Wednesday, 26 August 2015

Ontario Bankruptcy Trustees – Who They Are and How They Advertise!

Debt consolidation, get out of debt, debt relief: it is hard to turn on the radio or television these days and not hear one or all of these phrases. Why? Because so many Canadians are facing financial challenges thanks to the ease with which credit is granted coupled with high (credit card) interest. The temptation to pay on credit can quickly lead to getting in over your head, and then struggling to find a solution.

When it comes down to it, the question is, who advertises these solutions and what do they do?
Ontario bankruptcy trustees, more aggressively now than ever before, are advertising to the public that they offer the best solution for people facing financial woes. We disagree with much of the advertising we hear from many Ontario Bankruptcy Trustees. Why? Because we exist because of them!

Ontario bankruptcy trustees promote financial solutions. However, if you choose the solutions offered, the Ontario bankruptcy trustee does not represent you.  A bankruptcy trustee in Canada is a court appointed officer who administers estates when a bankruptcy or consumer proposal is filed. They do not represent you, they do not represent your creditors. They apply rules set out in the Bankruptcy and Insolvency Act. The trustee is required to represent the best interests of all parties (and this includes their own financial interests).

What does this mean? Well, trustees are paid a tariff out of the proceeds of your bankruptcy or consumer proposal. In the case of bankruptcy the fee is fixed, whereas with a consumer proposal the fee grows with the amount of the proposal.

Some things to know:
·         Trustees advertise to you, despite the fact that they don’t represent you - this is because without you, they have no business.
·         In the case of bankruptcy, finding surplus income means that they can extend your bankruptcy and collect larger tariffs because the bankruptcy is being administered for a longer period of time.
·         In the case of consumer proposals, convincing you to propose a higher amount to your creditors will result in the collection of more fees - and thus is a major priority for them.

Now, of course a few bad apples shouldn’t spoil the whole bunch, and we don’t mean to say that all trustees are shady. Many trustees in bankruptcy are reputable and do business above board - but the few that don’t can do a lot of damage. There are just too many conflicts of interest and the law needs to go further in terms of requiring trustees to state in their advertising that while they are promoting a service they don’t represent you.

A consumer proposal or bankruptcy is often a really good financial solution for someone backed into a corner. These allow for one monthly payment, can reduce debt, stop interest, and stop collections. Just keep in mind, just as you wouldn’t go to a meeting at the CRA without your accountant, you shouldn’t go to a trustee without your own independent financial representation.

Financial counsellors who specialize in bankruptcy and proposals can structure the numbers, review your information, make recommendations, and bring a proposal forward to a trustee on your behalf- protecting you throughout the entire process.

DebtCare Canada represents your best interests - yours and yours alone. Call us today BEFORE contacting a trustee:  1-888-890-0888.

Wednesday, 19 August 2015

Missed the Small Business Tax Deadline? Canadian Tax Penalties, Interest and Options!

Running a business is tough! Most small business owners are experts in their individual trades, but not necessarily experts in all aspects of business - or other businesses for that matter. For example, you may know how to unclog a toilet, or even install one, but you wouldn’t necessarily want to take on the task of outfitting the plumbing for an entire house. The same is often true when it comes to taxes; many small business owners are well versed in their own finances, but when it comes to their taxes, GST/HST and payroll deductions, etc., this can represent a whole different level of accounting know-how.

When the small business tax deadline passes, there are always a significant number of individuals who have missed it. Most often, small business owners miss the deadline for 5 reasons:

1.    Unsure of when it was
2.    Procrastinated on hiring someone to come in and prepare the books and returns
3.    Think that money will be owed and are not sure how it will be paid
4.     Missing some type of information, proof of expenses are just one example, and so don’t think that their return can accurately be prepared
5.    Think they will not owe and thus the deadline is more of a guideline…

If you are a sole proprietor or part of a partnership in Canada, the small business tax deadline was in June. We are now officially past that date, and so, if you have not filed, you’ve missed it.

If you missed the deadline, the following are the financial penalties:

o   If it is your first time filing late the penalty is up to 5% of the amount owing plus 1% per month for up to 12 months.
o   If you filed late in any of the preceding 3 tax years the penalty is up to 10% of the amount owing and then 2% per month for up to 20 months.
o   Keep in mind that interest is back-dated to the tax year, and accrues on both the principal and penalties!

If you missed the tax deadline, this is considered tax evasion and you could also be subject to criminal prosecution and further financial penalties. Owing money to CRA is not tax evasion, but failing to file is! One will lead to financial challenges, while the other could land you in court.

Often, late filing and tax avoidance is due to an underlying financial problem and an inability to pay. If you missed the small business tax deadline the best course of action is:

Step 1 – Get your books and returns prepared. If you don’t have receipts or other documentation, tell the accountant and they will tell you what you can and cannot include in the return.

Step 2 – Once the return/returns are prepared you will have a better idea about what you owe and can use the numbers above to estimate penalties. Be realistic about your finances. Consider CRA debt, other debt you have and what assets you want to protect.

