Canada Revenue Agency Collections Policy has the Potential to Ruin Your Life

The Canada Revenue Agency has a very aggressive collection policy. Their mandate is to collect past due tax debts and they have what appears to be limitless authority to do so. This article will outline the top 4 tactics that the Canada Revenue Agency will deploy to collect from you when you have an outstanding tax debt.

1.       Wage Garnishments. The Canada Revenue Agency routinely places wage garnishments on taxpayers who have an outstanding income tax debt. A wage garnishment served upon an employer could result in a garnishment of your wages of up to 50%. Secondary income like pension income, insurance income, etc. can be garnished up to 100%. Once the Canada Revenue Agency serves your employer with instructions to garnish your wages, they must and will comply. Once a wage garnishment is attached it can be very difficult to remove.

2.       Property Liens. The Canada Revenue Agency will place a lien on your home, vehicle or equipment (in the case of a business), if they learn that you have an asset. Even if you have no equity in the asset and no ability to refinance it, they will still place a lien on it. If you cannot raise the money to pay your tax debt in full, they can force you to sell the asset and will take any proceeds (if any) to cover the tax debt.

3.       Requirements to Pay on Bank Accounts. If the Canada Revenue Agency sends your bank a requirement to pay, your bank account will be frozen. The bank will hold the money in your bank account for 30 days and then send it to the Canada Revenue Agency. Outside of the fact that you will lose all the money in your bank account, it will also alert your bank to the fact that you have a tax problem. In many cases this will permanently damage your relationship with your bank.

4.       Set-Off’s on Invoices. If you are a small business owner, the Canada Revenue Agency can send a set-off notice to your customers. This notice will direct your customers to forward the payment of your invoices to the Canada Revenue Agency. Not only can this put you out of business because you will have no business income coming in; in addition, your clients may be apprehensive about continuing to work with you under these circumstances.

Depending on the severity of your tax problem, the Canada Revenue Agency could take more than one of these collection actions, concurrently. You do not have to let things go this far; there are services available to help individuals and businesses that have an income tax debt. If your wages are already being garnished or your bank account has already been frozen, there are Federal Government programs available to help. Once you participate in one of these programs, the Canada Revenue Agency will immediately, and must by law, remove a wage garnishment and/or unfreeze your bank account.

For more information about the Canada Revenue Agencies collections policy or to see if you qualify for relief contact Michael Goldenberg at DebtCare Canada by calling 888-890-0888 or visit www.debtcare.ca

Canada Revenue Agency Income Tax Debt and You

Canada Revenue Agency income tax debt can be crippling when your payments fall behind. Interest and penalties accrue at an alarming rate, and what starts off as a small debt can grow into something a lot more difficult to pay.

Income tax debt is much more serious than other types of debt because the Canada Revenue Agency has many more resources to collect the money from you, as opposed to regular creditors such as banks and finance companies. Banks and finance companies must take you to court and obtain a judgment against you before they can take any legal enforcement action. The Canada Revenue Agency does not.

When income tax debt is owed, it is a demand debt and the Canada Revenue Agency will demand to be paid in full. Very seldom will the Canada Revenue Agency consider making a voluntary payment plan arrangement with a consumer or a small business. If they do, they will request full financial disclosure, including your banking and employment information. This is done to ensure that if you can’t honour the payments, they know where to go to attach a lien or garnishment.

The financial disclosure is also used to determine your cash flow. They will not consider monthly payments that you have to make to other creditors, such as credit card companies and loan providers. They will deduct your basic living expenses from your income and they will want to be paid what’s left. For most individuals, this is unrealistic and results in total destruction to the consumer’s credit rating.

Outside of the financial implications of a tax debt, other problems can arise. The stress associated with a tax debt can cause medical problems like depression and anxiety. In extreme cases, individuals have even contemplated suicide when the stress of having an income tax debt to the Canada Revenue Agency proved to be too much to handle.

Similar to dealing with other debt problems, an outstanding income tax debt can also cause a strain on relationships. When financial problems emerge they can cause otherwise happy couples to have major problems. Wage garnishments sent to employers by the Canada Revenue Agency can cause unbelievable embarrassment and are very difficult to stop once they are in place.

If you have an income tax debt, the most important thing to do is attack it; don’t ignore it. It will not go away by itself. Ignoring it will eventually result in the Canada Revenue Agency taking collection and enforcement action against you.

There are resources available to individuals and businesses that are struggling with a tax debt. These resources generally do not involve bankruptcy. There are Federal Government programs available to help individuals and businesses that have tax debt. Do not attempt to negotiate with the Canada Revenue Agency yourself, as this could have dangerous consequences. Instead, work with agencies that have access to Federal Government programs and experience negotiating with the Canada Revenue Agency. For more information about Canada Revenue Agency income tax debt and to see if you qualify for relief contact Michael Goldenberg at DebtCare Canada by calling 888-890-0888 or visit www.debtcare.ca 

Small Business HST and Past Due Tax Returns – What You Need to Know

HST has intensified the tax obligation of small business owners. Prior to the HST, many small business owners only had to collect and remit 5% GST. With the amount that must be collected and remitted increased to 13%, the stakes for those who fall behind in filing their HST returns is much higher.

The Canada Revenue Agency is much more aggressive when collecting past due HST as opposed to GST because the tax revenue for the government is now more than double. In conjunction with that, they are also more diligent in their reviews of HST tax returns and claim expenses.

Once tax returns (including GST returns) are more than 4 years past due, the Canada Revenue Agency will not permit the taxpayer to claim input tax credits. The interest and penalties on past due HST and GST returns are massive.

According to the Canada Revenue Agency website http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/rtrns/pnlts-eng.html, when GST/HST returns are filed late the following formula will apply to tabulate the penalty that will be applied to the tax debt:

a)      1% of the amount owing; plus

b)      the result of the following calculation:

A x B where A is 25% of the amount you calculated in (a) and B is the number of months the return is overdue (to a maximum of 12 months).

In addition, the Canada Revenue Agency will also charge interest on an overdue amount equal to the basic rate plus 4%. Late filing of a GST return is not the only way you can incur GST penalties. You can also be fined for non-compliance. If you receive a demand to file a return and fail to do so, a penalty of $250 will be charged.

This can cause a GST/HST tax debt to double or even triple in size. Facing this type of tax problem, especially where multiple past due returns are involved, can be paralyzing. It simply can’t be ignored because it will not go away on its own.

Fortunately, there are programs that are not offered through the Canada Revenue Agency but are Federal Government programs that will provide a small business owner tax relief as well as relief of interest and penalties. These programs do not involve bankruptcy, and not only will they eliminate interest and penalties but will also reduce the size of the overall tax debt.

It is best not to wait until the Canada Revenue Agency is pursuing enforcement and collection action. Act now and take the steps necessary to deal with a tax debt. If collection action has already begun, these Federal Government programs will stop all collection action including garnishments and frozen bank accounts. For more information about small business HST and past due tax returns please contact DebtCare at 888-890-0888 or visit www.debtcare.ca

Tax Relief and the Canada Revenue Agency Tax Payer Relief Program - Who Qualifies?

When an individual or business falls behind filing tax returns, it is imperative that they become tax compliant.  Filing tax returns and being up to date is very important. It is important because as long as tax returns remain in arrears the taxpayer will not only face massive interest and penalties, but could also face prosecution.

Usually financial problems are the primary reason cited for people falling behind in filing their tax returns. They don’t file because they know that once their tax returns are filed they will face the daunting task of paying their tax debt, in its entirety, to the Canada Revenue Agency.

The Canada Revenue Agency Tax Payer Relief program offers individuals and businesses the ability to request relief of interest and/or penalties. This is not tax relief; the Canada Revenue Agency will not reduce the actual tax debt and under this Tax Payer Relief Program, only interest and/or penalties can be forgiven.

