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  • Self Employed? Is a CRA Garnishment Going to Your Clients?

    Self Employed? Is a CRA Garnishment Going to Your Clients?

    CRA GarnishmentAnyone who is self-employed knows the many challenges that come with owning a business – and one of the greatest is dealing with the many complexities that come with the intricate tax process in Canada. Because of these complexities, many self-employed individuals find themselves owing money to the Canada Revenue Agency (CRA), for numerous reasons, and if unable to pay, face strict enforcement actions as a result. One of the most common of these is a CRA garnishment of your receivables.

    Here are some numerical facts when it comes to a CRA garnishment:

    The CRA can garnish up to:

    • 100% of subcontracted income
    • 100% of other income like pension
    • 100% of self-employed income

    If you are self-employed, the CRA can send a notice to your clients to direct your receivables to the CRA. This can cause significant financial hardship and stress, as well as the negative impact it can have on your client relationships.

    So, can you stop a CRA garnishment? It is difficult, but you do have options.

    1.     You can try to get the CRA to agree to stop, but know that the chances of this happening are slim to none. As far as the CRA is concerned, you owe the money and their job is to retrieve it. Also important to remember, in the process of trying to cooperate, many who attempt to negotiate divulge information to the CRA that can cause even more problems; providing financial disclosure can prompt further enforcement action, a frozen bank account or a property lien for example. This option should be avoided at all costs!

    2.     Consumer proposal. By entering into a consumer proposal you can immediately stop a garnishment – with the added benefits of stopping interest and likely reducing the size of your overall debt. However, there are a few caveats:

    o   If you have other creditors they will be included in the proposal too.

    o   If the CRA is your majority creditor, they have to agree to the proposal (if they don’t respond within 45 days they are deemed to have agreed).

    o   If you own a home and the CRA has a lien on it, this greatly complicates things.

    3.     Bankruptcy. Like a consumer proposal, this would immediately stop a garnishment, and is likely to stop interest and perhaps reduce the size of your overall debt. Things to keep in mind:

    o   You have to report income and your financial circumstances to a trustee every month – if your financial situation improves you will have extra repayment added which has to be paid before you can get discharged.

    o   Your payment to the trustee depends on your income and can change if there is an increase in income.

    o   If you own a home and the CRA has a lien on it, this greatly complicates things.

    If you are suffering from a CRA garnishment of your receivables, there are options to have the garnishment lifted while keeping yourself protected from further enforcement action. DebtCare has the tools and experience to help. Contact us today by calling 1-888-890-0888.

  • Will a Consumer Proposal Ruin my Credit?

    Consumer ProposalMany of us have been there – finances are tight, and even making the minimum payments on your credit products has become difficult. Maybe you are opting to make payments on one card each month, or are continually increasing your available limit just to be able to keep your head above water. Whatever the situation, know that there are solutions, one of which is the consumer proposal.

    Maybe you have already looked into this option but are asking yourself, ‘will a consumer proposal ruin my credit.’ Among the many things to be considered with this form of debt relief, the impacts are important. That being said, it definitely isn’t the only thing you should be thinking about.

    The Process: The process is fairly straightforward. A consumer proposal must be conducted by a trustee in bankruptcy, but it is always smart to have your own representation – someone who can negotiate on your behalf and keep your best interests in mind. A proposal is drawn up that addresses your debt, and this is forwarded to your creditors. Once the majority of your creditors have approved the proposal (they have 45 days to accept or reject it), it is filed and you begin making monthly payments to a trustee, and that is then handed over to your creditors. Most proposals are made over five year terms, but can be paid off in full at any time.

    The Benefits: There are many benefits of a consumer proposal. Firstly, it reduces your debt. Since you make a proposal to your creditors with an amount that matches your budget, this can mean a significant reduction in the overall amount that you owe. Secondly, it stops interest. Often, especially with regard to credit card debt, it is the interest that kills you, and so with a consumer proposal the interest is stopped and you can actually make significant payments of the principal, rather than the majority continuing to go to interest. Furthermore, a consumer proposal means a single monthly payment, rather than a bunch of payments on different days (again, a great deal of which goes directly to interest).