Step 3 – Meet with a financial professional before you file to get a game plan in place for dealing with what you will owe to mitigate the blow-back of collection problems.

If you are worried about filing late and considering not filing at all because of a looming tax debt, our advice is to file right away to avoid a tax evasion charge, then deal with the debt with professional financial help. Call DebtCare Canada at 1-888-890-0888.

Wednesday, 12 August 2015

Does a Consumer Proposal in Canada Stay on Your Credit for 7 Years?

Many people choose a consumer proposal in Canada to get finances back on track. These represent a great debt relief option because you can settle your debt, often reduce the total balance to be repaid, freeze interest and consolidate the various monthly bills into one single, monthly payment.

Of course, as with any debt relief solution, there are implications for your credit, and we are often asked what those implications are. Many individuals come to us with a fear that a consumer proposal will ruin their credit for the long term, and leave happy knowing that this isn’t actually the case. Often the pros far outweigh the cons, especially when you consider the fact that your credit is likely already not so stellar - coupled with the fact that a CP can save you thousands of dollars and stop self-serving creditors from continually harassing you.

When it comes to consumer proposals, by far the question asked most often is “how long does it stay on my credit report?” The answer is fairly simple, but the length of time really depends of you. Many think that a CP is just like a bankruptcy - on your credit report for 6 years following the date of discharge - but this is not the case.

In a nutshell, a proposal is on your credit for 3 years from the date it is paid off in full. The faster you pay off the proposal, the faster it is off your credit report.

Here is a handy chart to help show you how to calculate how long a CP will be on your credit:

Paid of immediately
On your credit report for 3 years overall
Paid off one year after filing
On your credit report for 4 years overall
Paid off two years after filing
On your credit report for 5 years overall
Paid off three years after filing
On your credit report for 6 years overall
Paid off four years after filing
On your credit report for 7 years overall
Paid off five years after filing
On your credit report for 8 years overall

A consumer proposal in Canada is not like bankruptcy where you have an ongoing obligation to your trustee pending a discharge. Once creditors agree to a proposal, it is binding and can be paid off at any time. Or, you can choose larger monthly payments to get it paid off faster - the choice is up to you and your own personal situation.
Once you have negotiated a proposal and it has been accepted, start rebuilding your credit quickly with a secured credit card. This will help you establish good credit behaviour and show future lenders that you are committed to getting back on track.
Also, make sure that you stay on top of your credit report. Ensure that the credit reporting agencies are aware that you have filed, and also that it has later been paid off - don’t just assume that they have been made aware. Consider sending letters of discharge through registered mail.
Rather than being a credit rating killer, a consumer proposal is actually a great way to begin the process of getting your credit rating back on track. By consolidating all payments and reducing principal, you can get back on your feet, and don’t have to worry about long term impacts.

For more about filing a consumer proposal in Canada, or to discuss other options for debt relief, call DebtCare Canada today at 1-888-890-0888.

Wednesday, 5 August 2015

Your Rights: Canada Revenue Agency Collections Policy

With this year’s tax deadline long gone, for many individuals, the stress that comes with income tax filing is also long forgotten. However, if you are one of the many Canadians now stuck dealing with a tax debt, the stress may just be in its infancy, growing exponentially as the days pass and interest continues to accumulate. How well do you know the Canada Revenue Agency collections policy?

Of course the Canada Revenue Agency has a right to their money, but that does not mean that you don’t have rights as a taxpayer. The CRA is a very powerful organization, and often that power means intimidation and fear - just know that you do have rights and can fight the CRA if you so choose.

Taxpayer Bill of Rights. This is a set of rights established to protect the taxpayer when it comes to things like language, privacy, harassment, objections, etc. For example, if you feel as though you are being unfairly treated, you are able to file a formal complaint under the Bill of Rights. Intimidation is a tactic that often works, but largely because people are unaware that avenues for recourse exist.

Here is a link to the CRA website and the Rights in their entirety:

Additionally, when it comes to a tax debt, individuals are often not aware of the programs that exist to help fight CRA collection action, actions such as a wage garnishment, frozen bank account, or property lien. These collection actions can cause extreme financial hardship and getting them lifted can be a challenge. Some of these programs can also stop interest and penalties. For example, the Taxpayer Relief Program or even the Voluntary Disclosure Program may give you the chance to deal with what you believe are tax debts leveraged as a result of personal circumstances which prevented you from filing or impacted your ability to pay.

Just remember, any negotiations you enter into directly with the CRA can have negative impacts long term; often in exchange for a repayment plan the CRA will require personal information, information that will later be used against you! The CRA will never voluntarily negotiate to reduce principal, and typically this can only be achieved through a consumer proposal or bankruptcy.

If a CRA tax debt has you feeling anxious and overwhelmed, our advice is NOT to call directly to negotiate, but rather to speak first with a debt counsellor with the experience and knowledge that will help you protect yourself. Call DebtCare Canada today at 1-888-890-0888.