Applicants who want to apply for taxpayer relief under the Canada Revenue Agency Tax Payer Relief Program will have to satisfy the Canada Revenue Agency (C.R.A.) that any one of four circumstances prevented them from filing their tax returns or from paying their tax debt. These circumstances include:

1.       Significant financial hardship.
2.       A serious medical problem.
3.       A natural disaster.
4.       An error on the part of the Canada Revenue Agency.

Very few applications for taxpayer relief are approved. Before one considers whether the cost of hiring a representative to make an application for interest and penalty relief under the Canada Revenue Agency Tax Payer Relief Program is worth his while, he should first consider if he even has the ability to pay his principal tax debt in full.

Once a tax debt is owed to the Canada Revenue Agency, they will demand to be paid in full. They will also proceed to collect their money. Collection action could include wage garnishments, property liens, freezing bank accounts and more. Business owners could face having their customers notified of their tax problem and have a set off placed on their receivables.

Directly attempting to negotiate with the Canada Revenue Agency is similar to playing Russian roulette. In most cases they will not make a voluntary payment plan with you unless you offer complete financial disclosure. Once they learn where you bank and what assets you have, you are in a very vulnerable position. Most voluntary payment plans that individuals self-negotiate are short term, so once the term is up and the taxpayer tries to negotiate another payment plan, they will refuse. This is simply due to the fact that they now have full financial disclosure, at which point they will proceed with further enforcement action ensuring that they collect all of their money.

The good news is that Federal Government programs do exist. Programs that do offer taxpayer tax relief will not only eliminate interest and penalties but will also reduce the size of a taxpayer’s tax debt significantly. To see if you qualify for tax relief, you must deal with an agency that can provide you with access to these programs. For more information about tax relief and the C.R.A. Tax Payer Relief Program please contact DebtCare Canada at 888-890-0888 or visit www.debtcare.ca   

Debt Consolidation Loan, is it a Good Idea before the Holiday Season? We Explore Canadian Debt Consolidation Options

As the holiday season approaches, you may be thinking that a debt consolidation loan is a good idea so that you don’t face the New Year with maxed out credit cards and a budget that is stretched to its limit. There are so many services out there that offer debt consolidation options, but what is most important is that you fully understand each option and what it means to your personal finances and your credit.

Understanding your options starts with understanding who is offering you the option, so this article will outline Canadian debt consolidation options and what they really mean to you.

Your first thought may be to approach your bank for a debt consolidation. If you qualify, banks will often recommend a personal line of credit or a large credit card to consolidate your debt. The interest could range anywhere from 7% to 25%. The problem with this type of debt consolidation loan is that your budget may only have room to manage the minimum payment. If you don’t have the income to make massive lump sum payments, this type of debt consolidation loan may prove to be very difficult to pay off. Banks will usually calculate your minimum payment based on 1% to 3% of your balance, which usually only covers interest. If you get into the habit of only making minimum monthly payments, you will see no end to your debt.

Bankruptcy trustees also offer Canadian debt consolidation options. The challenge is that trustees in bankruptcy represent your creditors. A debt consolidation option offered through a trustee in bankruptcy may offer you the debt relief you need. With that said, a consumer proposal or bankruptcy is not a debt consolidation loan. If you go directly to a trustee in bankruptcy, the consolidation that is arranged will often give preference to your creditor which ultimately means you pay more.

Credit counselling agencies that offer Canadian debt consolidation options may be not for profit, however, they obtain most of their financing from the banks. This is by far the least favourable debt consolidation option because it not only destroys your credit, but it also involves paying off your debt over a long period of time. Not for profit credit counselling is really the best option only for consumers who owe less than $6,000 in debt.

Mortgage Agents will often promote debt consolidation options that involve mortgage refinancing. After legal fees, appraisal fees, broker fees and administration fees, this can prove to be the most expensive type of debt consolidation loan.

At the end of the day, if you are drowning in debt, the only way out may be through a debt consolidation loan. The type of debt consolidation that is right for you will depend on your how much debt you are in, the type of debt, your income, income type and assets. You will secure the best deal that makes the most sense for you by working with a skilled Financial Advisor, one who can help you determine the type of debt consolidation loan that best suits your personal financial situation. For more information about debt consolidation loans and Canadian debt consolidation options please visit www.debtcare.ca or call 416 907- 2582.

Get Out of Debt and Get Debt Relief before the Holidays and Start the New Year on Fresh Footing

With the holiday season quickly approaching, it may seem that everywhere you look there is a holiday offer or enticing deal. Holiday shopping can be fun but also dangerous, especially when your plan is to finance it using your credit cards.

Every year consumers approach the holidays already in debt and dig themselves into a deeper hole during the holiday season thereby facing huge credit card bills in the New Year. Those who have already maxed out credit cards and are barely able to make minimum payments, may be wondering how they are going to finance this holiday season at all.

Believe it or not, while the holidays are a time to enjoy with family, it can also be the source of immense financial and emotional stress, especially as it relates to debt. Instead of adding to your personal debt this holiday season, why not go into this holiday season with a strong financial plan to get out of debt?

The primary reason that families go into debt over the holidays is because of a lack of cash flow. Let’s face it, the recession in 2008 has caused many families to rack up personal credit that they are still trying to pay for today. If you are approaching this holiday season with more than $10,000 in household debt, then finding a solution to get out of debt and get debt relief should be your first priority.

Dealing with your debt before the holidays will not only free up cash flow but will also enable you to go into the New Year on fresh footing. You may have already gone to your bank for a debt consolidation loan, only to be turned down. You may be thinking that there isn’t a way to get debt relief before the holidays.

Your bank is not the only option available to consolidate and eliminate your debt. There are many options available to achieve debt relief, however, the key is to choose an option that best considers your entire financial situation and results in the best deal for you. This can be tough when you are out there on your own struggling to find the answer to get out of debt.

It is easy to procrastinate, thinking that you can deal with your debt in the New Year, but can you imagine starting 2012 without a landslide of credit card bills to deal with? Strong financial planning, budgeting and access to resources that help you achieve your financial goals will enable you to start the New Year stress free and with more cash in your pocket.

Banks, trustees in bankruptcy, credit counsellors and finance companies will offer “free financial assessments or consultations” as a gimmick to bait you into their offices, at which point they will offer you their financial products and services. This will often result in more debt, a bankruptcy or a financial arrangement that favours your creditors. There is unbiased financial help available to help you get out of debt and get relief before the holidays. The kind of help that doesn’t involve more debt or bankruptcy. For more information about how you can get out of debt and get debt relief before the holidays visit www.debtcare.ca or call 416 907-2582. This holiday season get financial help from an organization who represents you, not your creditors!

Business Owners Use Personal Credit and Find Themselves in Financial Trouble

Personal household debt in Ontario has been steadily on the rise over the past 10 years. The 2008 recession proved to many individuals that the idea of dedicating your life to a company in an effort to work towards a good pension is no longer a safe option. Most companies offer little in the way of job stability; this has caused many people to go into business for themselves and has increased the number of small businesses.

The reason we started this article by talking about personal debt is due to the fact that in most cases small business owners find themselves financing their dream of a small business with their personal credit. In Ontario, most financial institutions will not loan money to a small business without the owner personally signing for the debt. Therefore, if the business runs into financial trouble, the business owner will bear personal liability for the debt.

There are three primary reasons that a business owner will go into debt as it relates to their business:

-        To finance business growth

-        To finance start up

-        To keep the business going during times that receivables are down

When business owners use personal credit where their business is concerned, they are taking a major gamble. This risk could have serious consequences not only to their personal finances, but also to their health and relationships. Financial trouble can be the source of incredible stress, the kind of stress that can tear families apart.

