• Every day we provide debt advice and guidance to consumers with a range of needs, and a common thread is that “knowing is not owing” – people need to have the facts so they can make informed decisions about their unique situation.
• Even if you don’t consider your debt a problem, it’s important to understand your rights and responsibilities – owing money is stressful, there are many ins and outs when it comes to debt, and unfortunately what you don’t know can hurt you financially.

Read on as we break down 10 of the most common consumer debt myths and misconceptions. 

Myths About Debt You Owe

Myth: Creditors Can Always Sue You Over a Debt Owed

Fact: Canadian law sets out a statute of limitations on debt.

In BC, the Limitations Act caps the period of time a creditor has to take legal action against you (i.e. sue you) for a debt you owe. What this essentially means is that while the debt does remain payable, if it has been two years or more since you made a payment or acknowledged the debt in writing, then your creditor may not have further recourse to collect the debt from you, beyond putting notations on your credit history and sending you mail.

Myth: Co-signing Debt Makes You Responsible for Half

Fact: By co-signing a debt, you become equally responsible for repaying 100% of the unpaid balance to the lender.

When you co-sign a debt, if the original borrower doesn’t pay back the debt the lender can demand that anyone listed in the loan or agreement (i.e. the co-signer/co-borrower) repay the entire balance – not half. This type of liability is known as ‘joint and several’.

• Read your applications and lending agreements carefully to understand the terms of borrowing and who is responsible for what – these can change depending on the lender and whether they are considering an application/account for “additional cardholders” or “co-borrowers/co-applicants.” Always check the fine print!

Myth: Marrying Someone Makes You Responsible for Paying Their Debt

Fact: One spouse is not responsible for repaying the debts of the other spouse solely by virtue of marriage or cohabitation.

You are responsible for repaying debts you’ve co-signed for or taken on jointly (as discussed above), or debts triggered as marital debts by the act of separation under the Family Law Act. You cannot be suddenly made liable for a debt owed solely by your spouse just because you got married. Essentially, there is no way to “marry into” a debt.

Am I Responsible for my Spouse’s Debts? Learn More

Myth: You Should Always Buy Insurance Protection

Fact: Credit card balance protection insurance often isn’t “worth” its cost.

Some banks are quick to sell and aggressively promote various insurance products, and while some are worthwhile considerations, like life insurance for a young family, others provide little value in most circumstances – one of these Licensed Insolvency Trustees often caution against is ‘balance protection insurance’.

• Even if you don’t carry a balance each month you pay fees into this product, which can be as high as 1% of the purchases on the card. Over the course of one year, this could take a 20% credit card interest rate to more than 32%.
• The other issue is that in most instances where you’d expect the insurance to help, it does very little. For example, if you lose your job, it may cover the minimum payments for the period you are unemployed – but very little of these payments will reduce the balance you owe on the card.

Myth: Incorporating Your Business Fully Protects Owners Personally

Fact: While corporations may protect owners from their debts to some degree, there is still a personal liability created for certain debts that cannot be avoided.

This personal liability can include debts such as:

• Wages; GST and payroll remittances
• Debts you have signed a personal guarantee for

Many business owners are aware that essentially any debts a sole proprietor or partnership business accumulate are payable by their owners, since there is no distinction between business and owner, but unfortunately, some business owners have a false sense of security when it comes to protecting their personal assets and liabilities if they incorporate their business.

Myths About Managing Debt

Myth: There’s No Forgiveness or Renegotiation Option for Government Debts

Fact: You can have government debts reduced and cleared by filing a Consumer Proposal (or forgiven through bankruptcy).

A Consumer Proposal is a legal debt consolidation remedy that can be used to stop all interest, reduce amounts owing by up to 50-80%, and work out a payment plan for what you can afford to repay. Government debts like taxes, business GST, student loans, benefit overpayments and more – plus debts like credit cards, payday loans, lines of credit, etc. can all be dealt with using this powerful tool, which will also halt a wage seizure or bank account freeze.

Myth: Minimum Payments on Credit Cards are Enough

Fact: Making just minimum monthly payments may keep your account in good standing, but it’s not enough to get debt paid off without incurring considerable interest costs.

Many individuals fall into a trap of just making the minimum payments on their credit cards and assuming that they are making progress towards getting their debt paid off. The reality is that at 20% interest, making minimum monthly payments on a $10,000 debt could take more than 25 years to clear and will cost more than $12,000 in additional – and avoidable –  interest charges.

• Banks must disclose exactly how long it will take to pay off a debt if you make only the minimum payments, so you can see this breakdown on your own bill.
• If you can only afford minimum payments each month, you very likely have a debt problem and should talk with a Licensed Insolvency Trustee as soon as possible.

Compare Your Debt Options

Enter your total amount of debt (excluding mortgage and car loan) and we’ll show you a list of options.

Myth: Your Credit Score is a Reliable Indicator of ‘Financial Health’

Fact: A credit score is essentially a numeric rating used by lenders to determine whether they will loan money, and at what cost.

Part of the problem with taking a ‘good’ credit score as an indication of financial and debt health is that habits that drive a high rating are often at odds with habits that lead to financial success. Since a credit rating mostly measures whether you pay your bills on time it considers nothing about whether those bills are too high or if you have any savings or assets at all.

Myth: Debt Consolidation Must be Done by Borrowing

Fact: You can consolidate your debt without borrowing or interest by making a Consumer Proposal.

Many people considering how to manage their debts believe their options amount to consolidation loans, credit counselling programs, or bankruptcy – but these are not your only options!

• Consumer Proposals are an effective debt solution that allows you to consolidate your debts, repaying what you can afford, with the unpaid balance being forgiven by your creditors.
• This consolidation option requires no borrowing and interest charges (such as a consolidation loan), nor require you to pay added professional fees (such as credit counselling).

Myth: Canada has Government-Sponsored Debt Relief Programs

Fact: The Canadian government does not offer grants or programs for personal debt repayment other than the options provided by a Licensed Insolvency Trustee.

The Canadian government does not have government grants or debt programs available, but it does regulate legitimate legal debt relief options that are available through Canada’s designated debt help professionals – Licensed Insolvency Trustees – namely Consumer Proposals (to consolidate and cut debt) and bankruptcy (to get debt forgiveness), as well as some student loan relief administered through Canada Student Loans.

Get Information and Advice About Your Debt and Debt Options 

The best and safest way to get accurate information about debt, and your debt options and resources, is to reach out directly to a Licensed Insolvency Trustee local to your province and ask to have a free consultation – you don’t need a referral to talk confidentially with us.

• Sands & Associates is available for help seven days a week and we have options for in-person appointments, as well as full support over the phone and online videos.
• In about 30 minutes you should have a clear understanding of your situation and next steps in the debt solution you decide best fits your needs. Knowing is not owing! 

Get solutions, support, and a debt-free plan that’s right for you.

The post Debunking Common Consumer Debt Myths appeared first on Sands & Associates.

• Virtually all your debts can be included in a Consumer Proposal, everything from credit cards to payday loans, outstanding taxes to student loans and more.
• Typically creditors will agree to accept repayment of 20-50% of your balance to consider the debt fully settled, and interest charges are automatically frozen.
• You’ll have up to five years to pay off the agreed amount of debt, usually via monthly payments.
  • For example, if you owe debts totalling $25,000 you might offer to pay $210 a month for three years (36 months), repaying a total of around $7,500 to cut your debt by 70%. The balance of the debt is legally eliminated at the end of the Proposal.

Filing a Consumer Proposal can be a great way to streamline your debt repayment, and despite being a legal solution, the process is generally straightforward. Read on to learn details around how a Consumer Proposal works, and some of the ways a Consumer Proposal does and doesn’t impact you.

Key Ways a Consumer Proposal Will Affect You 

A Consumer Proposal Provides Protection from Creditors

When your Consumer Proposal is filed it acts as a shield to protect you and your assets from your creditors. This Consumer Proposal effect is an especially welcome relief to anyone worried about overdue payments or outstanding accounts since a Consumer Proposal will:

• Stop creditors from contacting you for money, and stop all collection activities that may have been happening.
• Halt legal action creditors may have been taking against you.
• Immediately remove wage garnishments or account freezes (even from the government).

