finlit – Consumer Proposal & Bankruptcy – Powell Associates Ltd.

Is a Consumer Proposal Worth It?

admin — Thu, 16 Sep 2021 16:15:47 +0000

Many years ago, the Government created a second path to deal with debt, but many consumers still don’t know about this choice. It’s called a consumer proposal.

You’re probably here because you’ve finally realized you have to do SOMETHING about your debt. Maybe you’re losing sleep at night worrying about all the bills. Perhaps you’re getting calls from creditors because you’re late on payments. Or perhaps you and your spouse are fighting about money issues because there doesn’t seem to be enough to go around every month.

You might have thought that bankruptcy was your only way out of this financial bind. However debt troubles show up, you’re not alone—hundreds of thousands of honest Canadians are in the same boat as you!

There are other choices. A consumer proposal is one of them. The question remains: Is a consumer proposal worth it? Is a consumer proposal a good idea? Let’s explore…

What is a Consumer Proposal?

What is a consumer proposal, and what happens in a consumer proposal, exactly? Very simply, it’s just a deal you make with your creditors, the people to whom you owe money. Typically you pay back much less than 100% of the money you owe, so it’s a great deal for you. It’s also a good deal for the creditors—they will agree to the proposal because you are offering something more than they would receive if you were to go bankrupt.

“A consumer proposal is just a deal you make with your creditors – typically you pay back much less than 100% of the money you owe.”

Another significant benefit of a proposal is that you pay no interest. Once the creditors have agreed to the proposal, you pay a fixed monthly amount with 0% interest. Usually, you have five years to make the payments, but you have the right to pay the proposal off early if you want to.

What Debts Can be Included in a Consumer Proposal?

The answer to this question depends on understanding the difference between secured and unsecured debts. A secured debt is always secured against an asset of some kind, such as a house or a vehicle. If you don’t make the regular payments on a secured debt, the secured creditor you owe money to has the right to take the asset away from you. The most common examples of secured debts are mortgages and car loans.

Unsecured debts are everything else, and you CAN include almost all of these debts in your consumer proposal. This list includes:

Credit cards
Bank loans
Tax debt
Payday loans
Utility bills
Unsecured lines of credit
Personal loans
Student loans if it has been more than seven years since you completed your studies

Here are the types of unsecured debts that you CANNOT include in a consumer proposal: student loans if it has been less than seven years since you completed your studies, court-ordered fines, and spousal or child support payments.

How Does a Consumer Proposal Work?

So what’s involved in the consumer proposal process? The first step is to meet with a Licensed Insolvency Trustee (LIT) such as Powell Associates Ltd. Trustees are licensed and regulated by the Federal Government and are Officers of the Court. Learn more about Trustees here.

“LITs are the only people with the legal power in Canada to provide you with protection from the people you owe money to.”

A Licensed Insolvency Trustee (LIT) is the ONLY professional with the legal power to provide you with protection from the creditors. No other agencies, such as credit counsellors or the various debt consulting firms that operate in Canada, have these legal powers or the ability to file a consumer proposal.

When you call our bankruptcy trustee at Powell Associates Ltd. the first step is to gather some information from you. We can do this in person, by video or over the phone. Either way, we will ask about how much you owe and to whom. We’ll look at your income and the substantial items that you may own, such as vehicles and a house if you’re a homeowner.

Finally, we will find out how many are in your family. All of this information gives us a clear picture of your financial situation. Next, we’ll schedule a meeting with you.

We’ll let you know what all of your choices are to deal with your debt at the initial meeting. Based on your information, we can estimate what your payments in a proposal might be. Together, we can look at your budget, and you can decide whether filing a proposal is the best option or whether filing for bankruptcy makes more sense.

“Based on your information, we can estimate what your payments in a proposal might be. We want to set you up for success!”

If there are any other ways of addressing your debt besides a proposal or bankruptcy, we’ll let you know those as well. We want to set you up for success! If you are filing a consumer proposal, we want to make sure the payments will be affordable for you while still acceptable to the creditors.