    The Impacts: Will a consumer proposal ruin my credit? Firstly, if you are considering a consumer proposal, your credit may not be in the best shape as it stands currently, and so before getting even further in over your head, it is best to gain control of your finances. The consumer proposal, like any credit activity, will show on your credit. It will remain on your report for 3 years following the date it is paid in full (so it is better to pay it off quickly). Although it is not considered positive credit activity, you can actually start rebuilding your credit as soon as you enter into a consumer proposal.

    If you are thinking about a consumer proposal but are worried about the impacts on your credit, please contact DebtCare Canada today for a free consultation: 1-888-890-0888.

  • The Challenges of Dealing with Debt Through a Divorce

    In Canada, divorce is one of the biggest causes of debt, and debt is one of the biggest causes of divorce. No matter how you look at it, financial strain wreaks havoc on your life in a number of different ways. When you separate, and go from a 2 income household to a 1 income household, it can become incredibly difficult to navigate this change in your financial situation. Maintaining a hold on your current debtload, meeting minimum payments, even establishing and sticking to a realistic budget can be really tough. Check out this video of DebtCare’s own Pam Shimmerman, our financial restructuring specialist. With a legal background, Pam has helped countless individuals deal with the debt that comes from divorce.

    One of the best things that you can do once a divorce is initiated is to take a detailed look at your household income and expenses, as well as your current debt load and future financial goals. Working through these items with a financial specialist can help ensure stability and can help you to achieve your financial goals. If you are in the midst of a divorce and would like some help dealing with the financial repercussions, please contact Pam for a free consultation. You don’t have to do it alone. Please call 1-888-890-0888 or email Pam directly at pshimmerman@debtcare.ca.

  • Is Credit Counselling in Canada a Debt Consolidation?

    Credit Counselling in CanadaWe have all heard the commercials on the radio and television talking about debt consolidations and credit counselling. When you have a debt that is becoming increasingly difficult to pay, these may seem incredibly enticing – but it can be difficult to know what each one means, or if they are in fact even different. So, is credit counselling in Canada the same as debt consolidation, and if not, what is the difference?

    Firstly, no, credit counselling is different from a debt consolidation. Many people confuse the two, but there are major differences. Both can represent significant debt relief, but each one requires a specific process that needs to be followed properly in order to be successful.

    Credit counselling in Canada – credit counselling is usually not for profit and is usually funded by the bank or your creditors. With a credit counselling proposal, you are essentially going to your creditors and asking to have the interest on your debt frozen and for them to accept a reduced monthly payment based on your budget. If accepted, you make one payment to credit counselling and they disperse the money to your creditors. This means a single monthly payment for you, that you can afford, and drastically increases your creditors’ chances of being paid, on time, each month.

    Some things to keep in mind with credit counselling: it does not reduce your overall debt. Although your interest is frozen and your payments may be reduced, you are still on the hook for the entire amount. Additionally, with credit counselling in Canada, the damage to your overall credit rating is the same as in bankruptcy – all ratings turn into R7 and I7 for a period of 3 years from the date the proposal is paid in full.

    Debt consolidation – A debt consolidation is when you are approved for a loan to cover the entirety of your debt. You then pay off your debt completely, and just pay that one loan on a monthly basis. With a debt consolidation, many of the same benefits are visible, such as one monthly payment and reduced interest, but without the damage to your credit.

    When you have financial challenges and you want to consolidate debt into a single payment, you have a few options, including a debt consolidation loan or mortgage financing. Other options for debt relief may include a consumer proposal or bankruptcy. You viable options will depend on a number of things, including your credit, assets, budget and cash flow, and so it always helps to speak to a debt specialist to determine all of your options.

    For more about debt consolidations and credit counselling in Canada, please contact DebtCare Canada today by calling 1-888-890-0888.

  • Wage Garnishment Blog Series Part 3 – Wages Garnished by Other Sources

    Wage GarnishmentIn the first two blogs of our wage garnishment series we discussed how wage garnishments work when you owe money to the Canada Revenue Agency or to a creditor. While these are two very common forms of wage garnishments, there are other forms of wage garnishments that can quickly become severe financial burdens.