A Consumer Proposal Restructures Your Debt Payments

Because a Consumer Proposal will consolidate (and cut) virtually all your debts, rather than juggling multiple accounts and payments, you’ll have one simple (usually monthly) payment to make to your Licensed Insolvency Trustee.

• Since your debt may be cut by up to 50-80% with no interest charges or added fees, Consumer Proposals usually save people paying off debt a considerable amount of money and time.
• Most people opt to handle payments for ‘secured debts’ that are in good standing outside their Consumer Proposal, so normally a Consumer Proposal won’t include secured debt agreements you’ve decided to continue paying, such as your mortgage or vehicle financing.
  • Many clients find themselves in a much better position to continue to make payments on their home mortgage or car loan after they have significantly reduced their other consumer debts through a Consumer Proposal.

Book Your Free Consultation

A Consumer Proposal Temporarily Affects Your Credit Rating

Like other types of debt consolidation or settlement, filing a Consumer Proposal does temporarily reduce your credit score. Here’s what you should know:

• Your Consumer Proposal will be noted on your credit history for three years after the debts included in your Proposal are paid off – or – for six years from the date your Proposal started, whichever is soonest. This is often considerably less time than it would take you to pay off your debt on your own.
• You can seek new credit any time, even while your Proposal is active, and most people are able to get basic things like a credit card shortly after filing their Proposal.
  • Secured or prepaid cards can also be good alternatives to have the convenience of a credit card but enjoy the break from debt accounts.
    • Keep in mind that a secured card, rather than a prepaid card, will normally provide updates to credit bureaus to help you rebuild your credit after filing the Consumer Proposal.
  • If your mortgage comes up for renewal during your Consumer Proposal this shouldn’t be an issue, provided it is paid up to date.

Many people worry about whether consolidating their debt with a Consumer Proposal will have a long-term (or even permanent) impact on their credit score, but the reality is that the effect is generally far less severe than they fear, and for most people the benefits far outweigh the temporary inconvenience.

• It’s also important to know that despite a ‘good’ credit score, many people dealing with a debt problem can’t get help from their bank to deal with their debt, notwithstanding that they may have a high credit score and are not missing payments.

Key Ways a Consumer Proposal Will Not Affect You 

A Consumer Proposal Doesn’t Make Your Spouse Pay Your Debt

Filing a Consumer Proposal should not affect your spouse in any way unless they have co-signed or guaranteed debt together with you.

• Having a spouse or common-law partner does not on its own trigger a shared liability with the other spouse/partner, nor does it give your creditors recourse to ask them for payments, nor mean they must do a Consumer Proposal too.
• Unless you’ve given your creditor means to collect from both of you by taking on joint debt or triggered a division of “family debts” by separating or divorcing, your spouse isn’t responsible for repaying your debt.
• Your financial responsibilities are in fact so separate that where there is no co-signer, guarantor, or co-cardholder, it is possible for one spouse to file a Consumer Proposal without the other one being aware, as typically only creditors are notified of your Proposal.

Book Your Free Consultation

A Consumer Proposal Doesn’t Affect Your Employment

For most people a Consumer Proposal in no way affects their job and you can change jobs or switch careers at any point.

• Overall, the Consumer Proposal process is very private and in normal circumstances your employer is not notified about your Proposal unless your wages are being seized – this is because your Licensed Insolvency Trustee will contact your payroll department to halt the garnishment when your Proposal starts.
• If you still need reassurance that a Consumer Proposal won’t impact your employment, know that the federal Bankruptcy and Insolvency Act, which governs Consumer Proposals, specifically states “No employer shall dismiss, suspend, lay off or otherwise discipline a consumer debtor on the sole ground that a consumer proposal has been filed in respect of that consumer debtor.” (S. 66.36)
• Also, for business owners – you can be self-employed during a Consumer Proposal, including being the director of a corporation.

A Consumer Proposal Doesn’t Take Away Your Tax Refunds

A Consumer Proposal doesn’t impact how you file your tax returns or cause you to ‘lose’ your tax refund or other tax credits you may be eligible for, even if you included a prior income tax (and/or business GST) balance owing to Canada Revenue Agency in your Consumer Proposal.

• While your Consumer Proposal is active you’ll need to ensure your tax returns are filed up to date and that any balances owing from these new returns are paid.
• If you regularly owe money to Canada Revenue Agency a clause may be added to your Proposal that allows you to include the exact amount you owe for income taxes up to the date you start your Consumer Proposal, even if that tax return isn’t yet due.

Book Your Free Consultation

A Consumer Proposal Doesn’t Prevent Immigration Sponsorship 

If you have a Consumer Proposal you can still apply to sponsor someone to immigrate to Canada, bearing in mind that you should always refer to the Government of Canada for the latest rules and guidelines. This is an important distinction between Consumer Proposals and bankruptcy, as a person who has not yet been discharged from bankruptcy will need to wait until their bankruptcy is finished before making an application to sponsor immigration to Canada.

• Neither a Consumer Proposal nor bankruptcy prevent you from applying for citizenship in Canada, nor from leaving the country (for vacation or permanent relocation) – just be sure to keep your Trustee informed as to your address if you move before your Proposal or bankruptcy are complete.

Is a Consumer Proposal a Good Solution for Me? 

For people who owe debt totalling less than $250,000 (excluding their mortgage), and want to make their debt payments more manageable, a Consumer Proposal is one of the best debt consolidation options available.

If you’ve been wondering about a Consumer Proposal but worried about navigating any aspects of the process, be sure to talk with a Licensed Insolvency Trustee about your concerns. It’s vital that you have all the facts about how to deal with your debt and the opportunity to explore all your options together with a qualified professional.

• A Consumer Proposal can only be filed by working with a Licensed Insolvency Trustee. We are Canada’s only official debt help professionals and Licensed Insolvency Trustees alone are qualified and endorsed to help you make a Consumer Proposal.
• Consumer Proposals are a unique debt solution – they are not the same as bankruptcy, nor are they the same as credit counselling or other types of informal debt settlement plans.
• If you’ve been advised against a Consumer Proposal by anyone besides a Licensed Insolvency Trustee, it is recommended you contact a Licensed Insolvency Trustee for a second opinion.

You can connect directly with a Licensed Insolvency Trustee local to your province and ask to have a free, confidential consultation to talk about your situation and options.

• Sands & Associates serves all of BC and our Licensed Insolvency Trustees and Insolvency Estate Managers are available to talk with you seven days a week. In just half an hour we can help you better understand your situation and choose the debt-free plan that’s right for you.
• You’re welcome to talk with us confidentially over the phone, by online video, or in person at a local office near you – whatever you find most comfortable and convenient.

You are not alone in finding a way to move forward – we’re here for you with support and solutions.

Talk with a local Sands & Associates Licensed Insolvency Trustee today and find your best debt solution.

Book Your Free Consultation

The post How Does a Consumer Proposal Affect You? appeared first on Sands & Associates.

Read on to learn how consolidating and cutting debt with a Consumer Proposal, or having debt forgiven through personal bankruptcy, impacts your personal tax filings, tax debt, refunds, and more.

How Does a Consumer Proposal Work? 

A Consumer Proposal is a special type of consolidation solution that allows you to manage virtually all your debts in one streamlined payment and cut how much debt you must repay to have your debts cleared.

• Your consolidated debts are reduced to what you can reasonably afford to repay over a period up to five years, and you may repay as little as 20-50% of your total debts to settle them in full – without any interest or added fees.
• Virtually all types of debts can be consolidated and cut in a Consumer Proposal, and you have the option to exclude certain debts such as a vehicle loan or mortgage.

Your Licensed Insolvency Trustee will fully coordinate your Consumer Proposal, taking on all communications with your creditors, facilitating your payments, and providing you with support throughout the process.

• Two private one-on-one financial counselling sessions will be conducted with you, giving you resources and tools to help you improve your finances moving forward.
• You will generally have few duties to complete besides making whatever payments you are offering to your creditors and keeping your taxes filed and paid up to date.

