Monday, 25 February 2013

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

Tuesday, 19 February 2013

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

Monday, 11 February 2013

Credit Card Debt Relief Scams - Buyer Beware

If you are drowning in credit card debt then there is no doubt you have been thinking about how you can get credit card debt relief. Fortunately for you there are more companies than ever before advertising credit card debt relief services, but it is very important to do your due diligence when choosing one if you want to avoid credit card debt relief scams. 
Here are some things that you should ask yourself in order to find a legitimate company:
1.       Does the company have a website?
2.       Is the company listed with Industry Canada?
3.       Does the company have a bricks and mortar retail location?
4.       Have past clients of the company made positive reviews about them?
5.       Do the company and its employees have a presence online on sites like LinkedIn?

If you want to avoid credit card debt relief scams, ask a lot of questions: 
 1.       Does the company charge an upfront fee? If they do, this is a not a good sign. The company should be able to present you with financial options and advise you of the cost to participate in them. Only upon selecting a program should you pay any fee to the company. 
2.       Is the company going to hold the money you pay to them monthly and then disperse the money at a later date? Beware of credit card debt relief companies that collect money from you monthly on the premise that once it has accumulated, they will use it to settle your debt. You don’t know what could happen with the company in the future and this is risky business. 

3.       What will the impact be to your credit? Let’s be realistic – if you are behind making payments or know you will be soon, your credit has likely already taken a hit – or you should expect it to. Any debt solution that involves reducing your debt or freezing the interest will have a negative impact to your credit. A financial program that involves reducing your debt will cause you to pay off your debt much sooner so it really is short term gain for long term pain. Our point here is that the company that offers you debt relief should be open about the implications that different programs will have on your credit and have the ability to guide you through the process of rebuilding your credit. 

4.       Ask the company to be clear about their solution. Many companies will promote debt consolidation but there are different types of debt consolidation. Debt consolidation involves consolidating debts into a single monthly payment. Many credit card debt relief options achieve this but each is different. For example:

a.       If a bank gives you a debt consolidation loan your creditors will be paid off in full. Pros: You can preserve your credit and your relationships with your creditors. Cons: You will pay interest on the debt and it will take a long time to pay off. Also, you must have good credit for this option.
b.      You could refinance your mortgage to consolidate your debt. Pros: You can preserve your credit and your relationships with your creditors. Cons: You will pay interest on the debt and you will be stretching the debt out over your mortgage amortization.
c.       If you go to credit counselling they will allow you to make a single monthly payment to them. Pros: Monthly payments are low. Cons: Damages credit, damages relationships with creditors, takes a really long time to pay off.
d.      A consumer proposal also involves making a single monthly payment. Pros: Debt can be reduced, single monthly payment, stops collection action, interest is frozen. Cons: Damage to credit.
e.      A bankruptcy will also result in a consolidated single monthly payment. Pros: Debt can be reduced, single monthly payment, stops collection action, interest is frozen. Cons: Damage to credit, ongoing reporting obligation to trustee, if financial situation improves payments could be increased. 
When looking for a company that offers debt solutions remember that if you do your research and ask a lot of questions you should be able to find a debt solution while avoiding credit card debt relief scams. 

For more information about credit card debt relief or if you need help with a financial problem please call DebtCare at 1-888-890-0888 or visit

Monday, 4 February 2013

Dealing with Collection Agencies: Harassment and The Collection Agencies Act

In Canada, if you have a debt that goes into default, your creditor can assign your debt to a collection agency to be collected. The collection agency will then attempt to collect the debt from you. They will do this by calling you, sending you letters, and some creditors will even grant collection agencies the authority to sue you. 

Dealing with collection agencies is no fun! When a collection agency is after you they can be ruthless and even harass you. Some people find themselves feeling powerless when dealing with collection agencies. 
Dealing with collection agencies used to be even worse than it is now, but as a result of public outcry, the government decided to begin regulating them. Collection agencies are regulated provincially and all provinces have legislation that regulates the activities and conduct of collection agencies and their collections. In Ontario, for example, this legislation is referred to as the Collection Agencies Act and is administered by the Ministry of Consumer Services.
Although all provinces regulate collection agencies, with regulations varying from province to province, here are some things that, across the board, collection agencies can’t do. 

·         Ask you for payment without first having notified you in writing that they have been retained by your creditor to collect the debt.

·         Make phone calls to you with a frequency that would be considered harassment.

·         Make phone calls to you outside of the days and hours the legislation in your province mandates.

·         Ask you to pay a debt without having provided you with the name of the creditor and the total amount owed.

·         Provide personal information to third parties, such as other people in the household, or leave it on your voicemail.

·         Contact your employer (unless there is a court order), neighbours or friends to obtain an address or telephone number for you.
Sometimes life throws us a curve ball and no one wants to end up with a debt in collections. Having a debt in collections is an indication of an underlying financial problem. While you may be able to count on things like the Collection Agencies Act to control the behaviour of your creditor’s collection agencies, you won’t be able to stop dealing with collection agencies until you have a plan to deal with your debt.

So many people get stressed out when dealing with collection agencies that, instead of facing the debt head on, they alter their lifestyle. They stop opening mail or answering the phone. Don’t do this!

There are financial solutions to deal with debt that is in collections and companies that specialize in these types of problems. Some financial solutions can even reduce the size of your debt or freeze the interest on your debt, and all financial solutions will stop collection action!

Just imagine your life without the phone ringing off the hook every moment. Imagine being able to rebuild your credit. Imagine having control over your debt. All is possible – it’s up to you to take the first step.

For more information about dealing with collection agencies or if you need help with a financial problem please contact DebtCare Canada at 1-888-890-0888 or visit