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  • Debt and Divorce: How to Handle Your Finances During a Divorce

    Debt and divorce. How to handle your finances during a divorce isn’t an easy task. Since approximately 38% of marriages end in divorce in Canada, it is no wonder that people want to know how to deal with their own debt and marital debt during divorce. This article will explain your options and comes from the office of a noted debt defense and bankruptcy lawyer in Philadelphia, PA.

    You Are Not Responsible for Your Spouse’s Debt

    Debt and divorceIf your spouse incurred individual debt before or during your marriage, you are not responsible for paying it. In other words, no creditor of your spouse can come after you for their debt.

     

    However, the court may reassign individual debt in the course of the divorce proceedings. For example, if one spouse incurred debt while supporting the other through education or training, the supported spouse may have to pay some of that debt.

     

    A problem arises if someone fails to pay debt per the court order. Then, a creditor will pursue the spouse whose name is on the lending contract. If this is you, it may be prudent to make the monthly minimum payments in order to maintain your good credit, while your lawyer assists you in getting compensation and forcing your ex to pay.

    You and Your Spouse are Jointly and Severally Liable for Marital Debt

    If you incurred debt jointly, you are each responsible for paying the whole amount. While this might not seem fair, creditors may pursue one or the other of you, or both of you, until the debt is paid.

     

    Here is where it can get sticky. The court may order one or the other to pay the joint debt, but if that person fails to pay, the creditor can pursue the other for payment. Look into refinancing joint debt in the name of the person who has accepted responsibility for paying the debt or the person who was ordered by the court to pay. This avoids problems for the other spouse in the future.

     

    For example, the marital home is commonly mortgaged jointly. If one or the other intends to remain in the home, it may be prudent to refinance the home in that person’s name.

    If Possible, Agree on How to Manage Joint Debt Before Divorce

    You both should pull your credit reports from Equifax and TransUnion and, if possible, discuss what debt appears on each. If the divorce is not amicable and you are unable to reach a preliminary agreement about your debt, know that eventually it will be settled but by the court, but in the meantime, things will get messy.

     

    You can take steps to protect yourself financially, such as removing your spouse’s name as an authorized user on any credit accounts, freezing joint accounts, and opening an individual account to deposit your income and pay your expenses.

    What if My Ex Files Bankruptcy?

    Unfortunately, it is common for one or both divorcing spouses to file bankruptcy due to the financial burden of establishing and maintaining two households on the same amount of income used to maintain their single marital household.

     

    If your former spouse files bankruptcy, they will be discharged of most unsecured debt, including any joint credit cards or personal loans, and maybe discharged of secured debt such as a mortgage or a car loan if they surrender the collateral in their bankruptcy case.

     

    What does this mean for you? If your spouse is discharged of any joint debt, the creditor will pursue you for payment even if the court ordered your ex to pay it in your divorce proceedings. Your only recourse at that point is to seek an order from the court for reimbursement for having to ultimately pay that debt.

     

    If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. If you are struggling with joint debt issues during or after your divorce, speak with a professional who specializes in debt management options. Contact us, for a free consultation, by calling us on 1-888-890-0888 or visiting www.debtcare.ca.

     

    About the Author

    Veronica Baxter is a legal assistant and blogger living and working in the great city of Philadelphia. She frequently works with David Offen, Esq., a busy foreclosure and bankruptcy lawyer in Philadelphia, PA, U.S.A.

  • Can You Really Trust An Ontario Bankruptcy Trustee

    Ontario Bankruptcy TrusteeBefore you can determine if you can trust an Ontario bankruptcy trustee, you first have to understand what an Ontario bankruptcy trustee is and what his or her role in a bankruptcy or consumer proposal is.

    An Ontario bankruptcy trustee is an individual or a corporation that is licensed by the Superintendent of Bankruptcy. Bankruptcy trustees are regulated federally. The role of an Ontario bankruptcy trustee is to administer bankruptcies and proposals, administer the estates of the bankrupts, hold in trust and subsequently distribute the assets of the bankrupt. The bankruptcy trustee must follow the Bankruptcy and Insolvency Act (BIA).