There are many advantages to filing a Consumer Proposal, which will allow you to avoid bankruptcy AND the cost of borrowing while you get your debts paid off for good, plus provide you with full protection from your creditors.

What Happens in a Personal Bankruptcy?

Personal bankruptcy is a legal debt forgiveness option that can allow you to have up to 100% of your debts totally forgiven, and protects you from ongoing creditor harassment, collections, legal actions, etc. The bankruptcy process in Canada is generally very straightforward and private.

• Once you file for bankruptcy your debts are frozen and your creditors are immediately prohibited from contacting you for payment or charging interest on your balances.
• The cost of bankruptcy is generally minimal compared to repaying all your debts in full (with interest), and there is no cap on how much debt can be forgiven.

Most people will retain all their assets and be “in bankruptcy” for only nine months and, in this time, you’ll work to complete a few key duties that will allow you to exit bankruptcy and consider your debts cleared:

• Have two private, one-on-one financial counselling sessions with a qualified counsellor who works with your Licensed Insolvency Trustee.
• Keep a monthly budget of your household income and living expenses.
• Provide your Trustee the information necessary to file your income tax return for the year of your bankruptcy.

Learn More About Financial and Credit Counselling with a Qualified Insolvency Counsellor

Does a Consumer Proposal Clear Tax Debt?

Yes! Consumer Proposals and personal bankruptcy are the only two options in Canada that can be used to settle or forgive government debts for less than the total balance owing. Both a Consumer Proposal and personal bankruptcy can include:

• Basic consumer accounts such as credit cards, payday loans, lines of credit, overdrafts, etc.
• Government balances including tax debt, business GST, CERB overpayment, federal and provincial student loans (private lender student loans can also be included).
• Outstanding MSP premiums, EI overpayments.
• Debts for a business that you’ve signed a personal guarantee for.
• An amount owing to an individual.
• Secured debts where the ongoing payments have been halted (such as a vehicle shortfall or mortgage foreclosure).
  • If you want to continue with your vehicle financing or mortgage, then your Consumer Proposal or bankruptcy could exclude these debts.

If you owe a government debt a Licensed Insolvency Trustee will often consider this a high priority debt, as Canada Revenue Agency collects on behalf of many of accounts and has more power than virtually any other type of creditor when it comes to collecting on an outstanding balance.

• Many people end up in incredibly stressful situations almost overnight because Canada Revenue Agency has taken steps such as freezing their bank account, garnishing their wages, or placing a lien on their property.

If you have a government (or other) debt that you cannot pay, or that you need help in managing, the best thing to do is reach out to a Licensed Insolvency Trustee local to your province right away. Staying ahead of the problem can save you a lot of stress – and money!

Read an Overview of Wage Garnishment in BC

How Does a Consumer Proposal or Bankruptcy Impact Tax Refunds? 

Although Consumer Proposals and bankruptcy have several things in common, they are quite different solutions and some of these distinctions are in how tax filings and refunds are handled.

Tax Returns and Refunds in Consumer Proposals

If you owe Canada Revenue Agency for a tax (or business GST) balance, you’ll need to ensure all your tax filings have been submitted before you make your Consumer Proposal. Your Licensed Insolvency Trustee can advise you on what to file if you are behind.

• If you typically owe money on your tax returns your Trustee may additionally recommend including a clause in your Consumer Proposal that allows you to include the exact amount of tax debt you’ll have, calculated to the day your Consumer Proposal starts – even if that return isn’t yet due. This allows you to consolidate and cut the most debt possible.
  • For example, if you start your Consumer Proposal July 5^th, you could include debt from a provisional tax return that covers your taxes from January 1 to July 5.
  • A second return would later be filed to cover from the date of your Proposal to December 31, separating the pre- and post-Proposal balances.

If you don’t have any tax debt and your returns are filed up to date when you start your Consumer Proposal, you’ll continue to file your tax returns yourself, paying any balances due and keeping any refunds ‘as usual’.

• For people who typically get a tax refund (especially one you rely on for paying annual or semi-annual expenses) this is another consideration that can make a Consumer Proposal a better option than bankruptcy.
• It’s also not uncommon for people to use their tax refunds towards making an additional payment on their Consumer Proposal, with a goal of having it paid off early.

It’s important to stay on top of your tax requirements (filing and paying) while your Consumer Proposal is in place.

Consolidating Debt with a Consumer Proposal: Step-by-Step

Tax Returns and Refunds in Bankruptcy

Two tax returns will be filed for you by your Licensed Insolvency Trustee for the year that you declare bankruptcy, called pre- and post-bankruptcy tax returns. All you need to do is supply the required information to get these returns filed.

• The pre-bankruptcy return will cover the period from January 1 to the date you file for bankruptcy, and any balance owing from this return will be eliminated in your bankruptcy, along with any other balance from prior tax years.
• The post-bankruptcy return will cover the period from the date your bankruptcy started to December 31, and any balance owing from this post-bankruptcy return will be considered a new debt outside of your bankruptcy and therefore your responsibility to pay.

If there are any refunds from these pre- and post-bankruptcy tax returns (or any prior years’ returns that are filed at the time you start bankruptcy), these will be included in your bankruptcy ‘estate’ and go towards any money collected that could be distributed to your creditors as a dividend.

Subsequent years’ tax returns and balances are yours to file, pay, or collect.

Learn More About What to Expect Working with a Licensed Insolvency Trustee 

Learn More About Your Debt Options, Including Consumer Proposals and Bankruptcy

Licensed Insolvency Trustees are the best debt help resource for individuals, and the only professionals in Canada fully qualified and authorized to help you with your debt. You may be able to address your financial difficulties using the resources we can advise you on, a self-directed approach, or a legal solution like a Consumer Proposal or bankruptcy.

• Anyone can have a free confidential consultation to talk about their needs and get a plan to become debt-free – your finances do not need to be in an urgent state to qualify for help.
• By connecting with a Licensed Insolvency Trustee local to your province, you can safely get accurate advice and guidance.

The best time to confront a debt problem is in the early stages, as the issues often get worse if you don’t take action. Avoid the temptation to wait it out – you owe it to yourself to get debt help.

• Sands & Associates helps consumers across BC and we can review your financial situation together and provide you with information on a full range of options to deal with your debt.
• There is no cost for a consultation, and you are under no obligation to continue working with a Licensed Insolvency Trustee – and in less than an hour you will have clear understanding about the next steps in whatever solution you choose.

Learn about your options and get a debt-free plan that’s right for you. Book your free, confidential consultation with a non-judgmental expert at Sands & Associates today.

The post What Happens to my Tax Filings if I Make a Consumer Proposal or File Bankruptcy? appeared first on Sands & Associates.

Watch the clip here, and read more below:

Potentially Risky Consumer Debts

Although these two common types of credit can offer a short-term benefit, use caution when taking on these debts, where payments can easily become unmanageable:

Long-Term Vehicle Financing: Many people finance a vehicle, which is not necessarily a problem – but financing terms are now longer than ever. Even though committing to a five, seven, or even eight-year financing term is becoming more common, consider the risks of doing so:

• Making an unaffordable vehicle ‘affordable’ by stretching out payments over a longer term.
• Investing in an asset that will rapidly depreciate (the exact opposite of a mortgage, where your investment is expected to increase in value).
• Extended car payments can take up a big portion of your household income that could be used for savings, retirement, or even paying off other debts.

Credit Card Balances: Your credit has already been used and now you’re committed to the payments – and the worst part about credit card debt – the high interest that accumulates on often long forgotten purchases.

• If you’re not able to pay your balance in full each month it’s easy for credit card debt to add up over time, and this often happens through frequently overspending, sometimes as a direct result of having insufficient income to meet both your household costs AND debt payments.
• The ‘borrow-repay-borrow’ cycle can be almost impossible to break.
• With an interest rate of 24% (a mid-level rate for most bank and department store cards) your debt will double every three years!
• Making only minimum monthly payments (or slightly more than) means even a relatively small balance can take years to pay off. For example, a $6,000 debt could take 40 years+ to pay off making only your minimum monthly payments and you would pay several times more in interest charges than the actual amount that you originally borrowed.

