garnishment. CRA wage garnishments are terrible to have to deal with, and unless you face the problem head-on, you might be in for a struggle financially.

    What kind of struggle are we talking about? The CRA can garnish a significant portion of your income depending on its source. Here are a few examples:

    • CRA wage garnishments to employment income = up to 50%
    • CRA garnishments to pension income = up to 100%
    • CRA garnishments to subcontractors = up to 100%
    • CRA garnishments to companies = up to 100% of gross income

    In addition to issuing no warning prior to garnishing your wages or income, the CRA doesn’t need a court order to issue a garnishment. They simply need to send a notice to your employer/clients and the funds will be taken directly from your income.

    Once a wage garnishment is in place, getting the CRA to remove it is incredibly difficult.

    So, what can you do?

    A consumer proposal is one option for getting rid of a CRA wage garnishment. Once a proposal is in place, the CRA has to remove the garnishment as soon as notification of the proposal is received. Furthermore, a consumer proposal may even reduce the size of your tax debt – a consumer proposal or bankruptcy is the only way to reduce a principal tax debt – and stop interest from accumulating. A consumer proposal will also get rid of your multiple monthly payments, merging all into one, for a far more manageable payment.

    Just remember, don’t go directly to a trustee to negotiate your proposal. While a trustee will represent you, they will also represent the CRA which won’t always mean the best deal for you. Instead, speak with a financial consultant first. A professional financial consultant can facilitate your proposal, negotiate it with the trustee and represent your interests – both protecting your information and getting you the best, most fair, deal.

    At DebtCare, we will stand beside you throughout the entire process. We have years of experience dealing with both CRA wage garnishments and negotiating consumer proposals.

    You can count on us. Call us today 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.

     

  • 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.

     

  • CRA Tax Debt Collectors Get More Aggressive

    shutterstock_445545787-1The Canada Revenue Agency (CRA) has always had a reputation for strict and aggressive collection behaviour. When money is owed, agents will try their hardest to retrieve it. This usually results in extreme stress on the taxpayer and enforcement action that can wreak havoc on their financial stability. What’s worse, those tactics seem to be getting more and more aggressive. If you’ve got CRA tax debt collectors calling, read on.

    When you receive an assessment, perhaps your initial thought is to call and speak to the CRA directly. When you try to negotiate with the CRA directly, before they even speak with you they will ask you to complete a financial disclosure form – this is a very dangerous form. They will want disclosure of everything from your bank account to your employer, to assets and income and expenses. Some of this information they may already have, or have the resources to obtain, but it is always easiest just to ask you.

    Remember, the goal of each and every agent is to get what is owed, as soon as possible. They are not interested in negotiating a long, drawn-out payment arrangement. Perhaps you assume that they will allow a realistic schedule based on your income. Oh, they will, but it will be based solely on your income – requirements to other creditors will not be considered, and your debt to the CRA will be made the top priority.

    Once this has happened, you will have little recourse. Since you’ve disclosed all of your information – where you bank, work, live, etc. – they can initiate enforcement action against you. This may include a frozen bank account, wage garnishment, even a lien on your home. Unlike other creditors, no court order is needed for CRA enforcement action, and once imposed it can be very difficult to remove.

    Our best advice is this: if you have received a notice of assessment/re-assessment informing you of a tax debt, don’t go directly to the CRA. You should consider speaking with a financial specialist to find out about all of the available options for getting rid of the debt before the CRA comes calling.

    If the CRA has already taken enforcement action, there are federal government programs that can protect your bank account and income. Speaking with a financial specialist, again, is the best approach here. We can help you take advantage of those programs and get rid of the tax debt once and for all.

    Protect yourself and your assets. At DebtCare, we can help you get rid of a CRA tax debt and help you retain your financial footing. Call us today at 1-888-890-0888.