Canadian Families are in A Lot of Debt Coming into the Holiday Season

While the Canadian economy continues to strengthen, Canadians continue to carry record amounts of debt. The CBC recently reported on a Trans Union report on Canadian debt trends and the numbers were revealing to say the least.

As of August 2012, the average overall consumer debt in Canada had risen to its highest level since 2004, with the average consumer debt load sitting at over $26,000. This does not even include mortgage debt. In Ontario in Q2 2011, the average consumer debt load was $24,721, and in Q2 2012 Ontario saw this number increase to $25,447.

These numbers are startling because, while the economy continues to improve, we are not out of the woods yet. Interest rates are still at historic lows and CMHC has gradually implemented changes to their guidelines making it more difficult to obtain high ratio mortgage insurance in Canada. These strides by CMHC have been in conjunction with a consolidated effort by the Ministry of Finance to try to mitigate the effects of a looming housing bubble in Canada.

Eventually mortgage interest rates in Canada will go up, and when they do, families carrying a significant amount of consumer debt will find it increasingly difficult to make ends meet, if they have not found this to be the case already. We surmise that the consumer debt level may be as high as it is because many families are looking to credit to fill budget shortfalls.

The holiday season is a better time than any for you to help your clients look for ways to improve the state of their finances and get their debt under control. Over the years, DebtCare has come to be known as a trusted resource to businesses that provide services to people who struggle with debt, supporting accountants, legal professionals, real estate investors, employee assistance program providers, and more. We help your clients get to a healthier financial state, which in many cases makes your job working with them easier. Debt can lead people to have other problems, such as with personal relationships or with employers, and can lead to additional financial issues. Having the resources to help your clients through the rough times creates a point of distinction that sets you apart from your competition. Whereas debt causes significant stress, generally once a person gets their finances under control they experience physical and emotional relief.

If there is one thing that these reports demonstrate it is that debt continues to be a problem for the average Canadian and many are in need of help.

If you would like more information about the services that DebtCare Canada offers to businesses like yours, please reach out to me at 416-907-2582 ext 258? Or visit www.debtcareserivces.ca

Giving Guidance About The CRA Taxpayer Relief Program

When an income tax return is filed late and the CRA assesses what is owed, or a previously filed return is re-assessed and new monies are owed, the CRA will add interest and penalties to the amount of the tax debt that an individual owes, which may substantially increase the amount of that debt. In this situation, Taxpayer relief is an important option that may help those clients who find themselves with tax debt.

Taxpayer relief is a formal program offered by the Canada Revenue Agency where they agree to cancel all or part of the interest and penalties. Individuals can qualify for one of the following reasons:

  1. A natural disaster, for example, misstated expenses resulting in an inaccurate return filing because a basement flooded and all receipts were destroyed.
  2. Extreme financial hardship
  3. A documented personal issue like a medical problem or death in the family
  4. An error on the part of the CRA

The Taxpayer relief program is a long and complicated process and very few applications under this program are granted. Furthermore, the CRA will not reduce the principal tax debt owed. However, it is an important option that can reduce interest and penalties.

Prior to making an application, it is important to determine whether or not the initial debt is payable, and if not, your client may need some advice on where to turn in order to reduce the debt and to make it more manageable, regardless of whether or not they receive interest and penalty relief under the program.

For more information about the Taxpayer relief program in Canada and how your clients may benefit from it, please contact me by emailing kgoldenberg@debtcare.ca, call me at 416-907-2582 ext 2587 or visit www.debtcareservices.ca.

Is a Direct Referral to a Bankruptcy Trustee a Good Idea?

If you have clients that are dealing with debt, they may have questions about consumer proposals and bankruptcy. Both are important options for those that are struggling to make their monthly payments, but there are important things that need to be considered before you clients choose to take either route.

One of the most important is to let them know that going directly to a bankruptcy trustee is not the smartest choice. Instead, having independent financial representation will allow your client to have their best interests represented, rather than relying on the advice and work of a court appointed official whose responsibility is to both the client and the creditor.

The problem with going directly to the trustee is that they are not obligated to find your client the best deal or to try and save them the most money. Furthermore, trustees will often collect equity in your clients’ assets or surplus income for the benefit of the creditors.

Consumer proposals are also administered by trustees in bankruptcy. When your client goes directly to a trustee for a consumer proposal, the trustee will propose an amount and present it to the creditors to be paid back. If this amount is agreed on, your client has no recourse for negotiation, and must accept whatever deal is made – regardless of whether or not it is the best.

If any of your clients are considering filing for bankruptcy or a consumer proposal, and you want more information to be able to support them, please contact me by emailing kgoldenberg@debtcare.ca, call me at 416-907-2582 ext 2587 or visit www.debtcareservices.ca.

How to Help Your Clients Face the Financial Problems that Come with Divorce

Debt and financial problems are one of the leading causes of divorce in Canada, and all too often debt and divorce go hand in hand.  If your clients are in the midst of a divorce, providing them with information about how to deal with the financial repercussions can be very important.