Compare Monthly Payments with Our Debt Options Calculator

Most Risky Consumer Debts

These types of debts can point to an urgent debt problem, either present – or waiting to reveal itself:

Payday or ‘Fast Cash’ Loans: Payday loans are usually a ‘last resort’ type of debt used to meet daily living expenses in a hurry. Because the borrowing fees and interest charges on payday loans are extremely high, using payday loans or ‘fast cash’ advances creates a major risk of kicking off a borrowing cycle that can be even more difficult than credit cards.

• This type of borrowing often leads to people carrying multiple payday loans. It’s not uncommon for people to become trapped in a cycle of payday loans, to have up to a dozen different loans outstanding at the same time.

Canada Revenue Agency Debts: Whether an unpaid balance for income taxes, business GST, or CERB overpayment – an outstanding government debt is not to be taken lightly.

• The government has powerful collection actions at their disposal, and, unlike many other creditors, Canada Revenue Agency can start collection action virtually overnight. You may not learn of pending action until it is already in place, including wage garnishment/seizure, a bank account freeze, or a lien placed on your property.

If you find yourself unable to repay your government debt, or in a situation where collection action is escalating, talk with a Licensed Insolvency Trustee as soon as possible.

Learn More About Solutions for Having Government Debts Forgiven

Consumer Debts to Be Cautious Of

There are two additional types of consumer debt to be cautious of, particularly when it comes to trying to manage debt you already have:

Co-Signing Debt: As Licensed Insolvency Trustees we’re regularly asked when it would be advisable to co-sign a debt for someone else – our answer: almost never!

• Co-signed debts are not a 50/50 liability as many people believe – each person on the account is responsible for 100% of the unpaid debt if the other person does not pay.
• Getting a co-signer when you’re already struggling financially often just introduces additional layers of stress and emotional responsibility – you’ve now given that creditor another responsible party to pursue for payment.
• Conversely, if you’re considering co-signing for someone else, understand that you are potentially letting someone else impact your monthly financial commitments and credit rating.

Read More About Co-Signing Debts

Using Assets as Collateral: Particularly if you are seeking to consolidate debt by borrowing, lenders may require you to pledge to them security over an asset to get a loan.

• Like co-signing, in the event you are unable to meet your repayment terms, your creditor now has additional recourse to collect upon the debt, which could include seizing and forcing the sale of the pledged asset.
• Be especially careful before taking on additional charges against your home equity – you only have so much to borrow against, not to mention potentially leaving yourself vulnerable to an interest rate increase or downturn in the housing market.

Learn More About Options to Consolidate Your Debt

Where to Get Debt Help in BC

If you have concerns about any of your debts or are considering what you can do to manage your debt, reach out to a local Licensed Insolvency Trustee in your province. You can safely get confidential support from a qualified and unbiased professional by contacting a Licensed Insolvency Trustee for a free debt consultation.

Sands & Associates’ team of debt help experts work with people across British Columbia and our full suite of debt help services is available in person from local offices around the province, over the phone, or online – whatever is most comfortable and convenient for you.

Your debt-free future IS possible and may be closer than you think. Connect with a caring, non-judgmental Licensed Insolvency Trustee today – book your free, confidential consultation now.

The post Risky Consumer Debts – and What to Watch For appeared first on Sands & Associates.

As consumers face tough financial demands, Sands & Associates, BC’s largest firm of Licensed Insolvency Trustees focused exclusively on providing debt help services to individuals, is seeing a substantial increase in the number of BC residents seeking professional debt advice and debt relief support. President of Sands & Associates, Licensed Insolvency Trustee Blair Mantin joined Global News to share more on consumers’ growing financial concerns, and what you should know if you’re a BC resident facing a debt problem.

Watch the clip here and read on to learn more about what to watch for across the province.

Carrying Consumer Debt? Here’s the Latest You Should Be Aware Of

Creditors Are Significantly Ramping Up Collection Tactics

In 2020 BC courts were closed and many creditors were extending payment deferrals to their customers.  It’s safe to say that this leniency has now passed and it’s back to ‘business as usual’. In 2023 so far, creditors seem to be taking a noticeably more aggressive approach to collections, with legal actions increasing even for relatively low account balances.

• Individuals owing as little as $5,000 are now finding themselves being sued for payments; in previous years this was generally a risk only where a debt exceeded $20,000.
• Local Sands & Associates Licensed Insolvency Trustees are noticing a trend of individuals seeking urgent debt help because creditors owed these smaller balances have taken them to court and obtained wage seizure orders which often make it impossible for an individual to cover their regular monthly costs of living.

What Consumers Should Know: If you are facing a wage garnishment (or the threat of one) by a creditor, a Licensed Insolvency Trustee can help you make a Consumer Proposal or alternatively file personal bankruptcy, both of which will immediately stop this creditor action. 

Learn more about Wage Garnishments and How to Stop a Creditor with a Garnishment Order

The Number of Consumers Turning to Consumer Proposals is Growing Substantially

A Consumer Proposal is a unique type of legal debt consolidation and an alternative to both personal bankruptcy and debt consolidation loans. Working with a Licensed Insolvency Trustee, an individual will make an offer to their creditors to repay the portion of their debt they can afford (often as little as 20-30 cents on the dollar), with no interest charges and no added administration costs.

The Office of the Superintendent of Bankruptcy (the Federal branch that oversees all insolvency filings) released recent statistics which illustrate how popular Consumer Proposals are becoming for cash-strapped consumers seeking to consolidate and cut their debt:

• The number of Consumer Proposals filed in BC in February 2023 compared to February 2022 increased by a whopping 38%. (And the number of bankruptcies filed over the same period declined by 8%.)
  • A Consumer Proposal is now the option chosen by 84% of people who file formal insolvency proceedings, which is a huge jump from 62% of customers choosing this option in February of 2020
• Overall, there was a year-over-year increase of 28% in the total number of BC residents filing formal insolvency proceedings to deal with their debts, which indicates that although many people are struggling, they are increasingly finding relief by restructuring their debts to offer partial repayment, instead of filing for bankruptcy.

What Consumers Should Know: You do not need to be delinquent on your payments to consider a debt restructuring solution like a Consumer Proposal – also, know that bankruptcy is not your only option for debt relief!

Learn more about Consumer Proposals and Whether a Consumer Proposal Could Be Right for You

Canada Revenue Agency (CRA) is Offering More Time to Pay Balances

Prior to 2020, CRA would typically accommodate a six-month payment plan for individuals to repay a balance owing in full, and it was rare for leniency to extend beyond that time, or in getting relief from penalties and interest charges. Now in 2023 CRA has extended this period to as long as 12 months in cases where they believe the six-month plan would create hardship for the individual.

• Despite this increased repayment timeline, however, for many individuals this is still not enough, especially as another trend contributes to the significant growth in Consumer Proposals – people being pursued for a CERB overpayment, with no means to afford to repay the debt within 12 months, even if the interest and penalties are waived.

What Consumers Should Know: If you have an unmanageable balance owing to CRA a Consumer Proposal is the only means of negotiating your debt to CRA (or having it forgiven with bankruptcy). Also, if CRA has begun collections against you, other than paying the debt in full, only a Licensed Insolvency Trustee can help you with options to get them to stop.

Learn more about What Happens if You Can’t Afford Your CERB Repayment

“Buyer Beware” – Impact of Unlicensed Debt Consultants Increasing in BC

Consumer warnings are being echoed by many Licensed Insolvency Trustees as a resurging presence of unlicensed ‘debt advisory’ firms have begun attracting BC consumers. These unlicensed and largely unregulated agents typically take advantage of vulnerable consumers, collecting money from people seeking debt help these agencies simply can’t provide. Here’s how it often works:

• An individual reaches out for help and is charged fees in the range of 1-2% of their total debt. The advisor explains how a Consumer Proposal can work to help them, and after they’ve collected their fee (often over two or three months) the consumer is eventually introduced to a Licensed Insolvency Trustee – the only professional who can actually file a Consumer Proposal.
  • This is completely unethical as every Licensed Insolvency Trustee in Canada offers a free, confidential consultation to review your financial options – and most, including Sands & Associates – will file a Consumer Proposal for you with no up-front payments whatsoever!