    A very common ‘other’ form of wage garnishment is a wage garnishment related to unpaid child support. In Ontario, if you fail to pay child support, your wages can be garnished. The typical process is as follows: once your spouse has given you notice, their lawyer or the Family Responsibility Office will make an application to the court to garnish your wages, and once approved, your employer will receive notice and be legally required to do so. If there is back child support your wages can be garnished up to 50%.

    Getting your wages garnished by Family Responsibility should never come as a surprise and you should always ensure that your child is financially cared for. When it comes to a wage garnishment from Family Responsibility, there is nothing you can do to reduce or stop this, other than going to court. These types of garnishments are unforgiving, and even if you are financially strapped and finding it incredibly difficult to pay, they will often throw you further into financial turmoil.

    So, if you are having your wages garnished as a result of unpaid child support, are you then stuck between a rock and a hard place? Are there really no options to help you pull yourself out of a financial hole? No, you do have options, but these may mean looking at dealing with your other debts as quickly as possible to free up the cash to finally settle up those Family Responsibility payments.

    What options are available? If you struggle with what seems like a mountain of debt, including debts for child support payments, a viable option may be a debt consolidation or a consumer proposal. Both of these may represent significant relief, as well as a single monthly payment. Just remember, if you are approved for a consumer proposal, payments to Family Responsibility cannot be included, but the proposal can free up potential monies to pay that debt and lift a wage garnishment.

    If you are facing a wage garnishment of any kind, DebtCare Canada is here to help. For information about the many different options that may be available, please contact us today by calling 1-888-890-0888.

  • Wage Garnishment Blog Series Part 2: Wages Garnished by a Creditor

    Wage GarnishmentMany people run into financial problems and can’t pay their creditors. Often these debts end in a wage garnishment. Last week we looked at Canada Revenue Agency wage garnishments, so this week we thought we’d explore what it means when you are faced with having wages garnished by a creditor other than the CRA.

    When you have a debt that you have continually had trouble paying down, failing to meet even the monthly minimum payments month in and month out, your creditors will quickly tire of this and will eventually take enforcement action in an attempt to get their money. Sure, if you can’t pay, you can’t pay – your creditors can’t draw blood from a stone – but that doesn’t mean they won’t try!

    If your creditor has no security on your loan, they can do one of two things to try and get what they are owed:

    • Sue you in Small Claims Court
    • Send your file to a 3rd party collection agency for collection – they can in turn sue you in Small Claims Court.

    Remember – aside from the CRA, a creditor cannot garnish your wages without a court order, so Small Claims Court is a necessary first step.

    If you are sued in the Ontario Small Claims court, your creditor has to serve the papers on you. Once you have received the papers, you have 2 options as far as filing a Defense (and only 40 days to do so):

    a)     If you file a Defense a date is scheduled for you to make a settlement and repayment terms with your creditor. If a settlement is reached, as long as you don’t breach the terms, the matter is settled. If you breach the terms the creditor can get a default judgment against you. If you don’t make a settlement the matter will proceed to trial; it should be said that most disputes are settled at the pre-trial settlement conference.

    b)     If you don’t file a Defense, the creditor can obtain Default Judgment against you. Once they have this, they can file a Notice of Garnishment with the Ontario Small Claims Court and also send it to your employer. The maximum wage garnishment from the Ontario Small Claims Court is 20% of your earnings. Your employer must then begin remitting the specified percentage of your income to the court. The court holds the money for 30 days and then sends the money to your creditor.

    If your wages are being garnished because of a Small Claims Court wage garnishment, and you can’t make ends meet, there are only 2 ways to reduce or stop a Small Claims Court wage garnishment.

    1. File a motion with the Ontario Small Claims Court – include and present your financial information and ask the judge to reduce the percentage of the garnishment or mediate a voluntary payment plan that you can afford with the other side. You may need a paralegal to do this as it will involve completing court forms and attending a court date.
    2. Speak to a financial restructuring professional – this could involve discussing options such as a consumer proposal, which will immediately stop a wage garnishment imposed through the Ontario Small Claims Court.