Outside of using personal credit or personally signing on business debt, some small business owners will also collect sales tax throughout the year. They use this sales tax to benefit the business and do not set it aside for their annual remittance. Therefore, if the financial situation has not improved by the time taxes are due, the debt increases and this is a debt that the Canada Revenue Agency will demand to have paid in full.

When small business and personal debt compounds, a strong financial plan is the first step to financial recovery. There is help for small business owners who find themselves in financial trouble. The Federal Government offers programs for individuals who are drowning in personal and business debt. Access to these programs and strong financial planning is available through some Financial Advisors.

You will not find this type of financial help through your bank, through a company that lends money or through a trustee in bankruptcy. A good rule of thumb to follow when pursuing a company to help you deal with your debt, is to deal with a company whose only service is to offer financial planning and guidance. If a company lends money then they have an incentive to see that you borrow more. Trustees in bankruptcy and credit counsellors represent your creditors; this means that you cannot count on them for financial advice that represents your best interests. The only way to receive the best advice for you is to work with a company that represents you, and has access to the resources you will need to get debt relief. This will enable you to regain your positive financial standing.

If you are a small business owner who has found yourself in financial trouble and need help contact Michael Goldenberg by calling (416) 907-2582 or by visiting www.debtcare.ca and take a step towards a positive tomorrow.

Small Business Debt Help Options in Ontario – Where Are They?

The recession that hit Canada in 2008 forced many Canadian businesses to make some very difficult decisions. For many, the recession came out of nowhere. When consumers stop spending, a seemingly prosperous business can quickly fall flat.

To survive, some businesses were forced to cut back. Laying off staff, implementing a hiring freeze and reducing spending on business expenses are a few examples of ways that businesses tried to survive. Other small business owners relied on credit to make ends meet and they are still suffering the consequences today.

For most, starting a business is a dream. Many individuals who start their own businesses invest everything into this dream. When things are going well you may be on top of the world, but when things take a turn for the worse, your business can quickly become the source of incredible stress. At this point the stress will begin to consume all of your time, energy and credit.

So what options exist in Ontario for small business owners who find themselves in debt and in financial trouble?

If you are a small business owner who has found yourself in financial trouble, you may have already realized that debt-financing options are scarce. Many banks will not lend to those small businesses who:

1. Have been in business for less than 2 years.
2. Have issues with their receivables (invoices that come in more than 60 days from the date of issue).
3. Cannot show good net business income on at least 2 years on consecutive business income tax returns.
4. Are looking for financial help because the business is struggling.

That is why many small business owners who are seeking debt help options in Ontario find themselves putting their company’s debt on their personal credit. Some max out their personal credit cards, and others go as far as refinancing the equity out of their homes in an effort to see their small business (their dream) survive. This doesn’t often work and blurs the line between an individual’s business and family because suddenly everything is at stake.

There are debt help options in Ontario for small business owners and for individuals who are stretched to their limits. These options often do not involve filing for bankruptcy. You will not access these resources through your bank. If you have found yourself in this situation, the best thing that you can do is establish a relationship with a good Financial Advisor, one who has experience working with small business owners who have found themselves in debt.

Take a step back and you will realize that more credit may not be the answer. Tough times call for tough financial decisions and you do not have to make these decisions on your own. If you would like information on small business debt help options in Ontario please contact Michael Goldenberg by calling 416 907-2582 or by visiting www.debtcare.ca

Reverse Mortgages for Seniors in Ontario – Is This the Right Solution for a Senior Citizen in Debt?

In Ontario, seniors are amongst the most vulnerable when it comes to dealing with debt. With a steady influx of companies providing early retirement packages to employees, more and more seniors are finding themselves retiring with minimal income. More often than not, their income is not even enough to survive.

Once an individual has retired from the workforce his borrowing options become severely limited; this leaves him with his debt and little in the way of debt consolidation options. In many cases, banks do not lend to people who are on a fixed income (unless they have an asset or investment that they can offer as security).

Seniors who own their homes sometimes think that the reverse mortgage is the answer, and for some it may be, however, for most it is not. On top of that, a reverse mortgage is not so easy to qualify for.

Reverse mortgages are reverse loans where lenders, such as the Canadian Home Income Plan, will lend a senior up to 40% of their home’s value and either issue her monthly payments or a lump sum to help her supplement her income. The money does not have to be repaid until she dies, stops living in the home, or sells the home. The money then has to be repaid with interest and the interest rates are higher than what a regular mortgage would bear. This leaves little behind for children and grandchildren.

How about all the seniors who owe more than 40% of their properties value, or worse, don’t own homes at all?

CTV News recently reported that 1 in 3 seniors are retiring in debt. According to their report on a recent Statistics Canada study, 17% of retired Canadians, 55 years or older, who have debt owe more than $100,000.

The report also revealed that the median amount owed by retired seniors carrying debt was $19,000. Of the seniors over the age of 55 who have not retired, two-thirds carry a mortgage or consumer debt. And their median debt load is $40,000 – that's about double that of retirees.

Increasingly, seniors are retiring with low incomes and according to the CARP pre-budget submission to the Standing Committee on Finance and Economic Affairs, among unattached seniors – 28.1% of men and 38.3% of women are considered “low income”.

This is why families have to take a stand to protect their aging parents and grandparents who are facing retirement with little in way of assets and income.

There have been Federal Government programs introduced over the past few years to help our seniors who are struggling with debt; many of them offer immediate debt relief and solutions that eliminate debt in very short time spans. This is crucial in the case of someone who is facing retirement or has just retired. The key is that our seniors have our support to help them make effective financial choices; in turn, they can retire without stress and worry over debt. For more information please contact Michael Goldenberg at DebtCare Canada by calling (888) 890-0888 or by visiting www.debtcare.ca

Credit Counselling Services in Canada and Your Credit Report

Before a consumer makes the decision to enter into a credit counselling service program in Canada, it is most important to understand the long term implication to their credit.

There are many options available to consumers who struggle with debt and some pose greater implications to a consumer’s credit report than others. With all the choices available, unless you owe less than $7,000, credit counselling programs are the least attractive.

Credit counselling services are “not for profit” because they rely on donations from the big banks to operate. In many cases, the consumers are indebted to these very same big banks. Why would banks fund organizations who effectively allow consumers to pay less than what was originally contractually agreed upon? With all the debt relief options out there, credit counselling programs put the most money back into the coffers of the big banks.

Credit counselling involves the credit counselling agency arranging a reduced monthly payment to your creditors over an extended period of time (4-5 years). The result to your credit is horrendous. When a consumer enters into a credit counselling program, all of the ratings on their credit report turn from a “1” to a “7” and remain that way for 3 years from the date the credit counselling program has been completed.

Credit counselling services in Canada also have no formal authority to stop collection action on the part of your creditors.

If you have reached a point where you owe more than $7,000 and you can no longer make your minimum payments, keep in mind that there are other programs that have been made available by the Federal Government. These programs will result in more favourable outcomes for the consumer than credit counselling.

These programs provide immediate protection to consumers who have unsecured debt. What this means is that if the debt has gone to collections or the consumer is being sued, these programs can legally stop all collection action.

Debt settlements that are arranged are “final settlements”, so while they involve low minimum payments over 3, 4, or 5 years, if the consumer’s financial situation improves she can pay the balance of the settlement in full and thus begin the process of rebuilding her credit. Debt settlement also impacts credit for 3 years from the date it is paid in full, however, you can actually pay it off early.