Despite advertising promises and even A+ BBB ratings and positive reviews, there is no such thing as ‘government debt grants’ or ‘programs’ beyond what is available to consumers by working with a Licensed Insolvency Trustee.

• When seeking debt advice, you should always ask “Are you a Licensed Insolvency Trustee?”
• If you’re not dealing with a Licensed Insolvency Trustee, it’s highly likely you are unnecessarily paying money that is providing no value, and you may be the victim of a growing scam in BC.

What Consumers Should Know: Licensed Insolvency Trustees are Canada’s ONLY regulated, endorsed, and qualified debt help professionals. You do not need a referral to get safe, free, and confidential advice from a Licensed Insolvency Trustee – simply contact a Licensed Insolvency Trustee local to your province. It should never cost you money to find out what your options are!

Learn about resources and options to help you become debt-free faster – book your free, confidential consultation with a non-judgmental debt expert today.

The post British Columbians Struggling with Unmanageable Debt as Personal Insolvencies Surge appeared first on Sands & Associates.

Why Consider a Consumer Proposal?

A Consumer Proposal is a debt solution that allows you to legally consolidate all your debts into one repayment plan that usually offers creditors a partial recovery of your debt, in full satisfaction of the amount owing.

• Consumer Proposals provide an opportunity to consolidate your debt without financing and interest charges and allow you to have your debt partially forgiven without claiming bankruptcy.
• Debt repayment terms in a Consumer Proposal are flexible and tailored to your individual situation, making a Consumer Proposal a suitable debt management option in many different circumstances.

Consumer Proposals can only be filed by working with a Licensed Insolvency Trustee, and you’ll have our professional help and qualified expertise throughout the process.

What are the Advantages of Consumer Proposals?

From cutting monthly payments to creditor protection to debt cost savings, there are many built-in benefits to Consumer Proposals. Some advantages to choosing a Consumer Proposal over other debt management options include:

• Consolidating all your debt into one manageable repayment plan
  • Virtually all types of debt can be included in a Consumer Proposal, including (but not limited to) credit card debt, overdrafts, tax debt, payday loans, student loans, CERB overpayments and more.
• Stopping ongoing interest, financing costs and other creditor charges
  • Debts become ‘frozen’ and will not accumulate more interest or fees.
• Reducing the amount of debt you must repay down to what you can afford
• New monthly Consumer Proposal debt payments are usually substantially lower than prior monthly debt payments
• Breathing room and keeping your assets safe and protected from creditor collections and seizures
  • Creditors must stop contacting you for payment and must discontinue all collection actions.

Filing a Consumer Proposal with Sands & Associates

Sands & Associates’ Licensed Insolvency Trustees are often successful in filing Consumer Proposals that reduce a person’s debt by up to 50-80%. Some considerations to determine the amount of debt reduction that may be possible in your Consumer Proposal can include:

• Your overall personal situation and finances including income, expenses and household size.
• How much debt you have, and who your creditors are.

Once your Consumer Proposal has been filed your debts will be frozen and creditors will no longer be able to add interest and other charges to your debts. This freeze will also stop collections including phone calls, court actions, and even wage garnishment (in many cases, preventing these actions before they start).

Upon completion of your Consumer Proposal the debts included in your Consumer Proposal will be written-off and unpaid balances will be considered legally forgiven by your creditors.

Compare Your Debt Options

Enter your total amount of debt (excluding mortgage and car loan) and we’ll show you a list of options.

Are There Debts a Consumer Proposal Can’t Cover?

Almost all debt can be completely paid off in a Consumer Proposal, with few exceptions. Debt that may be included in your Consumer Proposal but have a remaining balance that needs to be paid after your Consumer Proposal is finished are limited to very specific debts:

• Fines imposed by a court and certain court-awarded damages
• Money owing due to theft or embezzlement
• Liabilities from obtaining property or services by false pretenses or fraudulent misrepresentation
• Alimony or maintenance payments
• Government student loans if your Consumer Proposal is filed within seven years after the end of your studies
  • If it has been less than seven years since the end of your studies, your unpaid government student loans and interest will need to be repaid, less money your creditor was paid through your Consumer Proposal.
  • However, if it has been seven years or more since you last attended school, all your student loans will be fully covered and forgiven through your Consumer Proposal.

If applicable, survivable debt balances would be discussed in detail together with your Licensed Insolvency Trustee during the consultation stage. Our goal is for you to have a “no surprises” experience and feel confident and in control when you move forward with a Consumer Proposal.

Learn More About Solutions for Government Debt Forgiveness

What Do I Need to Do During my Consumer Proposal?

Besides making whatever payments your Consumer Proposal calls for, other requirements are minimal and typically include:

Two Private Financial Credit Counselling Sessions: You’ll complete two sessions (around 45 minutes each) with one of Sands & Associates’ friendly Qualified Insolvency Counsellors.

These sessions are supportive conversations intended to offer you tools, strategies and resources for areas of financial literacy such as budgeting and spending habits, financial planning and goal setting, credit scores, and more.

Filing Tax Returns: Ensure your tax returns are filed up to date and new balances owing are paid.

• If you already have a balance owing to Canada Revenue Agency (“CRA”) your tax returns and any applicable business GST/HST returns should be filed up to date before your Consumer Proposal is made, for CRA to determine how much is owed.
  • In some cases we can help you catch up on tax returns that need to be filed.
• If you regularly owe money on your tax returns, we may also include a clause in your Consumer Proposal that allows you to consolidate the exact tax amount owing up to the specific date you start your Consumer Proposal – even if that tax return is not yet due.

Attend Meeting of Creditors (rarely applicable): If your original proposal offer is not accepted by creditors, a meeting of creditors may be called by your Trustee. This meeting’s objective is to provide creditors an opportunity to reach an agreement on repayment terms acceptable to all parties.

• Nearly 99% of Consumer Proposals filed receive creditor approval as they provide for more money repaid to creditors than if an individual chose bankruptcy. What’s more, making a Consumer Proposal does not forfeit your option to seek bankruptcy should you later wish to do so.

Income: You are not required to report your household income during your Consumer Proposal.

Your regular earnings such as wages, commissions, self-employment income, pensions, etc., all continue to be paid directly to you throughout your Consumer Proposal. Other government benefits and credits (tax refunds, Canada Child Benefit, GST/HST Credits, etc.) will also continue to be paid to you as usual.

Does a Consumer Proposal Affect My Spouse?

Generally your spouse (or other family members) would not be impacted in any way by your decision to file a Consumer Proposal. The exception to this would be if your spouse is legally responsible for your debts together as a co-signer, co-cardholder or guarantor.

Read More About Dealing with Debt and Financial Stress in Your Relationship

Many people tell us that if anything, using a Consumer Proposal to manage debt and negate its stress has a positive impact on their lives and relationships.

What is the Cost To Do a Consumer Proposal?

Whatever repayment you are offering in your Consumer Proposal terms includes all administrative fees, the cost of which will essentially be paid by your creditors. Licensed Insolvency Trustee fees are set by government tariff, not a ‘fee for service’:

• These fees cover everything, including the government’s charge to register your Proposal, professional services, disbursements and counselling costs
• Fees are calculated to legal guidelines and simply deducted from the funds your creditors receive
  • No additional payments are needed from you beyond what you are offering to creditors

Sands & Associates does not charge an up-front fee to start your Consumer Proposal and debt consultations and ongoing support throughout your Consumer Proposal are always free.

How Long is a Consumer Proposal?

The length of time a Consumer Proposal lasts depends on your needs and specific situation.

• Most Consumer Proposals will intend for you make monthly payments, with terms of up to 60 months, but some Consumer Proposals may offer a one-time lump sum payment instead.
• Although some people may offer an asset (or funds from the sale of) as part of their Consumer Proposal, this is less common. Generally you will keep all your assets.
• You can make additional payments throughout your Consumer Proposal and even pay-off your Consumer Proposal early at any time without penalty.

How Does a Consumer Proposal Impact my Credit?