    The bankruptcy trustee is to be impartial and act in the best interests of both the bankrupt and the creditors. The same is true whether you are filing a consumer proposal or a bankruptcy. In the case of a bankruptcy, the bankruptcy trustee can oppose your discharge if you have not fulfilled your obligations under the bankruptcy. These obligations can change over the course of your bankruptcy and/or as a result of undisclosed information at the time you filed for bankruptcy. In layman’s terms, if you incorrectly estimate the value of an asset, forget to tell the trustee that you have a particular asset or in the middle of your bankruptcy you get a better job, this may change your monthly payment in bankruptcy and the length of time you are bankrupt – the bankruptcy trustee will make this determination.

    In the case of a consumer proposal you don’t have an ongoing obligation to the bankruptcy trustee like you do in a bankruptcy. With that said, the bankruptcy trustee assesses the proposal they will offer your creditors based on extracting maximum value for your creditors.

    So the answer to the question “can you trust an Ontario bankruptcy trustee” is yes. They are a licensed, regulated officer of the court. However, now that you know the role a trustee plays in a bankruptcy or consumer proposal, it may not be wise to approach him or her directly, no matter how warm and fuzzy the advertising is.

    Consumer proposals and bankruptcies are good options for getting out of debt and starting off on a fresh footing, but before jumping to this conclusion it is important to consider all of your financial options. Working with a qualified financial consultant that is experienced working with debt consolidation, mortgages, debt settlements, consumer proposals and bankruptcies will make you aware of these options. A financial consultant who is hired by you to represent your financial interests will ensure that you can be open and honest about all of your finances, ask questions that won’t impact you and assess a host of different financial choices. He or she can also line you up with the appropriate professionals (this includes bankruptcy trustees if necessary) and represent you through the process. This takes the burden off of you and ensures that you walk away with the best possible deal. In the case of a consumer proposal you could save thousands of dollars.

    If you are struggling with a financial problem and would like to review your financial options contact DebtCare Canada at 888-890-0888 or visit www.debtcare.ca.

  • Spring Cleaning Should Include Cleaning Up Your Finances

    Cleaning you your FinancesThe sun is shining and spring is in the air. Cars are lined up at carwashes and the parks are filled with people taking advantage of the warm weather. And, with the advent of spring comes the inevitable ‘spring clean’. From a financial perspective, the spring clean also represents the perfect opportunity to get your finances cleaned up.

    Still feeling weighed down by a financial boulder? You are not alone. Canadians everywhere are dealing with rising debt loads and relying on credit to pay for everything. If you are struggling with debt, it is time to take control and clean up your finances. We’ve compiled a list of ways to help you manage this spring clean.

    Financial Spring Clean Tip #1: Make a list. Sure this list won’t include things like washing all of the windows or cleaning out the garage, but it should include those financial goals you want to achieve in the coming months. It is easier to stick to something if you can physically tick things off of that list.

    Financial Spring Clean Tip #2: Create a budget. Sure this seems like a band-aid solution that many individuals attempt – but if you are serious about taking out the ‘debt’ trash, creating a realistic budget and sticking to it is crucial. A budget, one that takes into account every aspect of your monthly finances, can show you exactly where you need to sweep away some of that extra spending and where you can save.

    Financial Spring Clean Tip #3: Organize. Just as you would organize those closets or bins collecting miscellaneous junk, organize your debt. A great way to do this is to consolidate. Instead of having several different credit cards, loans, and lines of credit, consolidating debt merges all of these into one, neat, tidy monthly payment. The added bonus here is that this also reduces the amount of your monthly interest. So, just like purging your closet gets rid of those items collecting dust, consolidation gets rid of that extra financial burden.

    Financial Spring Clean Tip #4: Call in the professionals. Rather than attempting to tackle that mountain on your own, seek the guidance of someone that knows exactly how to help you get out of debt. A professional financial consultant can give you the advice you need and present the options that will help you get rid of your debt. Whether it be budgeting tips, a consumer proposal, or bankruptcy, a seasoned financial consultant, one with your best interest in mind, will get you on the right track to financial spring cleaning.

    Don’t let another year of debt build up. See spring as the perfect opportunity to get your finances under control and regain your financial independence.

    To get started on your financial spring cleaning and get rid of your debt for good, please contact DebtCare Canada online or call 888-890-0888.

  • 3 Reasons Why You Should Not Try to Negotiate with the CRA Directly

    3 Reasons Why You Should Not Try to Negotiate with the CRA Directly photoThousands of Canadians struggle with tax problems. One of the worst things that you can do if you have a tax problem that has or will result in a debt that you can’t pay is to try to negotiate with the CRA directly. The reason for this is because the CRA has a single mandate and that is to close your file, whether the money is successfully collected from you or not.