All in all, consumers are looking for solutions to deal with their debt, solutions that don’t involve bankruptcy. What is important is educating yourself to fully understand what is out there and the possible implications for you when choosing an option that provides debt relief. Hiring a Financial Consultant/Advisor to guide you through your options is often an excellent choice. For more information about Credit Counselling Services in Canada and your credit report please contact Michael Goldenberg at DebtCare Canada by calling (888) 890-0888 or by visiting www.debtcare.ca

Debt in Canada vs. Debt in Toronto - Average Toronto Family Carrying $40k in Debt

Earlier this year, the Globe and Mail reported that the average household debt in Canada (minus mortgage debt) is approx. $38,000, which is very close to the amount of consumer debt that exists here in Toronto.

Last week the Toronto Star reported that the average homeowner in Toronto is carrying $40,000 in debt and that the debt to income ratio in Toronto has increased from 88% to a record 150% over the past 10 years. The headline of this article read, “Toronto's wealthiest are the most indebted”.

It is not a sign of wealth if the average Toronto household is $40,000 in debt, and the average Toronto household does not represent those who have the most wealth.

Increases in the cost of living combined with the recent recession and along with the ever-growing unemployment rate are all reasons for this astounding number. It is not a sign of wealth when, in many cases, the average family is dealing with debt that is more than their net annual take home earnings.

Is it easy to assume that people are living beyond their means? Sure it is, but we are noticing that this trend is part of a much deeper problem, with many moving parts.

Financial Institutions, including the big banks, have over the years made it far too easy for consumers to obtain credit. Credit that far exceeds their ability to maintain and bases their ability to repay their debt on the following factors:

-Their credit score (which is not a reflection of one’s cash flow)

-The equity in their home (the assumption is that if the debtor cannot pay they can always count on home equity to deal with their debt)

-Their household income (as opposed to the individuals’ income)

-The consumer’s income to debt service ratio; the credit limit is often approved based on the consumer’s ability to make minimum payments which often only covers monthly interest

When a consumer is granted credit based on the consumer’s ability to only manage interest payments, the consumer then becomes almost permanently indebted to the bank. If they cannot find the cash flow to make lump sum payments or pay 2-3 times more than their minimum payments, their balance will not move and they will forever owe the bank. Television programs like “Till Debt Do Us Part” have done a lot to shine a spotlight on this problem by showing individuals how long it will take them to pay down their debt if they continue to only make minimum payments.

The danger with these lending practices occurs when change happens in the household, such as an injury or an illness in the family, a marital separation, loss of employment etc… Individuals sometimes find themselves turning to credit to bridge the gap in order to make ends meet, the end result being even more debt. Those who have already maxed out their credit find themselves in deep trouble when they can no longer manage their minimum payments.

There is good news: the Canadian Government has responded by providing families who are struggling financially with access to programs that provide immediate debt relief. This can be achieved through freezing credit card interest, settling debt and these programs do not involve bankruptcy. If you are in trouble and would like more information on these programs please contact Michael Goldenberg at DebtCare Canada by calling (888) 890-0888 or by visiting www.debtcare.ca

Credit Card Debt in Canada – Find out the Truth About How Much You're Paying

Credit card debt in Canada is forever on the rise. Those applying for credit cards don’t even realize what they are getting themselves into, until it is too late. Canadian banks have made it really easy for the average person to not only be approved for credit cards, but also to make them feel like they can afford to repay them on a monthly basis.

This can get tricky. The manner in which you manage your credit card, the credit card’s interest rate and the credit card’s repayment terms, will determine whether or not you are going to have credit problems in the future.

Credit card interest rates can range from prime (in the case of lines of credit) all the way up to 29% interest (in the case of store cards). You can usually estimate what type of interest rate you will be looking at depending on the credit card grantor. Department store cards like Sears, The Bay, Best Buy, etc.. generally offer higher interest rates (25%-30%), while Visa cards and MasterCards are usually between 16%-25% and lines of credit are generally less than 16%. Make no mistake; this kind of interest can quickly land you in a situation where you have more credit card debt than you can afford.

The minimum monthly payments are usually estimated at 1%-3% of your balance. The result is that people use their credit cards based on being able to manage their minimum payments, however these minimum payments will often only cover interest.

Here is an example. If you obtain a department store card at 27% interest and then spend $2,000 on appliances, your minimum monthly payment, at 3% of your balance, would be $60 per/month. Now let’s take a look at the interest. Credit card interest almost always compounds monthly (12 times per/year). To calculate credit card interest, take the annual interest rate and divide it by 12. In our example, take 27% divide it by 12 and you will get 2.25%. Take the credit card balance of $2,000 and multiple that by 2.25%. The monthly interest would be $45, which means that if you were only making minimum payments, 75% of your monthly payment would be going to interest!

A simple rule of thumb to remember when using credit cards is to not borrow more than you can afford to pay in full at the end of the month.

Many folks who don’t follow this rule of thumb often find themselves in a situation where they have multiple credit cards, stretched to their limits, and when minimum payments collectively become unmanageable, a financial debt crisis can ensue. If you have credit card debt and would like to have your situation evaluated to see what debt elimination options are available please contact Michael Goldenberg at DebtCare Canada by calling (888) 890-0888 or by visiting www.debtcare.ca

Dealing with Debt and Depression

Facing an insurmountable amount of debt can cause an incredible amount of stress and in some cases the stress can lead to depression. On the opposite end of the spectrum, stress and depression can cause individuals to stop paying their bills.

On EMedicineHealth.com, Dr. Roxanne Dryden-Edwards cites (amongst the most common causes of depression) situations like difficult life events, loss, change, or persistent stress.

Martha Manning (therapist and author of “Undercurrents”) describes depression this way: “Depression is such cruel punishment. There are no fevers, no rashes, and no blood tests to send people scurrying with concern. Just the slow erosion of the self, as insidious as any cancer”.

Major financial problems result in individuals not honouring their obligations to creditors (most people want to pay their bills) and having difficulties maintaining their standard of living and providing support to their families. Many people who own homes find themselves in this very situation.

Those who struggle with depression and have more bills than they have money sometimes try to ignore the problem, hoping that it will just go away. Debt will not go away by itself.

When debt goes into default and creditors start trying to collect their money, phone calls and letters can cause personal anguish and embarrassment at work. Even high income earners who accumulate an unmanageable amount of debt may feel like the financial problem cannot be overcome.

If you are feeling depressed about your debt, you will feel much better if you come up with a plan to deal with it. This will empower you to begin working your way out of your financial situation. The first things to consider are:

1. How much in unsecured debts have you accumulated?

2. Have you badly damaged your credit?

3. Do you have the ability to make your minimum monthly payments?

If the answer to question number one is “more than $8,000”, the answer to question number two is “yes”, the answer to question number three is “no” and you know you have equity in assets, you may be relieved to hear that you could achieve immediate debt relief through a Federal Government program.

If you still have decent credit and some income, you may have other options to deal with your debt. Even when experiencing a financial crisis, it makes the most sense to speak with a Financial Advisor about your options.

You see, no matter how bad things may appear to be, there is almost always a solution. Many debt solutions enable individuals to get out of debt by creating a single and manageable monthly payment. This monthly payment is affordable and helps protect assets like your home and car.

Just as debt does not go away by itself, in many cases depression doesn’t either. Remember that your health and happiness come first so make it a priority to take care of it. There are more resources than ever for individuals who are battling depression. CAMH offers an abundance of resources and information. You can also speak with your family doctor and ask for a referral to a therapist.

If you would like more information about dealing with debt and depression, please contact Michael Goldenberg at DebtCare by calling 1 (888) 890-0888 or by visiting http://www.debtcare.ca/

Deal With Your Debt Before a Layoff – Ontario May Lose Manufacturing Jobs

While the Canadian economy is in better shape than many of our international counterparts, the strength of our Canadian dollar continues to be a concern for the manufacturing sector.