There are several things that a financial professional can help with, including:

–          Learning how to manage a budget: figuring out how to best prepare for life on one income. Budgeting also plays a key role in ensuring that all payments to creditors get made on time each month.

–          Dealing with the debt that already exists and being able to manage the monthly payments in order to keep credit in check. This may involve helping choose a solution to getting rid of the debt altogether.

–          Working with your client to consolidate that debt or file a consumer proposal to reduce monthly payments and keep credit payments from being neglected.

The best advice you can give to your clients to deal with the aftermath of a divorce and the debt that has resulted from it is to seek financial guidance from a financial professional who can represent them in the restructuring of their debt.

Being able to provide your clients with the support that they need is important, and if they are going through a divorce, this so often includes financial information.  If you have clients that are dealing with divorce debt, please reach out to me. I can be reached at 416-907-2582 ext 2587, or by email at kgoldenberg@debtcare.ca.

Who Should You Refer to Not-for-Profit Credit Counselling?

Thousands of Canadians suffer from debt, and often don’t know where to turn for help. If your clients find themselves in a tough financial situation, not-for-profit credit counselling may be an option they can consider.

Credit counselling is a service that helps many Canadians deal with financial challenges. Like any other financial solution, it does have its pros and cons. While credit counselling can help Canadians with any amount of debt, it is best suited to those individuals who owe $7,000 or less in total debt. For those clients with more debt, a consumer proposal or other solution may be a better option.

The credit counselling agency will make a proposal to creditors to create a reduced, fixed monthly payment. This proposal is not a consumer proposal and it will not reduce the overall debt. It simply provides for a reduced monthly payment.

The main benefit with credit counselling is that it allows your clients to manage their monthly payments.

There are also some cons, including:

  • Damage to credit – although this has likely already occurred
  • Overall amount of debt isn’t reduced
  • Repayment plan can extend over many years

Generally speaking, it is advisable to encourage your clients to seek financial guidance from an independent financial professional who can help them make the best financial decision and who does not work for the company that is providing the services, rather than going directly to the source.

If you would like to get informed about the differences between credit counselling and other debt solutions and which one is best for you clients, please call 416-907-2582 ext 2587 or email me at kgoldenberg@debtcare.ca.

When People Divorce Credit Card Debt Can Become Difficult to Manage

When people divorce many different financial problems can emerge. Both spouses will find themselves dealing with their finances on a single income. If one spouse wasn’t previously managing the household finances, she will now have to learn how to manage bills. Individuals may find it difficult to manage debt, such as credit card debt, on their own. One spouse may end up with the responsibility of paying the marital credit card debt on his own.

Divorce is one of the leading causes of bankruptcies and consumer proposals in Canada. Those who don’t end up in bankruptcy or in a consumer proposal still may be struggling with debt and may have damaged their credit as a result.

If you help people who are going through a divorce, a conversation about their debt and how they are managing their finances should take place. Even if you don’t deal with the financial aspects of a divorce it is important to know if your client is struggling with divorce related financial problems because your client’s financial problems could be fuelling mental health issues, damaging her quality of life,  disrupting his  employment or ability to gain employment and more.

Helping your client address her financial problems could be the key to a fresh start after a divorce. At DebtCare Canada we are committed to education in this regard. Check out the article we released last month “How to Make a Credit Card Debt Settlement” and feel free to share it with any clients you feel may find it helpful. http://www.debtcare.ca/articles/how-to-make-a-credit-card-debt-settlement/

Also, if you help people who are going through a divorce we can help you to help them address financial problems. Please reach out and I can send you more information about our WeCare Canada initiative and also about a new program for recently divorced individuals, “Budgeting in Transition.” I can be reached at 416-907-2582 ext 2587, by email at kgoldenberg@debtcare.ca and you can find more information about our business to business services at www.debtcareservices.ca

Helping Clients Who Have Tax Problems

Tax problems impact thousands of Canadians each year. Those who are self-employed, newly divorced, or who struggle to maintain their books are often among the first to be impacted by tax problems.

If you are an accountant, divorce lawyer, or work with self-employed individuals, then you likely encounter people who have tax problems. Once it is determined that an individual has a tax debt that they can’t pay, the real trouble starts. The Canada Revenue Agency wields incredible power and if your client is targeted, there will be little that you can do to help them.

If your client has a tax debt that they can’t pay, it is crucial that he or she comes up with a plan before the Canada Revenue Agency comes after them. This is where we come in.

We understand CRA enforcement practices, policies and procedures and we have the resources to be able to help individuals with the financial aspect of his or her tax problem.

Here is an article released by DebtCare Canada that educates individuals about the implications of missing the income tax deadline that you may want to share with your clients. http://www.debtcare.ca/articles/the-canada-revenue-agency-consequences-of-missing-the-income-tax-deadline/

Education plays a major role in helping people to avoid tax problems and also to face them if they come up.  At DebtCare Canada we take financial education very seriously and often work with organizations that help people who have tax debt. If you have clients facing unmanageable tax debt, please reach out to me. I can be reached at 416-907-2582 ext 2587, by email at kgoldenberg@debtcare.ca and you can find more information about our business to business services at www.debtcareservices.ca

You May Have Clients Whose Wages Are Being Garnished and Don’t Even Know It

When people have social issues, they often also have financial problems. The two regularly go hand-in-hand. If you help people who are facing social issues, such as an addiction, mental health problems, or hardships resulting from a divorce, it is important to understand that there may be financial issues that have emerged because of the problem, or financial issues that contributed to their problem.