    It may sound like it doesn’t make sense, but in fact it does. When a taxpayer is behind filing tax returns or has a large tax debt, the CRA’s success is actually benchmarked by files closed and not dollars collected. This means that, as time goes on, interest and penalties accumulate and by the time you file late returns or decide to try to pay your tax debt, bam – your tax debt may have doubled or even tripled in size.

    How does the CRA close files? By coming after you! Leveraging tactics like wage garnishments, sending garnishments to your clients (in the case of self-employed people and contractors), freezing your bank account, placing liens on your property and more… Sometimes one tactic will be deployed or multiples will be deployed all at once. Doing this forces you to do one of two things – pay the debt or go bankrupt or file a consumer proposal – all three result in your file being closed.

    This is why negotiating directly with the CRA can be dangerous. The average person doesn’t know what the CRA is capable of, so in good faith will try to negotiate, resulting in more personal exposure. The CRA will play good cop, bad cop – having one agent go after you and then another swooping in and being nice, delicately extracting your personal information to be used against you at a later date. The CRA may accept a temporary payment plan or suspend an enforcement measure “if” you complete a financial disclosure form that includes telling them any assets that you own, where you work and where you bank.

    While the CRA has methods to find out your personal information, why serve it up to them on a silver platter, making it that much quicker and easier for them to come after you? At the end of the day, if you have a tax debt that you cannot pay you have a financial problem.

    A financial problem can be resolved through a consultation with a financial consultant who routinely deals with CRA matters. Don’t go it alone – good help is out there. If you have a tax debt and you need help please call DebtCare Canada at 888-890-0888 or visit www.debtcare.ca.

  • What to Do if Your Wages Are Being Garnished

    Wages Being GarnishedIf your wages are being garnished then no doubt you are feeling the pain. Having your wages garnished results in severe financial problems and even embarrassment at work. There are different types of wage garnishments that have financial impacts.

    If your wages are being garnished as a result of family responsibility there is little that you can do outside of working with a lawyer to try to get the amount of the wage garnishment reduced or to work towards paying up your arrears and then moving to a voluntary monthly payment plan. There isn’t really any protection for individuals who have unpaid child support. Child support wage garnishments can consume up to 50% of your income.

    If your wages are being garnished as a result of a judgement in small claims court you do have some options. You can make a motion to the local small claims court and ask a judge to reduce the amount of the wage garnishment or to lift it and allow for an agreed-upon voluntary monthly payment. While this can be effective, the courts do have the final say, and can say no. It also depends on your creditor. You can also look at working with a financial consultant to make a proposal to your creditor so that they agree to lift the judgement. This can be quite effective and even result in the interest that is accumulating on your debt being frozen. A garnishment imposed through the small claims court can consume up to 20% of your wages in most Canadian provinces.

    If your wages are being garnished by the Canada Revenue Agency (CRA) this is by far the most dangerous type of garnishment. A CRA garnishment can consume up to 50% of employment income and up to 100% of secondary income. For example, if you are a contractor the CRA can demand that your client send 100% of your earnings. This is the most dangerous type of garnishment because a CRA imposed garnishment can literally make it impossible to pay for the necessities of life, such as food, transportation and shelter. Those who are self-employed may lose business or have clients simply walk away because dealing with the garnishment is just too much hassle.

    Like judgements issued through small claims court, a good financial consultant can also help you to combat a CRA garnishment. There are programs and protections available that can stop a garnishment (even one issued by the CRA), freeze interest and even reduce the amount of the debt.

    Do not continue suffering in silence. If a wage garnishment is holding you back, help is only a phone call away. For more information please call DebtCare Canada at 888-890-0888 or visit www.debtcare.ca.

  • How to Deal With a CRA Tax Debt Before The CRA Catches Up With You

    Tax debt can be terrifying; terrifying because owing the CRA money when you can’t pay will most certainly result in collection action. Tax debt is one of the main reasons people get behind filing income tax returns. Individuals get behind filing because the money to pay isn’t there and they fear that once the returns are filed the CRA is going to come looking for the money.

    If you have a tax debt or know that you will once you file late returns, don’t wait until the CRA catches up with you. You can beat them to the punch and get a plan together that will effectively deal with your tax debt.

    You see, you have more options to deal with a tax debt when the CRA has not begun enforcement action. A great example is homeowners who have tax debt. If you own a home, have a tax debt and the CRA puts a lien on your home, this will greatly reduce your options if you really cannot repay them monthly because the CRA will become a secured creditor.