Due to the economic instability in Greece, Europe and the US, and a strengthening economy in Canada, our dollar has continued to hold strong. A strong Canadian dollar means the cost to manufacture and import products from Canada is more expensive. Over time, a strong dollar causes organizations to reconsider their Canadian manufacturing operations.

Between 2008 and 2009, 250,000 manufacturing jobs were lost in Canada. Some experts have speculated that the strong Canadian dollar could result in a second wave of layoffs in the manufacturing sector.

The Canadian job market isn’t what it once was. As recently as 15 years ago, “The Canadian Dream” was to get a job with a good company, work hard for 25 years or so and then retire with benefits. No one believed in that dream more than the thousands of GM employees who lost their jobs in 2009, some after many years of service and pension contributions.

The job landscape has changed. Many companies now hire employees on a contract or consulting basis and have a much higher turnover ratio than what was seen in the workplace in years past. Some employers have capitalized on the news of the troubled economy, trimming their workforces without even making it on the news.

So what can you do if you work in an industry that is impacted by the economy and have a strong feeling that a layoff may be in your near future? Get your financial house in order!

You have many more financial options available to you while you are still employed. Take a good hard look at your finances, your budget and your debts. If you owe debt that is more than you can pay in full in the near future, consider a debt consolidation loan. You will have a better chance of getting approved for a consolidation loan if you are employed. Once laid off, you will likely not qualify, as most banks require applicants to be gainfully employed. A debt consolidation may be a good choice to deal with debt as it usually results in a reduction to monthly payments creating a greater cash flow.

Look for ways to trim your budget then add those savings to any cash flow you have already created by consolidating or paying off your debts. Start to bank that money immediately. Try to bank as much money as possible so that if you are laid off, you have a safety net while you wait for employment insurance or find another job.

If you have been laid off, cannot manage your debt and have not been able to get approved for a debt consolidation loan, you may have other options. The Federal Government has introduced programs that provide immediate debt relief and protection to those who cannot pay their debts. For more information about dealing with your debt before a layoff, please visit http://www.debtcare.ca/

Divorce Debt Can Cause Major Financial Problems – There are Solutions for Divorce Debt

Households that include a married couple that are both working and earning a decent income, are often able to accumulate assets and debts faster than a single individual or a family in a single income household.

When marital problems surface, the stakes are high, particularly when children, assets and debt are involved. Some instances see all of the debt in the name of one spouse (in some cases even when he or she is not the primary income earner in the household). Also, when a separation occurs, assets become tied up until the terms of the separation can be determined.

When a couple separates, both spouses will experience a major change to their financial situation. Especially if the choice is made to live in separate dwellings, at this point their cost of living will increase or even double.

In more accelerated situations, couples have already divorced and a determination has been made as to “who” will be responsible for “what” debt. In these cases, dealing with the debt for a single income family can create a harsh reality and an almost impossible situation. This is particularly true if the party who is held responsible for paying most or all of the marital debt also has to make support and/or alimony payments. This is one example of a situation where a financial restructuring may be warranted.

If things get ugly, no one wins, and this presents many challenges.

If you are in the process of a separation or divorce, you don’t have to go to a divorce lawyer or attend divorce court to negotiate with your spouse. There are family law lawyers that specialize in mediation and collaborative law; they help people come to an agreement on contentious issues, without going to court.

If you are separating or divorcing, have accumulated marital debt, will not be able to pay it living independently and own a home, it will be in your best interest to find a way to work with your spouse. This could enable you to refinance joint assets such as your home, to raise proceeds to deal with debts and hire legal representation to help you and your spouse work through the separation or divorce.

One major mistake people often make when separating or divorcing, is that one or both spouses will stop paying divorce debts until it is determined “who” will owe “what”. This is the worst thing to do. Even if you are having a dispute over your debts, it is important to maintain at least the minimum monthly payments on any credit that you have signed off on.

Letting your divorce debt destroy your credit will impair your options when moving forward independently. On the other hand, if you are left with debt and have absolutely no ability to pay it, you may have to seek out other options to help you deal with your divorce debt. The solution could include a debt consolidation, financial restructuring or even financial protection.

The best thing to do if you are separating, divorcing or have divorced and are dealing with divorce debt is to contact a Financial Advisor. One who will look at all available financial scenarios to come up with a strong financial strategy so you can come out of your divorce on a sound footing. For more information about solutions to divorce debt, please visit http://www.debtcare.ca/

Unemployed and In Debt – How to Cope With Debt When You Lose Your Job

If you have found yourself unemployed and in debt, it can literally take your breath away. What will your priorities be? What payments will be made when push comes to shove?

These are tough financial choices that are intensified if you have children (or a family), debt, own a home, or if a business is involved. At this point the stakes become higher, and the last thing anyone wants to do is ruin their credit or worse, lose assets they have worked their whole life to gain.

These tough financial decisions can be the source of incredible stress, which can often lead to illness. When change happens in our lives, especially change that is out of our control, it is easy to find our lives consumed with stress. It is easy to start ignoring your bills, which is always the worst thing you can do.

The best thing you can do to empower yourself when a job loss occurs, is to not sweat what you can’t change. Instead, get into the most positive state of mind possible, set personal goals to create awareness and then work through your list.

Here are some examples of goals you may set for yourself to find ways out of a financial crisis caused by unemployment:

If you qualify for employment insurance with Human Resources Development Canada, apply for it immediately. It can take time to be approved and the sooner you apply the better (whether you think you have found a job or not). You can always cancel it if you are presented with a job offer.

Create or refresh your resume. If you need help, you can turn to organizations such as JVS Toronto. JVS is a non-profit organization that helps people find jobs. They offer free career counselling, help with building a resume and offer support when preparing for a job interview.

Use Social Media platforms, like LinkedIn, to source job opportunities online.

Don’t apply only for jobs that are posted. Think outside the box. Make a list of companies that you would like to work for and reach out to them. Often large organizations have positions available that are not being advertised.

Take a good hard look at your budget and finances. Financial Counselling is something else that is going to be a vital resource. Not “Credit Counselling”, not “Debt Counselling” but “Financial Counselling”. A skilled Financial Advisor can look at your entire financial profile, make recommendations and find the resources that you will need in order to deal with your debt and restructure your finances, while you are bringing in less income. For more information about how to cope when you find yourself unemployed and in debt, please visit www.debtcare.ca

How to improve your credit score to qualify for low interest credit

If you want to improve your credit score, the first thing you need to know is what it is. Once you know your number you will have an idea of how far you have to go to achieve a great credit score. The better your credit is the lower interest credit you will qualify for when the time comes to seek credit.

Creditors call your credit score a “Beacon Score”. If you request your credit report online, it will reference your credit score as a “Fico Score” – these are the same numbers.

The credit score ranges from R all the way up to 900. An “R” credit score stands for “Reject” and appears immediately after someone files for bankruptcy. It does not become a number until the individual has been discharged from bankruptcy. 900 represents the best possible credit score. The majority of individuals have a credit score in the 700’s.

You need a minimum credit score of 680 to qualify for a mortgage with a major bank. If your credit score is between 600-679, you don’t have bad credit yet but you better make some improvements. If your credit score is below 600, most financial institutions will consider you to have bad credit.

So what goes into to a strong credit score? You just wouldn’t believe how seemingly simple things can reduce your credit score and they have nothing to do with making late payments. Here are the top 5:

1. Too much debt – this will reduce your credit score

2. Inquiries – the number of times you apply for credit in a single calendar year impacts your credit score. The rule of thumb is not to exceed 4 applications for credit in a single calendar year. Remember, when opening an account or applying for utilities or insurance, if you are asked for permission to pull your credit, it will count as an inquiry.