Often solutions to financial problems directly improve the social issues that people face. Usually those with financial problems suffer in silence because they are too embarrassed to let the people around them know that they are struggling.

Wage garnishments are extremely embarrassing because when one occurs the individual’s employer is notified. Wage garnishments result in crushing hardships to your clients and if you help people who have financial problems it is important to have (delete up) a dialogue on the subject so that they know help is available.

Here is an article that we released at DebtCare this past month that you can share with your client. Titled, “What Is a Wage Garnishment?” it will educate your clients about what they can do if they need help dealing with one. http://www.debtcare.ca/articles/wage-garnishment-we-explain-what-is-a-wage-garnishment/.

As you know, at DebtCare Canada we make it our mission to help people who struggle with debt. Through our WeCare Canada initiative we work with organizations that help people who have social issues deal with their debt and organize their finances. If you would like information about the WeCare Canada initiative, would like to host a WeCare day, or if you simply know someone who could use some help with a financial problem, please contact me today. I can be reached at 416-907-2582 ext 2587, by email at kgoldenberg@debtcare.ca and you can find more information about our business to business services at www.debtcareservices.ca

Helping People Who Have Income Tax Debt

Accountants are often the first to know that their clients are about to have a major financial problem. If you work in the accounting profession then you know that many, many Canadians struggle with income tax debt in Canada.

Once a tax return is filed late or re-assessed resulting in an amount owing, the Canada Revenue Agency will add penalties and interest retroactively on this tax debt which may cause it to double and even triple in size.

When a large income tax debt is owed to the Canada Revenue Agency it can be paralyzing. The Canada Revenue Agency will demand to be paid in full and has incredible authority and resources to collect the income tax debt owed.

Many people feel so overwhelmed when they have a tax debt that they simply ignore it because facing it is too stressful; but this is the worst thing to do because the Canada Revenue Agency will catch up eventually and the consequences will be catastrophic.

If the taxpayer does not have the liquidity to pay off his or her tax debt, then he or she needs to get financial help immediately, beginning with working with a debt consultant to weigh his or her financial options. Income tax debt is like any other debt. There are Federal Government Programs in place to provide Canadians with a legal avenue to deal with their debt. These avenues in many cases do not involve bankruptcy and can stop Canada Revenue Agency collection action.

If you have a client who is struggling with an income tax debt or if you would like to host a WeCare Day to provide education to your clients about how they can deal with tax debt once their returns have been filed, please contact me by emailing kgoldenberg@debtcare.ca, call me at 416-907-2582 ext 2587 or visit www.debtcareservices.ca.

Supporting Clients and Patients with Divorce Debt

Canada has the 8th highest divorce rate in the world. Human Resources Development Canada has reported that the proportion of marriages expected to end in divorce has fluctuated between 35% and 42% in recent years. In 2008, 40.7% of marriages were expected to end in divorce before the 30th wedding anniversary. In 2008, there were 70,226 divorces in Canada or 2.11 divorces per 1,000 people.

Divorce debt in Canada is also very common. Human Resources Development Canada also reported that in 2008, 115,789 Canadians were unable to repay their debts. Serious financial difficulties brought them to file either a consumer proposal or a bankruptcy. Individuals who were divorced or separated were more likely to file a proposal or bankruptcy.

Why is divorce debt one of the leading causes of bankruptcy in Canada? The answer is fairly simple. First, two income households will often accumulate debt based on their “household ability to pay the debt”. The challenge with this is that debt is accumulated based on two people sharing living expenses and when people separate, living expenses will double because now each party has to pay for rent or a mortgage and living expenses separately. When household debt is present this can make it challenging to pay it.

Second, some marriages will involve one person working and one person raising the family. When divorce occurs, the party who hasn’t worked will likely have little to no income but be faced with the immediate expense of having to hire a lawyer and also live. In many cases this forces the party who has been home raising the family back into the workforce. Individuals who have been out of the workforce for a long time often have to re-enter it in junior or entry level positions.

Third, sometimes one party in a marriage may carry all of the debt in his or her name. Much of the debt may have been used by the other spouse. There is nothing worse than getting a divorce and then finding yourself having to pay your spouse’s debt.

Legal protections may result in the party who has the weaker financial positioning receiving support payments, being awarded the house, having the other party take responsibility for the debt, but this can take years. Also, the legal fees that compound over the course of a divorce may end up being more than the debt that was owed to begin with.

We work with marriage counselors, family therapists and even family lawyers to help their clients come up with post-divorce financial strategies.

If you have a client who needs help or if you would like to host a WeCare day where we can come out and speak with your clients/members about coping with the financial aftermath of a divorce, please email me at kgoldenberg@debtcare.ca, call 416-907-2582 ext 2587 or visit www.debtcareservices.ca.