    There are many financial options to effectively deal with tax debt. Look at a consumer proposal for example. By leveraging a consumer proposal you can freeze the interest accruing on your tax debt, potentially reduce the size of your tax debt and stop collection action such as a wage garnishment.

    The challenge is that your chances of being able to make a consumer proposal are greatly reduced once the CRA has taken enforcement action, secured through a lien on your home for example.

    The same is true for bankruptcy. If you were holding the bankruptcy card in your back pocket or hoping that filing for bankruptcy might seem like a way to get out of the tax debt, this too would no longer be a viable option once the CRA becomes secured on an asset like real-estate.

    The faster you deal with a tax debt the better. Never mind issues like enforcement action and financial planning; the existence of a tax debt and CRA collection action against you can result in damage to your relationships with your family or with lenders like your bank or mortgage holder, embarrassment at work and even health problems if you become stressed and have difficulty coping with your stress.

    You don’t have to put yourself through this. There are companies that can help you with your financial tax debt problem. Choosing the right solution for you can be easier said than done, but not if you know your options. Working with a financial consultant hired by you to represent your best interests is one excellent way to review your options and formulate your plan.

    Dealing with your tax debt before the CRA catches up with you will enable you to breathe a sigh of relief and move forward on a fresh footing.

    For more information about how to deal with a tax debt or if you have a tax debt and need help, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • When to Use Online Financial Calculators

    Technology has brought us so many online tools for financial planning; there are online financial calculators for literally everything. Mortgage financing/refinancing, debt reduction, car payments, interest, and budgeting are all things that online financial calculators can help manage.

    Online financial calculators are very useful when planning anything from a new mortgage to calculating the interest that you are paying on credit cards. Of all the online financial calculators, mortgage calculators can be used for the most diverse range of financial calculations.

    What’s really cool about mortgage calculators is that you can use them to not only calculate monthly payments on a mortgage but also on loans.

    If you have a lot of debt for example, here is how you can use a mortgage calculator to create different financial scenarios if you were to consolidate:

    1. Input your total debt into the mortgage calculator.
    2. Set the term and amortization to 5 years – this will give you an idea of what it would take to get you out of debt within 5 years.
    3. Calculate your payment based on an approx. interest rate that you believe best reflects the average interest rate that you would pay if the bank gave you a loan to consolidate your debt. A general rule of thumb would be to use 10%-15% if your calculation is based on a bank’s loan rate.
    4. Now do the same calculations with the interest rate set to zero.

    Completing the above steps will enable you to see how much you would have to pay monthly if you were to consolidate debt at zero percent interest vs. full interest.

    One risk though when it comes to using online financial calculators is that calculations may not be accurate once the time comes to seek out a credit product or debt solution that fits with the estimates that you have calculated. For example, what if you have made a calculation based on being out of debt in 5 years but then your bank offers you a line of credit? A line of credit may leave you with a low minimum monthly payment, but may take much longer than your estimate to pay off because it is like having one giant credit card.

    If you are using online financial calculators to try to come up with financial solutions because you are in debt, sometimes it makes sense to use them with the guidance of a financial professional/consultant.

    Hiring your own financial consultant can enable you to have a professional review your budget, credit and finances, and then work with you to use online financial calculators to build some viable debt consolidation scenarios. A financial consultant will likely have the resources to help you put your plan into motion.

    For more information about online financial calculators or if you need help dealing with your debt, please call DebtCare at 416-907-2582 or visit www.debtcare.ca.

  • What is the CRA Late Filing Penalty?

    In Canada, if you file your income taxes late you will be subject to a CRA late filing penalty. This CRA late filing penalty can vary depending on how many times you have filed your income taxes late in the past. In addition to a CRA late filing penalty, you will have to pay interest on both the tax debt and the CRA late filing penalty.

    Here is an outline of current CRA late filing penalties:

    1.       The CRA late filing penalty for not filing your income taxes on time in 2012 is 5% of the balance owing. In addition, the CRA will also charge a further late filing penalty of 1% per month that you haven’t filed, up to a maximum of 12 months.

    2.       Now, if you were charged a CRA late filing penalty in 2009, 2010, or 2011 because you filed late on any of those tax years, your CRA late filing penalty for filing late in 2012 may be increased to 10% of the balance owning. You may also be subject to an additional late filing of 2% for each month you haven’t filed, up to a maximum of 12 months.