3. Too many new accounts – when you obtain a number of credit cards at the same time it will reduce your credit score.

4. Too many accounts altogether – even if you don’t owe money to all of them, too many credit products will reduce your credit score.

5. Credit balances too high in proportion to credit limit. Even if you pay your credit card in full each month, never run a balance that is more than 75% of your credit limit. This will reduce your credit score.

Your credit score is one component of your overall financial health. A relationship with a good financial advisor will help you not only work towards an excellent credit score but will also help you get your financial profile strong enough to qualify for the lowest interest rates. For more information about your credit score and how to qualify for the lowest interest rates please visit http://www.debtcare.ca/

Debt Counsellors vs. Credit Counsellors vs. Financial Advisors

When you hear “debt counsellor”, “credit counsellor”, or “financial advisor”, they may all sound like the same type of professional. They are not. All three provide very different services from one and other and it's important that you know the differences so that you don’t make the wrong financial choices.

Debt Counselling is an industry that has emerged in the past 5 years as a direct result of the public’s cries for help during the recent recession. Going directly to a trustee in bankruptcy is the same as negotiating with your creditors. In essence they represent your creditors so when they interpret your financial information, it often won’t be in your favour.

Debt counsellors understand bankruptcy and consumer proposals, only they are hired by you to structure your financial information before you meet with a trustee. The problem is that debt counsellors’ services are linear and are often the only choice. That choice is a bankruptcy or consumer proposal.

Credit counsellors are different. “Credit Counselling companies” services do not fall within the literal definition of credit counselling. Credit counselling companies offer a single service, which is a credit counselling program. In a credit counselling program your creditors agree to freeze the interest on your accounts at which point you make a single payment to the credit counselling agency that they then disperse to your creditors each month.

Credit counselling programs have a devastating impact upon your credit (as damaging as a bankruptcy or consumer proposal). Given the impact to your credit and the fact that it only freezes your interest, a consumer proposal would be a better option than credit counselling. A credit counselling program often only makes sense if the individuals’ debt is less than $8,000.00. If you approach a credit counselling agency for budget help and financial counselling and not for a credit counselling program, they will offer you little to nothing in the form of meaningful help.

Financial Advisors work for companies that offer a wide range of financial services. Financial advisors are hired by you to help you achieve your financial goals. Financial advisors can help you work through your budget and finances to find ways to get out of debt and increase cash flow. Some Financial Advisors offer debt counselling services and can provide you with access to Federal Government Programs that include bankruptcy and consumer proposals.

Financial advisors are different because they understand not just debt settlement and bankruptcy but also mortgage financing, credit products, insurance products, investment products, credit, regulatory bodies and more. A “financial advisor” is not a genuine financial advisor if they offer the financial product that they are recommending as a solution to your debt problem. A financial advisor is hired by you (paid by you) to help you make effective financial choices that propel you out of debt.

For more information about debt counsellors, credit counsellors and financial advisors please visit http://www.debtcare.ca/

Using Equity in Your Home to Consolidate Debt

If you owe debt on loans and credit cards and are at the point where you are only making your minimum monthly payments, it may be time for some intervention.

Making minimum payments on credit cards often means that you are only paying interest. If making minimum payments is all that you can afford to pay, then essentially the credit card debt will never get paid down.

If you own a home one of the easiest way to consolidate debt is through a mortgage. The challenge is choosing the right mortgage product.

In the finance business everything comes down to money. Banks, lenders and brokers are all incented based on their volumes. The more money they loan, the longer the terms, the more the financial institutions make. Sometimes going directly to a financial institution or a mortgage broker for financial advice is not the best choice. Often the first solution that a mortgage lender will present to you will be the one that earns them the most money. That first solution is refinancing your first mortgage.

The amount of debt that you have, the type of debt that you have, your current mortgage rate and terms, the amount of equity in your home, your credit and your overall financial profile will determine the best strategy to pay off your debt and what resources may be available to you.

If you owe less than $30,000, a second mortgage may be the best choice. Yes, second mortgages often bear a slightly higher interest rate, however they stand completely independent of your first mortgage and offer more flexibility. You can amortize your second mortgage more aggressively so instead of stretching it out over 25-30 years like a first mortgage, you can opt for a shorter amortization that will result in less overall interest and still reduce your monthly payments.

If you owe a significant amount of money, then refinancing your mortgage may be the best choice. However you can refinance your mortgage in a way that not only eliminates the debt but also your overall interest. You can achieve this through obtaining a lower mortgage rate than what you are currently paying, commit to accelerated mortgage payments or reduce your amortization by 5 years. Most folks don’t even realize that simply reducing their mortgage amortization by 5 years will save them tens of thousands of dollars in mortgage and interest payments.

It may be that a mortgage is not even the best choice at all. If you owe more debt than you have property equity, then you may need other financial resources to get out of debt.

The only way to receive impartial advice about how to use your home equity to consolidate debt is to hire a financial advisor to work with you to come up with a financial strategy to get out of debt. For more information please visit http://www.debtcare.ca/

Avoid Bankruptcy through Personal Debt Management

Personal debt management is easier said than done. No person chooses not to pay his or her bills. If you don’t have the money, you don’t have the money. Debt can become unmanageable for so many reasons.

Regardless of the reason, whether you have lost income or you have simply become over extended, all reports indicate that the economy is improving. Canadians are looking for options to deal with debt without sacrificing their dignity and without filing for bankruptcy.

There are pro’s and con’s to bankruptcy. If you have no means whatsoever to pay your bills, are being garnished or have collection agencies after you, bankruptcy may be the best choice. Bankruptcy immediately protects you from your unsecured creditors and stops most collection action. The drawback to bankruptcy is, it is a long process, is often expensive and has a negative impact upon your credit. The choice to file for personal bankruptcy is one that should be considered carefully.

Statistics show that Canadians are looking for other financial choices to pay off debt. The challenge is simple, it seems that no matter where you turn someone has an agenda.

The banks often pay mortgage brokers. The banks promote their products to brokers and different products carry different incentives. The larger the mortgage and the longer the mortgage term, the more the mortgage broker earns from the bank. On that basis, if a small short-term second mortgage is the best solution, a mortgage broker may propose that you refinance your entire first mortgage. Sometimes it is better to pay the mortgage broker fee yourself and negotiate a shorter term more flexible mortgage product.

Many debt companies that promote “debt consolidation” only offer two choices, consumer proposal or bankruptcy. The best way to know if you are dealing with one of these companies is to ask them what options they offer other than bankruptcy and consumer proposals.

Of course, if you turn to your bank and they offer you help at all, it will come in the form of a credit product that yields them the most benefit. Most financial services representatives in banks are paid different incentives based on the products and services that they sell to you.

So what can you do when you need help with personal debt management and at the same time want to avoid bankruptcy altogether? Hire a company that offers a wide range of financial counselling services to help you find a solution to your money problems.

Here are a few good rules of thumb when looking for a good financial advisor:

You get what you pay for! It is better to pay for a service that is impartial and can help you make responsible financial choices vs. trying to sell you products and services.

Do lots of research. If you find a company, read through their website. See how diverse their ranges of services are. For example, debt counselling services that only offer federal government programs as the solution indicate that there is no incentive to encourage you not to participate if there is another option available that they don’t offer. Google the companies’ name to see if they have lots of credible published literature online or search for positive client reviews. Ask lots of questions to ensure that whatever personal debt management program you chose, you have chosen one that gives the most consideration to your credit and future financial goals.

