Category Archives: Income Tax Debt

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.

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.

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.