    3.       The interest that will be added to the tax debt and penalties will compound daily.

    Individuals who find themselves behind filing taxes for many years can wind up in serious financial trouble. Once many years of tax returns are assessed at one time, the tax debt is determined, the penalties are applied and the interest is applied on the sum, your tax debt can grow to a size that can become impossible to pay.

    Once this occurs, the CRA will demand their money. First you will receive a letter, then perhaps a call, and once your cheque hasn’t arrived your file will be turned over to CRA collections and that’s when the real trouble begins.

    The CRA collections department has the authority to do many things in an attempt to force you to pay.

    • They can garnish up to 50% of your wages
    • They can garnish up to 100% of the income of subcontractors and small businesses
    • They can notify your clients of your tax problem
    • They can freeze your bank account
    • They can place a lien on your home, vehicle and business assets (such as equipment)

    A tax problem that spirals out of control can seem impossible to stop. The good news is that there are financial programs designed to deal with tax debt. These financial programs are quite effective in stopping CRA collection action and enabling you to make a monthly payment that you can afford. Some programs even involve reducing your tax debt and freezing the interest.

    The best thing you can do if you are behind filing returns is to file them. For each month that passes, penalties grow, and for each day that passes, interest grows. Get in to see a financial consultant as soon as possible to start coming up with a financial plan to deal with your tax debt so that you can make arrangements and avoid collection action.

    For more information about CRA late filing penalties or if you need help with your tax debt please contact DebtCare Canada at 1-888-890-0888 or visit www.debtcare.ca.

  • Filing a Consumer Proposal in Ontario – What you SHOULD know

    If you are thinking about filing a consumer proposal in Ontario there is a lot that you should know. Filing a consumer proposal can be a sound option for dealing with debt depending on your personal circumstances. When making a consumer proposal you are essentially making an offer to your creditors under the laws and regulations set out in the Bankruptcy and Insolvency Act (BIA). The BIA is federal legislation so the process to file a consumer proposal is the same whether you are filing a consumer proposal in Ontario or BC.

    Here is how the process works:

    1.       The amount of the consumer proposal is determined using a formula based on your income and ability to repay the proposal on a monthly basis, and then that payment is multiplied by a term of 4-5 years. The sum is the amount of the proposal. This can result in the debt being reduced.

    2.       Once the consumer proposal offer has been formulated, the official offer is made through a trustee in bankruptcy.

    3.       Your creditors then have 30 days to accept or reject the proposal. As long as creditors that represent 51% of the debt in your proposal vote yes, the proposal is accepted. Creditors who do not respond or vote lose their vote and go on record as not opposing the consumer proposal.

    4.       If your consumer proposal is accepted (and many are) you will then make a single monthly payment to the bankruptcy trustee for the term of the consumer proposal.

    Consumer proposals offer many benefits:

    • They can be paid off early so if your financial situation improves you can pay off the proposal at any time.
    • While the consumer proposal will have a short term negative impact on your credit report, the consumer proposal is removed from your credit report 3 years from the date it is paid in full, so the sooner you pay it off, the sooner you can rebuild your credit – the ball is literally in your court.
    • They stop collection action. All collection action with respect to unsecured creditors included in the consumer proposal will stop. This includes wage garnishments.
    • They offer a single monthly payment which is very convenient.

    Now that we have covered how a consumer proposal works and the benefits, let’s look a little bit closer at the process of actually filing a consumer proposal in Ontario. 

    Consumer proposals are administered by a trustee in bankruptcy. The trustee in bankruptcy has an obligation to act both in the best interest of yourself and your creditors. Going to a trustee in bankruptcy directly to discuss a consumer proposal is dangerous because they will probe you and use your financial information to pay your creditors the maximum monthly payment. This leaves many without much financial breathing room which is why many consumer proposals fail. Trustees are also compensated based on a percentage of your proposal. A larger proposal means more compensation for the trustee. It is for these reasons that you should seek out your own independent financial representation if you plan to file a consumer proposal.

    Hiring your own representative is a small expense that can save you thousands of dollars. A good financial consultant who is versed in the BIA can look at your financial picture and help you to craft proposal terms to push with the trustee. They can also arrange the proposal with the trustee and represent you throughout the process. This is money well spent!

    If you would like more information about filing a consumer proposal in Ontario please call DebtCare at 1-888-890-0888 or visit www.debtcare.ca.