For more information about how to avoid bankruptcy through personal debt management please visit http://www.debtcare.ca/

Personal Money Management and Money Management Skills through Personal Budgeting

Everyone is different, but one thing that we all have in common is that we all spend money. Some are more aware of their spending than others. Those who are highly aware of their spending habits are so for one of three reasons: they follow a budget, they have little to no income, or they are living paycheque to paycheque because they have extended their credit, beyond what they can afford.

A personal budget is the key to effective personal money management because it creates awareness of each and every dollar you spend. Outside of a loss of income, the most common reasons that folks cannot make ends meet are:

1. Lack of awareness of spending
2. Careless spending
3. Impulsive spending
4. Overuse of credit

When you are running on a tight budget any number of seemingly innocent things can send you into financial turmoil. Buying a vehicle or home that is too expensive or any unexpected expense, could spell financial disaster. Working towards better money management skills starts with refining your budget.

A personal budget should include all of your expenses, right down to how much you spend on coffee each day. Sometimes it can feel like our budget is tight and there is no room for improvement, but there often is room for improvement.

Your personal budget should consist of four sections. Housing, which includes your payments to rent, mortgages, property taxes, property maintenance and insurance. Transportation, which includes payments to vehicles, vehicle insurance, vehicle maintenance, bus/train passes, parking, gas, etc. Personal, which includes the money you spend on food, utilities, phone bills, entertainment, education, childcare and any other personal monthly household expenses. Finally, liabilities, which are the payments you make to loans, credit cards and other people you owe money to.

Prepare your budget in a table that has a column that represents the type of expense, a column that represents monthly cost and a third column that represents the areas in the budget that can be reduced. Go through your budget and indicate the places where you can save and by how much.

At times personal budgeting can be scary. It forces you to face your monthly expenses and if you can’t find ways to improve, you may feel deflated. Sometimes it pays to realize that you may need help with your budget. A professional financial counsellor will not only help you create an effective budget, but they also have access to other resources that may ease the process of achieving your financial goals. For more information about personal money management and money management skills through personal budgeting please visit http://www.debtcare.ca/

Canadian Debt Consolidation Pros and Cons

Canadian Debt Consolidation options are vast, especially in urban centres like Toronto. It seems that everywhere we turn there is an advertisement about debt consolidation.

What exactly is debt consolidation? This is an important question because while “technically” it involves making a single payment to deal with all of your debt, depending on the type of debt consolidation, it can result in endless payments and destruction of your credit.

Traditionally a debt consolidation included going to a bank or other lender, obtaining a loan, paying all of your debts in full and then making a single payment to a new creditor.

In the past few years different federal government programs have been introduced that provide immediate debt relief and involve making a single payment to a single company – but these debt consolidations do not involve paying off creditors in full. We call these “Debt Relief” debt consolidations.

Debt relief and debt consolidations are meant to be used if you have major financial problems. They involve freezing interest, reducing debt and making a single payment monthly that fits within your current budget. They also come with tough financial choices that include not honouring your agreements to your creditors and damaging your credit (if you haven’t already); this is an important consideration.

Credit counsellors provide similar types of “Debt relief” consolidation programs. Consolidation programs offered through credit counselling will damage your credit. Unlike programs that have been made available by the federal government these programs may freeze your interest but in most cases will not involve freezing your principal debt.

Traditional consolidation loans still exist, but are harder to come by. Most banks (if you qualify) will always offer a line of credit as a first debt consolidation option. These generally carry low interest rates, however they are like taking out a large credit card and are very challenging to pay off because of the monthly interest payments. If you have a lot of debt, the interest may represent a large amount of your minimum payments.

Many folks also use mortgage agents and mortgage brokers to deal with debt. This is also a good choice because the interest is low. Who you deal with to arrange your mortgage will determine the deal you get. To get the best deal it is imperative to deal with a broker who can handle all types of credit and financial circumstances. If you deal with a broker who primarily manages banks – you may find their attitude towards you change if you don’t qualify with the bank.

The best choice you can make is to have a strong relationship with a good financial consultant. Not a debt counsellor, not a bank, not a broker – a financial consultant. They will be able to look impartially at the state of your finances and help guide you through good financial choices that address your short term and long term financial goals.

For more information about Canadian Debt Consolidation pros and cons please visit http://www.debtcare.ca/

Getting Rid of Debt without Declaring Bankruptcy and without Losing Your House and Car

The good news is that in Canada the economy seems to be looking up. People are going back to work and bankruptcy rates are down; however some families are left picking up the pieces. The pieces left to be picked up include accumulated debt, a record of late payments and bruised credit. It could be worse; you could have been one of the thousands of Canadians forced into bankruptcy during the recent recession.

The reason that bankruptcy rates in Canada are on the decline is two-fold.

One cause is recent changes to the Bankruptcy Act in Canada. The changes make it much more difficult, much more expensive and a much longer process to file for bankruptcy.

Another reason that bankruptcy rates are declining is that Canadians generally have been more optimistic about the economic outlook in Canada and are looking for other ways to deal with their debt. While it is nice right now that things are looking up, historically low interest rates are what continue to prop up the economy.

Interest rates have nowhere else to go but up. The is the natural course – as the economy improves, interest rates rise; if the economy falters, interest rates are frozen or reduced – this we saw in the recent recession and continue to experience post-recession.

Last year in addition to changing bankruptcy laws, they tightened lending requirements on CMHC insured mortgage products in an effort to force Canadians to borrow more responsibly. The Bank of Canada and major banks continue to release opinions concerning the high levels of debt that Canadians are carrying.

Another reason that bankruptcy rates are declining is that Canadians have more options than ever to deal with debt. There are many different types of companies that promote solutions to consolidate debt and/or get out of debt. The tricky part is figuring out which one you should deal with.

Banks who promote consolidation loans require good credit and often involve consolidating the debt into a single payment but they do not provide meaningful long-term strategies to get the debt paid off. Why? Because as long as you have the debt they are earning interest.

Finance companies offer consolidation loans but the interest rates often exceed 20%. Mortgage brokers offer mortgage options to consolidate debt; these options can involve stretching your debt out over 15, 20 or even 30 years.

Credit counsellors, debt counselling companies and trustees may offer options that can provide immediate debt relief – however they often won’t highlight how these options will destroy your credit.

We are the first organization to offer a program to consumers that it not one-dimensional. We can access all of the resources listed above and more. Financial Consulting is an emerging industry that involves helping consumers work through all of the solutions that are available to them. For more information about getting rid of debt without declaring bankruptcy please visit http://www.debtcare.ca/

Collection Agency Harassment is Common and You Can Stop It

The number one tactic that collection agencies employ to entice you to negotiate with them is by simply harassing you, every which way.

In extreme cases we have had clients tell us about collection agencies who have used the following aggressive collection tactics to force a dialog:

- Sending an abundance of mail with collection agency letterhead to the residence

- Sending mail to the consumer at work

- Calling the consumer at work and/or leaving messages with co-workers

- Contacting the consumers payroll department

- Leaving descriptive messages on the consumers voice mail

- Calling the consumer multiple times daily, even at night and on Sundays

Especially in Ontario, there are a number of protections in place that protect consumers from “over the top” collection agency tactics. The Ministry of Consumer Services regulates collection agencies and the Ministry of Consumer Services licenses all collectors in the Province of Ontario.

When a consumer has a problem with a collection agency they can file a complaint against the collector personally or against the collection agency. If the Ministry agrees that you have a valid complaint they will write to the collection agency requesting a response. Depending on the response, the Ministry will continue to pursue the complaint until a satisfactory solution is reached.

Here is one example of an existing rule that applies to “third party disclosure”. A collection agency cannot provide information about you or your dealings with them to any third party. If a collection agency phoned you at home and your brother answered the phone and the collection agency told him to “have you call them back about your credit card debt”, this would be a third party disclosure violation.