    If your wages are being garnished and you don’t know what to do, DebtCare can help. We have the resources to help you pay off those debts and get you back on strong financial footing. Call us today at 1-888-890-0888.

  • Wages Garnished by CRA – Blog Series Part 1

    Wages Garnished by CRA – Blog Series Part 1

    Wages Garnished by CRAWage Garnishment Blog Series Part 1 – Wages Garnished by CRA

    With the advent of May, the personal tax filing deadline is now well behind us, and for many, a sigh of relief can be had. For others however, the passing of the deadline brings with it a whole new set of issues.

    If, after filing your taxes, you find yourself with a tax debt that has led to your wages garnished by CRA (the Canada Revenue Agency), this first blog in our wage garnishment blog series might be a smart place to start as far as finding relief.

    If you have yet to have your wages garnished by CRA, but are concerned that this might be a reality in the very near future, here are some things to think about:

    • If you are an employee on payroll with taxes deducted at the source, the CRA can garnish up to 50% of your wages. They simply need to send notice to your employer and your employer is legally required to submit a portion of your pay to them to pay off your tax debt.
    • If you are a sub-contractor, or receive a different form of income, such as a pension, the CRA can garnish up to 100%.
    • If you are self-employed, the CRA will send a notice to your customers to redirect your receivables directly to the CRA.
    • A court order is not required for wage garnishments initiated by the CRA.
    • If the person who receives the requirement to garnish your wages does not comply, the CRA can then pursue them (so don’t assume that just because your employer likes you that they will ignore a requirement to pay).

    How does the CRA know where to turn to garnish your wages?

    There are a number of different sources, including the T4 filed by your employer, an audit done on a client or supplier, a call to the CRA tip line, or personal disclosure.

    A garnishment can cause serious financial hardship, not to mention embarrassment or negative impacts to your personal business. Knowing this, what can you do to prepare yourself, or deal with a wage garnishment by CRA that is already in place?

    Remember that dealing directly with the CRA is never a good idea – unless you can pay the debt in full, your chances of getting an agent to even entertain a reasonable payment plan are slim to none.

    And, if you attempt to deal with them directly, providing additional information in the hopes of reaching an amicable agreement, a frozen bank account or property lien may be the only result.

    There are programs that offer immediate protection. Are your wages garnished by CRA? These programs also offer protection from other enforcement action, and finding out about these is the best place to start. If you are facing a tax debt or a CRA wage garnishment, DebtCare can help. Call us today at 1-888-890-0888.

  • Tax Return Going to Result in Tax Debt? What Can You Do If You Can’t Pay

    Tax DebtThe tax deadline is upon us, and for many this means a necessary hassle we must face annually – but once dealt with, is quickly relegated to the back of our minds until this time next year. For others however, those with a tax debt looming over their heads, tax time brings with it some serious stressors.

    As we hope you are aware, the tax deadline this year for personal income tax returns is April 30th. If you have everything in before this date, that’s great, especially if you don’t owe anything. However, if you have yet to file, and think you might owe, it might be prudent to consider the late filing penalties and how they can impact your tax debt – it might just be enough to motivate you to get your filing done.

    2013 late filing penalties:

    • If you owe for 2013, and do not file by April 30th, you will be charged a late filing penalty of 5% of your 2013 balance, plus 1% of the balance owing for each full month your return is late (to a maximum of 12 months).
    • If you were charged a late filing penalty for 2010, 2011, or 2012, your late filing penalty can increase to 10% of your 2013 balance, plus 2% of the balance for each full month (to a maximum of 20 months).

    These penalties are steep – and no one wants to get saddled with a major tax debt, plus interest – but what if you can’t pay? If you are thinking about just ignoring that debt, hoping that by not filing the CRA won’t catch on and you’ll be spared the financial strain – think again. The consequences of not filing may mean a notional assessment, where the CRA will estimate your annual income and charge you what they feel you owe based on their findings. Continued failure to pay a tax debt can result in enforcement action, including wage garnishments, frozen bank accounts, even property liens.

