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  • 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.

     

  • 2017 Budgeting Tips: Planning for the Year Ahead

    Many Canadians start a new year with a resolution to get their finances in order. Creating and maintaining a budget is a great place to start. This week, we’ve got the 2017 budgeting tips that will help you build a plan and stick to it.

    2017 Budgeting Tips:

    The first step in creating a successful budget is to think about why you’re budgeting. If you’re creating a budget just because – because someone told you it’s a good idea, be it a family member or a financial success book – budgeting won’t work. The real purpose of budgeting is to indicate where your spending weaknesses are and provide the structure for you to get stronger in those areas. It also helps to have a goal in mind – this works as a great motivator when it comes to sticking to your budget.

    Step two is writing down what you earn – from all sources.

    Step three is likely the most difficult and will probably take the most time – write down all of your monthly spending. This means both regular and sporadic payments. Sometimes it helps to have the first month be your test month. It shouldn’t actually be a budget at all, it should instead reflect your spending in an average month. Then you can use that data to build an accurate, realistic budget.

    Take advantage of the various budgeting tools available – even if this means something as simple as a pencil and paper. Use such tools to keep track of spending to ensure you’re staying within your budget guidelines.

    Creating a budget can be a frustrating task. Staying on budget can be even harder. Once you’ve created your budget, it’s important to stick to it. Here are some 2017 budgeting tips to stick to that budget:

    • Use cash and only cash, for everything
    • Divvy up your weekly spending into envelopes or jars
    • Make sure you get and keep receipts
    • Share the responsibility with someone else

    If your budget shows nothing left at the end of the month to pay down debts above and beyond minimum payments, you may want to consider other solutions such as a debt consolidation or even a consumer proposal, depending on how bad your financial situation is. Minimum payments will never lead to you paying off your debts.

    At DebtCare, we can help you create a financial plan to pay down debt and move towards a more stable financial future, no matter your current situation.

    Call us today, we can help. 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.

     

  • Tax Problem Tips – Is the CRA Friend or Foe?

    The tax season is just a few short months away, and that means, Canadians are getting ready to break out the calculators. If you’re on top of your taxes, a few days of hassle are quickly followed by a year of not worrying. However, if you owe a tax debt, or are nervous that one will be hanging over your head once you’ve filed, that year of not worrying may seem like a pipedream. This week we’ve got some tax problem tips to help you better deal with any issues.

    First of all, it is important to note that the Canada Revenue Agency is not in your corner. No matter how nice the agent assigned to your case may seem, they are not your friend. When you call to settle a tax debt, hoping for some mercy, the agent may at first seem sympathetic, but don’t be fooled.

    The first thing they will likely do is tell you that they will consider an arrangement with you once you’ve completed a financial disclosure form. This is a dangerous CRA form that requires information about your income, expenses, assets and liabilities. It will also ask you to provide information about where you work, live and bank. Often people will complete this form in good faith, assuming that once the CRA understands how much money you take in each month, compared to your current financial responsibilities, they will accept an arrangement based on what you can reasonably pay.

    This could not be further from the truth.

    What most Canadians don’t know is that the CRA will only consider your basic living expenses after seeing your budget and disallow payments to other things like credit cards. They will decide, based only on those basic living expenses, what you should have left over and often request a monthly payment so high that it will be impossible to pay.

    Additionally, sometimes they will accept your arrangement temporarily. The CRA is not looking for a long-term arrangement, and thus once your arrangement ends or if they deny you an arrangement, they will use all of the personal information you disclosed in the financial disclosure form against you! Then they will resort to collection action, including garnishing your wages, placing a lien on your home, or freezing bank accounts, to get what is owed.

    Before you complete one of these dangerous CRA forms or consider trying to negotiate with the CRA – have an independent review of your finances done by an independent financial consultant, hired by you to get an opinion as to your next best steps. Not only will they be able to help you anticipate what steps the CRA will take, they can also help you come up with a financial plan to deal with the tax debt so that you don’t get yourself into deeper trouble with CRA.

    Protect yourself. Call DebtCare first. 1-888-890-0888.

     

  • How to Choose the Right Ontario Mortgage Broker

    real-estate-sales-professional-smIf you are considering buying a home or want to refinance, you may be wondering which route is the best to take to obtain financing. Today we talk about mortgage brokers and how to choose the right one to best suit your needs.

    Often, when individuals set out to obtain mortgage financing, their first thought is to head to the bank. While this is a good option for some, going to a mortgage broker is often better than going directly to the bank or a lender because it gives you more choices. This is because banks are only able to offer you their rates, while a broker working with multiple lenders can offer a variety. That being said, it is critical to take steps to choose the right broker for you.

    Many mortgage brokers have an inherent conflict of interest because, over time, relationships are built with lenders that can lead brokers to find you a deal that makes the most sense for them. While the deal may be good, it won’t necessarily be the best. Furthermore, like the banks, some brokers only represent certain lenders, making it difficult to provide options for those with bruised credit or in atypical situations.

    So, how do you choose the right Ontario mortgage broker?

    Start by heading online to see what options are available locally. Once you’ve narrowed down a list, check the FSCO website to confirm that they are licensed and in good standing. If they are not, our advice is to steer clear.

    Follow up by Googling them and checking their reviews. Are there reviews of their brokerage? Have people recommended them online? Do they have presences on social media? How many followers do they have? Are people saying good things about them online? The answers to these questions can yield a great deal of insight into whether or not they are trustworthy and reliable.

    Ask them for references or to verify testimonials. A good mortgage broker will be able to provide you with references to previous clients.

    Once you’ve settled on a few, call and ask questions. Take notes on what deals they are able to offer you. Make sure to ask about special conditions. If you don’t understand something – such as terms used or calculations – be sure to ask for clarification.

    A mortgage is a very important financial product – one that you will likely have for years to come. You don’t want to rush into it. Be sure to do your research and find the right mortgage broker for you.

    Want more information on how to choose the best Ontario mortgage broker for your unique situation?

    Call DebtCare today: 1-888-890-0888.

     

     

  • Best Wishes from the DebtCare Team

    May every happiness greet you this holiday season!

    We hope your days are filled with laughter and love,

    good tidings and great friendship.

    The DebtCare team wishes you Happy Holidays and all the best for 2017!