An answering machine is also considered a third party. In many households many people have access to a single answering machine. Collection agencies are not permitted to leave details about your dealings with them on an answering machine. A co-worker is yet another example of a third-party.

If the fact of the matter is that you simply cannot pay your debt, there are steps you can take to ensure that the collection agency treats you fairly. With that said, the fastest way to get a collection agency off your back is by dealing with the debt. You can do this a number of ways: through a debt consolidation, through credit counselling or through government programs.

Coming up with a strategy to deal with your debt will put you on course to get the collection agencies out of your life and start working towards better financial help. For more information about collection agency harassment and what you can do to deal with debt that is in collections, visit http://www.debtcare.ca/

Collection Agencies in Toronto Can be Stopped Using the Collection Agencies Act

Collection agencies represent companies who have a debt to collect. In most cases collection agencies represent creditors collecting on loans and other credit debt. That being said, many other companies will also employ the services of collection agencies. Utilities, payday loan providers, telecommunication companies, gyms and dentists are all examples of private companies that use collection agencies to collect debt on their behalf.

In heavily populated centres, such as Toronto, there are many collection agencies to be found. Nordon, Collect Corp., Total Debt Recovery, Financial Debt Recovery, and CBV Collections are just a few of the collection agencies that operate in Toronto. There are more than 20 collection agencies located in the GTA.

Collection agencies will employ any number of tactics to collect money from you. These could include frequent phone calls, at home or at work, writing to you at work, placing a “collection item” on your credit report or, with authorization, they may even file a claim against you in Small Claims Court on behalf of their client.

As scary as it seems, believe it or not, if you are having problems with a collection agency in Ontario there is legislation and there are government protections in place that mandate what a collection agency can and cannot do.

Here are a few tips:

You can go to the E-Laws website and search for “The Collection Agencies Act”. There you will find the legislation that regulates Collection Agency conduct and you can learn more about your rights.

You can visit the Ministry of Consumer Services website. The Ministry of Consumer Services (MCS) regulates collection agencies in Ontario and arbitrates complaints from the public. On the MCS website you can learn more about your rights and can even initiate a complaint online.

You can request your credit report online on the Equifax Website. If a collection agency has registered a collection item on your credit report, it will remain on your credit report for 3 years from the date it has been settled or paid in full. If the collection item resulted from a defaulted loan or credit card, the trade line registered by the creditor will remain in a defaulted status for 6 years from the date it is paid or settled in full.

There are a number of programs that are available through the Canadian Government specifically designed to stop collection agencies in their tracks. These programs depend on the individual’s personal and financial circumstances.

If the stress of dealing with collection agencies has become too much, you can use a financial consultant to get in between you and the collection agencies, providing you with financial relief. This is by far the most painless route. A financial consultant that specializes in negotiating with collection agencies will know exactly what to do. For more information about how to deal with collection agencies please visit http://www.debtcare.ca/

Seniors in Debt Turn to Bankruptcy and Consumer Proposals to Get Out of Debt

In 2010 over 90,000 Canadians made the difficult decision to file for bankruptcy while more than 40,000 Canadians decided to file a consumer proposal. Senior citizens made the majority of these filings.

While it is true that the economy in Canada is in better shape than many other countries, the Canadian government is routinely warning Canadians about their use of credit. They have even gone so far as to change some laws (like mortgage lending laws) to deter the trend toward over-borrowing/lending.

The Bank of Canada released a survey at the end of 2010 that revealed that household indebtedness rose during the recession. The report came with a warning; credit growth needs to slow down. This is just one of many reports that show that Canadians are carrying debt loads much larger than previous generations ever did. In today’s society, when a financial crisis occurs, such as a job loss, medical problem or divorce - it is easy to turn to credit to bridge the gap.

So why are seniors in financial crisis turning to bankruptcies and consumer proposals to get out of debt?

 The cost of living continues to rise dramatically

 Many seniors are retiring on fixed incomes that barely cover their rent

 The recent recession has allowed companies to easily layoff their older workers, those that have seniority and accrued pensions (union or not), and this is done with no recourse whatsoever

The issues above make it difficult for your average Canadian to save and prepare for retirement especially when many are relying on credit to maintain their standard of living, pre-retirement. If it was hard to make ends meet with more income “pre-retirement”, then just imagine how hard it would be to make ends meet on a low and fixed income. Now also consider retiring with no assets.

Picture yourself or your parents in this scenario. What would they do? What if you were not in a financial position to help them? If this is the case all is not lost; there are options that provide immediate debt relief to seniors struggling with debt. These options include bankruptcy and consumer proposals; they could also involve additional or other forms of financial counselling.

A senior’s choices will largely depend on whether or not they have assets, who they owe money to and the amount of debt that they owe. Their children will also impact their choices; specifically their children’s financial standing and their ability to contribute financially. The last thing a parent wants to do is leave a mountain of debt to their children. Some seniors file for bankruptcy in secrecy to protect their children in the event that they pass away, not wanting to leave their kids with a financial mess to clean up. This is a hard but noble and respectable choice.

For a senior citizen their credit score and credit report becomes less important post-retirement. The ability to borrow becomes impaired because of the senior’s “new” type of income and also because of their age (similar to how insurance companies’ behaviour and attitude changes with a client's age).

The truth of the matter is that a large percentage of bankruptcy and consumer proposal filers are seniors and it is largely due to the fact that these two options provide the fastest form of immediate debt relief. For more information about seniors in debt who are turning to bankruptcy and consumer proposals to relieve their financial burden, please visit www.debtcare.ca

Bankruptcy in Canada Declines While Consumer Proposal Filings Are on the Rise

The rate of bankruptcy claims in Canada has declined, but not because Canadian families are no longer struggling with debt. Instead it is directly connected to the range of options now available to Canadians, options other than bankruptcy.

The recent recession has subsided, however there are many individuals who lost jobs and accumulated debt during the recession and this debt has now become unmanageable. Tough financial circumstances lead to tough financial choices.

Having financial problems can be embarrassing, even if no one else knows. You may be ashamed to reach out for help; you may fear your employer, family or friends will find out. If you are struggling to pay your bills you will inevitably reach a breaking point.

Don’t wait until a collection agency calls you at work. Don’t wait for the worst-case scenario where the debt problem becomes so large in size that bankruptcy is the only option left. You have choices.

A consumer proposal is similar to a debt consolidation in that it enables you to make a low, single monthly payment. The differences are that they involve freezing the interest on your debts, settling your debts for much less then you owe and often include stopping collection action being taken by your creditors.

Consumer proposals have become an attractive option to Canadians that struggle with their debt for the following reasons:

- A consumer proposal offers a single monthly payment that is much lower than what you currently pay to your loans and credit cards.

- A consumer proposal can be paid off in full

- In a consumer proposal you do not have to report your monthly income to a bankruptcy trustee

- A consumer proposal is removed from your credit report three years from the date it is paid in full

Another reason that there has been an increase in consumer proposal filings is directly due to the fact that recent changes to the bankruptcy laws in Canada have made it much more difficult to file for bankruptcy.

From 2010 to 2011 the bankruptcy filings decreased by approx. 20% and consumer proposal filings increased by approx. 20%.

The 20% of folks who may have previously filed for bankruptcy but instead chose proposals were likely mid to higher income earners with stable employment. The changes in bankruptcy laws affected these people the most. The new bankruptcy laws have made it very expensive for someone who has a decent job and steady income to deal with compounded debt.

What the new laws fail to consider is that inflation is steadily on the rise and the cost of living has gone through the roof. Hard working Canadians with decent jobs are struggling just to pay their minimum living expenses – decent income or not. For more information about the declining rate of bankruptcy in Canada and the steady rise of consumer proposal filings, please visit www.debtcare.ca