    So what can you do? If you have filed and owe, or if you have yet to file because you are afraid that you will owe, know that you have options. Don’t ignore that tax debt in the hope that it will go away. Speak to a debt solutions specialist to find out about all of the options available to you to get rid of that tax debt once and for all.

    For more information about dealing with a tax debt please contact DebtCare Canada today by calling 1-888-890-0888.

  • DebtCare Canada Weighs In: Student Debt

    Student LoanIt is very common nowadays to hear about 20 something individuals living with parents, or struggling to meet their financial responsibilities, especially when compared to 20 years ago – and as a recent Yahoo Canada article points out, much of this has to do with the rising costs of university education and the resulting student debt levels. This, coupled with the less than promising job market, has left many young Canadians facing significant challenges when it comes to their life plans.

    Our very own Michael Goldenberg, President of DebtCare Canada, was interviewed for the article, and had this to say: “Increasing debt and no plan to pay it off is a common problem among young Canadians, known as Gen Y or Millenials.”And it isn’t just student debt that is getting these individuals into trouble – as Michael states, “the extreme accessibility to credit that helps fuel the need for instant gratification” is also causing major financial problems for young Canadians when it comes to establishing themselves financially and saving for the future.

    Are young Canadians out of luck then when it comes to getting things straightened out? No, there are options available – it just requires discussing those options and choosing the one that best fits the situation.

    Check out the full article here: http://ca.news.yahoo.com/challenges-facing-young-canadians-throw-life-plans-curve-184000091.html

    Whether you are dealing with student debt, credit card debt, or a combination of the two, DebtCare Canada can help you get the relief you need to start over on fresh financial footing. Contact us today by calling 1-888-890-0888.

  • Ontario Bankruptcy Trustees – What is Their Role in a Consumer Proposal?

    Ontario Bankruptcy TrusteeWhen you feel as though you are drowning in debt, with few options available for relief, you may be considering a consumer proposal as a way to get those collection agencies off your back and to obtain some semblance of financial stability. Knowing this, perhaps you are thinking about seeking the advice or assistance of an Ontario bankruptcy trustee.

    Wait – before you enlist the services of a bankruptcy trustee, you should first know what role they play in a consumer proposal and how this can impact you.

    A bankruptcy trustee in Ontario is an individual licensed by the Superintendent of Bankruptcy. Their job is to administer consumer proposals and bankruptcies and to manage assets held in trust. They will negotiate the settlement between you and your creditors. In a proposal, that trustee will assist you in developing a proposal to present to your creditors (usually a percentage of what you owe them), and once accepted, monthly payments are made through the trustee, and the trustee transfers that money to your creditors.

    Sure, this all sounds well and good – after all, you can’t make a consumer proposal without a trustee – it is a legal agreement under the Bankruptcy and Insolvency Act and must be administered following a formal and regulated process. That being said, there are a few important things to keep in mind before you make the call to a trustee.

    Firstly, a bankruptcy trustee does not simply act on your behalf. Even though you are the one to call, this individual represents both parties (you and your creditors), not just you. This means that they are obligated to seek the most money possible for your creditors to ensure that they get as much of what they are owed as possible, while still being fair to you. What this means is that you may not necessarily be getting the best deal.

    Secondly, most bankruptcy trustees never outline how they are paid – but this is important. Although their fees are regulated, they are paid according to how much you pay to your creditors, and thus it is in their best interest to get as much money for your creditors as possible.

    So, what then are your options? Accept this and go forward? Skip the proposal all together to avoid it? No, there are ways to protect yourself and secure a consumer proposal that meets your needs. The best way to do this is to work with a financial organization experienced with debt relief solutions, one that can offer you representation and protect you throughout the entire proposal process. These professionals can walk you through the process, ensuring that you are aware of and understand your choices, as well as administer your paperwork.

    Know before you go: before you call that trustee, think about getting personal representation – someone who will look out for your best interests rather than their own or that of your creditors. DebtCare Canada can help – call us today at 1-888-890-0888.