In most cases only you, your Licensed Insolvency Trustee, the Office of the Superintendent of Bankruptcy (“OSB”), and your creditors will know about your Consumer Proposal, and credit bureaus will request information for their records directly from the OSB.

• The OSB is part of Industry Canada and is the government body that oversees all Licensed Insolvency Trustee matters and filings that the Bankruptcy and Insolvency Act applies to, including Consumer Proposals.

A Consumer Proposal will show as an R7 note on your credit history for three years following completion, or six years from the date it started (whichever comes first). This is similar duration to informal credit counselling debt repayment plans.

• Many people find they can gain a strong credit rating faster by settling their debts with a Consumer Proposal rather than if they continue with debt repayment on their own.

It is possible to apply for and be granted credit before this temporary R7 note expires from your credit history, including vehicle financing, mortgage renewal, etc. Guidance on boosting your credit rating and other financial resources form integral parts of the financial counselling process.

There are many circumstances and events that cause situations where it is no longer possible to continue managing debts on your own, or as you may have originally planned. Please know that whatever challenges may have happened, there are solutions that work – and we’re here to help you find the one that’s right for you!

Explore your options and learn how a Consumer Proposal could get you to debt-free. Book your free confidential debt consultation. Virtual and in-person services are available across BC.

The post Is a Consumer Proposal Right for Me? appeared first on Sands & Associates.

Every consumer deserves to make well-informed decisions about how to manage their debt, and professional guidance on debt repayment strategies and resources are available to you by connecting with a Licensed Insolvency Trustee in your province. Read on to learn more about getting confidential debt advice from an expert and why you should consider working with a Licensed Insolvency Trustee to deal with your debt.

Why Work with a Licensed Insolvency Trustee?

Virtually anyone can (and should!) connect with a Licensed Insolvency Trustee if they want to ask questions or get some advice about managing debt. Why a Licensed Insolvency Trustee?

Licensed Insolvency Trustees are the only professionals in Canada fully qualified, recognized and endorsed by the government to help people with debt.

We assist people with a range of needs and different situations, some examples include:

• You’re looking for general information on how you can efficiently deal with debt
• You’re unsure about what your legal rights and remedies are in a debt situation
• You are (or are concerned about) facing an urgent crisis or conflict with a creditor (i.e. wage garnishment, legal action, etc.), or don’t know what your creditors can or can’t do
• You’re financially stuck and can’t seem to move past making your minimum monthly debt payments
• You’re considering some type of debt forgiveness or relief option
• You’re interested in restructuring or consolidating your debt to make payments lower
• You have ‘bad’ credit and want to move forward with a fresh start
  • We can offer debt solutions regardless of your credit score. Some people we assist have ‘great’ credit ratings; others are struggling with ‘bad’ credit.

Whatever your specific goals and concerns – we help with debt, so the first step (and sometimes the only one needed) is to start is with a confidential debt consultation. This meeting is free, and without obligation to continue working together.

Free Confidential Debt Advice & Consultation

Sands & Associates makes our consultation meetings accessible in-person, by video conference, or over the phone. The goal is for you to get all the information you need to make a confident decision about your options, with a plan on how you want to move forward.

It’s important to us to understand your situation as much as possible, and why you’re seeking debt advice as well as any specific goals or issues you may want help with. Many people tell us that after just this one-hour meeting they came away with a huge sense of relief, a feeling like a weight has been lifted off their shoulders.

Meet Some of the People We’ve Worked With, Hear Their Stories

Although many people worry they don’t have any way to get out of debt, you may actually have multiple options to choose from. We’ll review all potential solutions together, including:

• Self-directed and informal (limited help) plans such as: Informal creditor negotiations, debt consolidation borrowing options, credit counselling repayment plans.
• Full service legal debt help including: Non-borrowing consolidation and debt reduction with a Consumer Proposal, declaring personal bankruptcy for full debt forgiveness.

At Sands & Associates our goal is that by the end of your consultation you have a better understanding about your current situation, knowledge about your options, and clear information outlining your next steps, whether you’re opting for a self-directed approach or want to continue working together with us.

Do I Have to Work with a Licensed Insolvency Trustee?

If you decide to try a self-directed or ‘DIY’ approach to tackling your debt, there is no need to work with a Licensed Insolvency Trustee.

• Even where you’re most interested in an informal solution to deal with your debt in a more limited way, you may still find that having received some qualified and impartial advice from a debt consultation offers you good guidance as you get underway.
• Don’t be afraid to check back in with a Licensed Insolvency Trustee at any time, situations may change over the time it takes you to pay down your debt.

Many people do choose to work with a Licensed Insolvency Trustee in managing their debt, whether it’s because they’re more comfortable having ongoing support, because they want to take advantage of the added benefits to formal debt solutions, or other personal reasons.

Although there are other organizations, agencies and individuals who offer debt management services, it’s important for Canadian consumers to understand that:

• There are no government-endorsed debt services, ‘programs’ or ‘grants’ in Canada other than Licensed Insolvency Trustees and the legal solutions we can offer.
  • Watch out for anyone who claims they can manage a Consumer Proposal for you who is not a Licensed Insolvency Trustee.
• Be highly suspicious of ads, offers or agents that promise to improve your credit rating, guarantee certain results or pressure you into taking out high-interest loans.
• Only Licensed Insolvency Trustees have the legal capacity to help individuals and businesses with debt solutions that can legally resolve or forgive your debts.
  • To be sure you’re getting advice from the right place, ask to meet with a Licensed Insolvency Trustee or an Insolvency Estate Manager working with a Licensed Insolvency Trustee.
• It should never cost you money to be connected with a Licensed Insolvency Trustee, or have a consultation with a Licensed Insolvency Trustee. There is no need to ask for a referral either, you can simply talk with a Licensed Insolvency Trustee directly.

What Canadians Should Know About Debt Relief Services – Learn More

Moving Forward, Debt-Free – What’s My Next Step?

If you decide that would like to move forward with a solution such as a Consumer Proposal, there are only a few more steps to get your plan officially started. Your Licensed Insolvency Trustee (or Insolvency Estate Manager) will work with you throughout the process, it goes something like this:

• When you’re ready to start your Consumer Proposal you’ll complete an information form, from which we will prepare the official documents for you to sign during a (virtual or in-person) meeting together.
  • If your situation is urgent we can get these documents ready very quickly (under 24 hours in some cases)
• Once signed, your Consumer Proposal will be registered and sent to your creditors. At this point the interest-freeze on your debts becomes active.
• After your creditors review and accept your Consumer Proposal you’ll satisfy the terms of your proposal. (These are usually monthly payments, along with two private financial counselling sessions).
• After your last payment, your Consumer Proposal will be complete, and your creditors will be legally compelled to write-off any unpaid balances. You are now debt-free and have achieved a financial fresh start!

Declaring personal bankruptcy follows similar steps:

• Following your consultation and decision to move forward with bankruptcy you will complete your information form and sign official bankruptcy documents prepared for you by your Licensed Insolvency Trustee.
• You would then complete a few requirements during the nine-month period of bankruptcy and your creditors will no longer be allowed to contact you for payments or charge you interest.
• Once your duties are complete and the correct period of time has elapsed (as little as nine months) your bankruptcy is complete and you will be officially discharged (released) from the process. You have achieved a full and final settlement (forgiveness) of your debts!

We understand that these steps may seem overwhelming if you’re at the beginning of your debt-free journey or are unsure about what option is right for you. Know that you are not alone. We’re here to help guide you and answer all your questions with honesty and transparency – and we’ll help you weigh the pros and cons as they relate to you and your specific needs and goals. The first step is simply to reach out and connect!

At Sands & Associates our team is committed to providing a safe space where you can get help without judgment. We’re not here to make you feel bad or convince you on what you should do. We offer solutions and support so you can make the decision on what’s best for you.

Learn about your options and get started with your debt-free plan today. Connect with a local Sands & Associates Licensed Insolvency Trustee – book your free confidential debt consultation here.

The post Looking for Debt Help? Start Here appeared first on Sands & Associates.

BC Licensed Insolvency Trustee Blair Mantin joined Global News to break down some of the key facts to know about wage garnishment, and what you can do if you’re a British Columbian facing a debt problem.

What Will Happen if I Can’t Make my Debt Payments? Who Can Garnish my Wages in Canada?

If you miss making required debt payments, you could anticipate that your creditor(s) might take steps such as charging you fees for defaulting on your payments and reporting the defaults on your credit history. Unpaid creditors might also increase your interest rate and later engage a collection agent to aggressively pursue you for payment.

If these steps are not successful, creditors may pursue legal remedies, and the outcome of a successful court action may result in a wage garnishment, where a portion of your wages will be paid directly to your creditor until your debt is repaid. Please note that fees, penalties, interest and legal costs may also be added to the total amount you have to pay back.

Wage garnishment may be undertaken by a creditor provided they follow the necessary processes, which will vary depending on who the creditor is, including but not limited to:

• Common creditors like banks, credit card companies and collection agencies.
• Canada Revenue Agency (“CRA”) collecting money owed for many different programs including tax debt, student loans, and EI overpayments.

How Much of my Income Can a Creditor Take?

Many people don’t learn that a wage garnishment is starting until their payroll department lets them know they have received the notice, giving them little time to react or prepare for this income cut.

In most cases in BC 30% of your net income may be garnished or seized from each paycheque. There are notable exceptions to this; and a creditor may apply to have the amount of the seizure increased:

• Provincial limits on how much income may be garnished do not apply to Canada Revenue Agency.
• 100% of income earned through self-employment (such as sub-contractor wages) may be garnished.
• Government benefits such as CPP, OAS, GIS, Employment Insurance and Social Assistance are considered exempt and cannot be garnished, except where the debt is owed to CRA or Family Maintenance Enforcement Program.

In addition to wage garnishment, creditors may also be able to collect on their debts by seizing money from your bank account. Unlike limits on how much income can be garnished, there is no cap on seizing money in a bank account to cover debt balances, and income that may have been exempt won’t be protected once it’s deposited in your bank account.

How Can I Stop a Wage Garnishment?

In the case of a court-ordered garnishment you could consider: Applying to court to have the garnishing order set aside, or to increase the amount of your wages that are exempt; or working out a payment schedule with the creditor that could result in the garnishment’s removal.

If these are unsuccessful, or if you have a CRA garnishment, short of leaving your job or letting the garnishment run its course, stopping a garnishment basically has two solutions. Fortunately, both can be implemented very quickly in urgent situations:

• Consumer Proposal: This unique consolidation solution will allow you to cut debt, consolidate virtually all your debt into one repayment plan – and trigger a ‘stay of proceedings’, giving you protection from creditors that would immediately stop bank account and wage garnishments.
  • Consumer Proposals can have significant advantages over other consolidation options and allow you to halt creditor actions like wage garnishments while still avoiding bankruptcy.
• Bankruptcy: Another legal option that will halt wage garnishment and bank account seizures. The personal bankruptcy process in BC is generally private, straight-forward and lasts only nine months for most people.

Learn More About Eliminating Debt with a Consumer Proposal

Most people’s debt problems do not resolve themselves; some intervening action needs to take place. For general consumer debts like credit cards you likely have some time before creditors escalate actions drastically, so if you have any concerns about your debt we recommend that you be proactive – connect with a Licensed Insolvency Trustee as early on as possible.

Warning signs of a debt problem may not always be obvious. If you are experiencing any of the following you should consider connecting with a Licensed Insolvency Trustee right away:

• Constantly thinking about your debt, feeling debt-stressed, worried or anxious about your finances
• Only making, or even unable to make your minimum monthly debt payments
• Relying on your credit cards or other means of credit to meet your costs of living

Resources and solutions for a financial fresh start are available – you deserve to live without debt and its overwhelming stress.

Sands & Associates BC Licensed Insolvency Trustees are here for you. Get confidential expert advice at no cost – book your free non-judgmental debt consultation today.

The post Understanding Wage Garnishment: Can Creditors Really Take my Income if I Can’t Pay my Debt? appeared first on Sands & Associates.

Given the difficulties of starting and maintaining a successful business, it’s no surprise that as Licensed Insolvency Trustees we often meet with business owners who are struggling with business debts simply because they didn’t know the liabilities they were taking on, or what to do when they wanted to wind the business down. Read on to understand some basics about business debts, common mistakes to avoid making in dealing with business debt, as well as information about getting debt help for small businesses.

Business Debt Basics

Here are some basic components of business debts that you should be aware of since the finances of a business are often interwoven with personal finances of owners and directors which can create unintended consequences.

Types of Businesses

In Canada there are three common types of small business structures and each one has advantages and disadvantages depending on the business owners’ goals and objectives and will have different requirements to set up. An accountant or lawyer can be a great resource for you when setting up your business, helping you weigh the pros and cons of each structure and ensuring you are not missing key setups like licenses, WCB or other insurances.

Sole Proprietorship

A sole proprietorship is the most straight-forward way to start a business or become a contractor. Essentially you (the owner) and the business are the same entity and not legally separated – the assets and debt of your business are also your personal assets and debts.

Partnership

If two or more people are combining resources in a business they may (but are not necessarily required to) establish formal terms and become a partnership, which is relatively easy to get underway. Each partner is personally responsible for the debts of the business, and they share in liabilities of the actions of the other partners.

Corporation

Incorporating your business takes more time to establish and is often more costly than setting up other types of business structures, but it means that the corporation is a legal entity separate from its shareholders. A limited company, or corporation, is essentially a separate legal “person” and can hold assets, acquire debts and contracts, sue, or be sued.

 Learn the 4 Financial Professionals Everyone Should Know

Common Problem Areas of Business Debts

At any time in business, and particularly in the start-up stages, business owners will often accumulate credit card or line of credit debt used to fund their operations. Be sure to track and retain documentation for all your expenses – not only will you need these for tax filings, keeping proper business records will enable you to understand whether your business is turning a profit versus becoming a liability.

Debts a sole proprietor or partnership accumulate are payable by their owners since there is no distinction between business and owner. While corporations may protect owners from their debts to some degree, there is still a personal liability created for certain debts you cannot avoid becoming personally responsible for such as GST and payroll remittances, employee wages, as well as debts you have personally guaranteed (i.e. committed to pay in the event the company cannot). Some common problem types of business debts owners often face are those owing to the Canada Revenue Agency (“CRA”).

It’s extremely important for business owners to understand their responsibilities for tax compliance and know clearly what they need to file with CRA. CRA debt is one of the top reasons we see small business owners needing debt help. In addition to general corporate tax debt, some key areas to be aware of are:

Collecting and Remitting GST

• If your business earns more than $30,000 revenue in a year, you will need to register with CRA, obtain a GST number to file GST returns and make remittances to CRA.
• There are a small number of professions where this will not apply, but in most cases CRA will assess GST against a self-employed person even if they have failed to register, charge, and collect the GST from their customers.

Payroll Source Deductions

If you pay salaries, wages or give a taxable benefit to an employee, you must take source deductions from that amount, which then need to be reported and remitted to CRA. Source deductions include: CPP contributions, EI premiums and federal and provincial income tax.

• New employers may be surprised to learn that in addition to withholding source deductions from an employee’s pay, they are also required to pay a share of CPP contributions and EI premiums on those wages.
• If you’ve had employees previously and then have seasonal workers or no employees in a period, you’ll still need to report a “nil remittance”.

Personal CPP and Income Tax

Newer small business owners often wind up with a tax balance bigger than they were expecting because tax requirements for a self-employed individual may create a higher tax liability than if they had continued to operate as an employee:

• When you’re self-employed you are required to calculate and remit money payable not only for income tax, but also for CPP.
• Even if you’re not required to make income tax instalments (i.e. monthly advance payments on your tax bill) throughout the year, we strongly recommend doing so to avoid the temptation of spending all your profits and having to deal with a big tax balance when you file your return next year.

How Can a Consumer Proposal or Bankruptcy Help with Tax Debt? Learn More

In addition to unpaid CRA debt, other common areas of debt issues for businesses include:

• Outstanding wages owed to employees or contractors.
• Unexpected increase of operating costs such as a rent or supplier price increase.

Business Debt Mistakes to Avoid

Unfortunately, some decisions business owners may make when facing financial difficulties can increase their personal liability – meaning the separation between your corporate and personal dealings is reduced (or eliminated altogether). This is often colloquially referred to as “piercing the corporate veil”. If you find yourself dealing with business debts, avoid making these common mistakes that often compound the problem:

Ignoring Accounting or Planning

Planning cash-flow short-term and long-term is a key piece of your business success. Without it, many self-employed people find they’re overwhelmed with the paperwork needed in even a basic small business and are unprepared for any delays in collecting their accounts receivable, paying employee wages (or themselves), or dealing with inevitable operating cost increases. This can often result in them becoming over-dependent on credit or borrowing to make ends meet.

Procrastinating

Waiting too long to assess your financial situation and options often results in making reactive or unwise decisions that can have serious consequences on your personal (and business) finances.

• In some cases, options may also become not feasible once too much time has passed, or the circumstances become urgently pressing.
• To properly consider all strategies available to you as a business owner, it is imperative to be proactive and seek assistance at the earliest onset of financial difficulties.

Injecting Personal Funds

While a business may initially require a personal investment, a business that is running smoothly and viable long-term should not require you to continually inject personal funds. If you are starting to consider (or already taking) these actions, stop and take a closer look at what’s happening in your business:

• Using personal credit or personal guarantees to cover costs.
• Being unable to draw a salary/pay yourself.
• Borrowing money from family or adding them as directors.

Borrowing More

Even if it is possible to obtain more credit, be cautious before doing so. Especially if you are already in a position of having difficulty meeting your current obligations, adding more creditors is unlikely to be the solution.

Postponing CRA Payments

Although it can be tempting to defer payments to the government or to use money earmarked for CRA remittances to fund operating expenses – this can have serious consequences, so our strong recommendation is: just don’t do it!

• Filing GST or corporate tax returns late or not paying CRA those funds on time is an easy way to get into financial trouble, likewise for failing to make income tax instalments CRA may require.
  • Interest and penalties are charged daily on these balances.
  • Directors of limited companies are personally liable for some debts with CRA.
• CRA can employ extreme collection methods if tax debts are left unpaid. It is common for people to experience a bank account freeze, garnishment (yes, self-employment income can be garnished!) or even a charge against their physical property or real estate due to owing CRA.

Learn More About Solutions for Government Debts

Where to Get Help with Business Debt

Licensed Insolvency Trustees can help a business owner evaluate their business and decide on how best to deal with both personal and business debts that have accumulated. They are the one debt help professional legally authorized and endorsed by federal and provincial governments to administer powerful solutions to deal with debts from both business and personal perspectives.

There are many factors in addition to your goals as the owner that a Licensed Insolvency Trustee will take into consideration when helping you assess your financial situation and potential options for your small business, including:

• The type of business structure you are operating and any other key parties involved.
  • For example, if you are operating as a sole proprietor filing a Consumer Proposal or personal bankruptcy may be possible solutions to deal with debts from your business along with any other debts, since your business debts are also your personal obligations.
• The creditors who are owed money and the type of debt that has been incurred.
  • As noted, not all creditors are created equal – particularly where CRA is owed money.
• The assets the business holds, its general cash-flow, financial statements, and viability.
  • Owners wishing to avoid a business bankruptcy may be able to work with a Licensed Insolvency Trustee to offer the business creditors a consolidated debt settlement that can greatly reduce balances owing and allow the business to continue to operate.

There is no cost to connect with a BC Licensed Insolvency Trustee to discuss your business debt and confidential consultations can even be conducted from the comfort and privacy of your home.

The post Small Business Debt – Basics, Challenges & Solutions appeared first on Sands & Associates.

Contrary to popular belief, the truth is that filing a bankruptcy in Canada actually provides protection for your assets and income. Read on to learn more about how bankruptcy protects your assets. 

What is a Stay of Proceedings in Bankruptcy?

Canada’s Bankruptcy and Insolvency Act states that when a person formally files for insolvency (the beginning of the official bankruptcy or Consumer Proposal process), no creditor has any remedy against the person or their property. This means that creditors cannot start or continue any actions to recover the debt balance they are owed, and the stay of proceedings in a bankruptcy or Consumer Proposal is a powerful measure to provide protection from creditors, even government creditors like Canada Revenue Agency.

• Your bankruptcy filing triggers the stay of proceedings, and this legally prevents your creditors from continuing to ask you for payment, from continuing collections or court action, and from seizing your assets, including your bank account or wages.
• In situations where creditors may have been about to begin, or have already begun serious debt collection methods, filing bankruptcy can protect assets that may otherwise be at risk from creditors.

Without being shielded by bankruptcy laws, when a person is unable to pay their debts, they are often quickly subject to collection actions from their creditors, which can lead to creditors attempting to seize assets and even garnish wages. For people who have been harassed with phone calls, texts or letters asking for payments or past due debts by creditors or collection agents, their bankruptcy’s stay of proceedings is always a welcome relief.

Do I Lose All my Assets by Filing a Bankruptcy?

Contrary to what you may have heard and what many people mistakenly believe, most people who file bankruptcy actually keep all their assets. Here’s why:

When you enter into bankruptcy, provincial laws automatically give you entitlement to keep certain assets – these are often referred to as ‘exempt assets’, meaning that they are protected in the event of a bankruptcy.

In British Columbia, the law that gives individuals these exempt (protected) asset allowances is called the “Court Order Enforcement Act”. Each province has its own exemption allowances; in BC the bankruptcy protected assets are:

• Household Goods and Effects
  • Up to a $4,000 value, based on garage sale value (not replacement value)
• A Vehicle, or Equity in a Vehicle
  • Up to a $5,000 value; or
  • Up to a $2,000 value if you are behind on child or spousal support payments
• Home Equity
  • Up to a $12,000 value in Greater Vancouver and Victoria; or
  • Up to a $9,000 value elsewhere in BC
• RRSPs
  • Up to an unlimited value
    • Except for contributions made in 12-month period prior to filing bankruptcy. Note, transfers between RRSP funds are not the same as contributions.
• Clothing and Medical Aids
  • Up to an unlimited value
• Work Tools (Tools of the Trade)
  • Up to a $10,000 value

It’s important to know that even if you have assets that are worth more than these allowances, you do not necessarily have to give the asset up in bankruptcy. There are a few potential avenues that would allow you to keep the assets. Here are two examples:

Repurchase of Asset in Bankruptcy

The non-exempt value of your asset may be paid into your bankruptcy estate, allowing you to retain possession of the asset.

$7,000 – Appraised Value of Vehicle Owned Free and Clear

-5,000 – Exemption Allowance for Motor Vehicle

$2,000 – Balance Paid Over 9 Months

File a Consumer Proposal

Filing a Consumer Proposal is the number one alternative to personal bankruptcy in Canada. In a Consumer Proposal your assets are not impacted, which can make it an attractive option for someone who may otherwise have a significant amount of non-exempt equity in an asset.

• Consumer Proposals work by consolidating your debts into one settlement and offering your creditors a partial repayment of the debt – the amount you can afford to repay.
  • Your debts may be cut down to as little as 20-50% of the balance with no interest charges and no requirement to surrender assets.
• A Consumer Proposal is not the same as bankruptcy, although it does offer an individual the benefit of the stay of proceedings when it comes to shielding you from creditors.

Compare Your Debt Options

Enter your total amount of debt (excluding mortgage and car loan) and we’ll show you a list of options.

How Does Bankruptcy Provide Income Protection from Creditors?

Because a bankruptcy filing will act as a barrier between you and your creditors, your income remains protected from wage garnishments and bank account seizures. Even if a creditor has already begun garnishing your income or has frozen your bank account, filing a bankruptcy will remove the ongoing garnishment or freeze.

This applies to virtually all creditors, including Canada Revenue Agency. In general Family Maintenance Enforcement Program collecting on child or spousal support payments is one of the few creditors who can continue a wage garnishment despite a bankruptcy filing.

Throughout the period of your bankruptcy income you earn would continue to go directly to you via your employer, pension provider etc.

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