Once you decide to work with us, the next step is to provide us with documentation to prove your income, debts, and assets’ value. Once this documentation is complete, we meet with you again, and we can file your proposal with the creditors.

“Once your proposal is filed, the creditors must stop their collections activity – the nasty calls and and they can’t file a lawsuit or garnish your wages!”

Filing the proposal gives you formal, legal protection from the people to whom you owe money. You stop making payments directly to them. The creditors must stop any further collections activity—those nasty calls will finally come to an end! They also can’t file lawsuits against you or garnish your wages.

The proposal filing starts a formal, legal clock ticking. From the time it is filed with your creditors, they have 45 days to consider your proposal and decide whether to agree with it or not. Most of the time, the creditors agree with your initial proposal offer: after all, your creditors are receiving more money than if you filed personal bankruptcy. Generally, creditors prefer consumer proposals to personal bankruptcy and are motivated to agree with them.

One aspect of how consumer proposals work is a real benefit to you; you don’t need to get all the creditors to agree with it. The consumer proposal includes all of your debts – you make one payment every month to deal with your debt instead of keeping track of multiple payments.

Another advantage of a consumer proposal is that you can include tax debt owed to Canada Revenue Agency! Once those creditors that control 50% of the debt agree with your consumer proposal, it becomes legally binding on all creditors.

Sometimes, a majority of your creditors don’t agree with your initial proposal. That simply starts a negotiation process with them. They think you can afford more than what you offered in the consumer proposal.

“Sometimes a majority of your creditors don’t agree with your initial proposal. That simply starts a negotiation process with them that we will help you with.”

At Powell Associates Ltd., we will look at their counter-offer to you and recommend the best response to them. Often, a modest increase in the amount of the payment you offer will get enough of the creditors on board to finalize the deal, regardless of whether they all agreed with it.

Once enough of the creditors agree to the proposal, the proposal becomes legally binding on you and the creditors. From then forward, you only have two obligations: make the regular monthly payments, and attend two mandatory counselling sessions. We will schedule those sessions with you; they cover some vital topics, including budgeting, spending habits, setting financial goals and the responsible use of credit.

The Pros and Cons of a Consumer Proposal

Many consumers choose a consumer proposal over a bankruptcy. We wrote an article on the 9 most common reasons to file a consumer proposal instead of personal bankruptcy.

The pros are:

It allows you to avoid more severe action. It can be tough to decide to tackle your debt head-on, but there’s one thing we’ve learned over the years: waiting to deal with your debt rarely improves the situation!
You typically pay much less than the total amount of the debt back, and the payments are in a manageable 5-year plan.
You get immediate protection from your creditors once the consumer proposal is filed. Creditors can’t garnish your wages or take any other legal action against you. They can also help with frozen bank accounts.
The proposal includes all of your debts in one affordable monthly payment with 0% interest.
Your monthly payments in a consumer proposal may be lower than your monthly payments would be in personal bankruptcy because the payments are usually over five years.
The proposal includes everyone you owe money to, and the terms of the consumer proposal bind all the creditors. Once completed you will receive a release from most creditors.
You feel better about dealing with your debt, as you have at least paid back what you can afford to.
You keep your assets, unlike in personal bankruptcy, where you may have to give up some of your assets, such as your house.
Some people work for institutions where filing bankruptcy has to be disclosed and could risk employment—filing a consumer proposal avoids that difficult situation.
Finally, your credit rating, which will take a hit when filing either a consumer proposal or personal bankruptcy, can be repaired sooner when you have filed a consumer proposal versus filing personal bankruptcy. Learn how a consumer proposal or bankruptcy impacts your credit rating.

Of course, the advantages of consumer proposals must be weighed against the cons. We are often asked ‘How bad is a consumer proposal’ so let’s explore the cons.

The cons are:

There are very few!
The primary consideration is whether you can afford to make the monthly payments in a consumer proposal. In discussions with us at Powell Associates Ltd., we’ll look at your budget and assess whether your consumer proposal payment is affordable. If it turns out you can’t afford the consumer proposal payment, then filing personal bankruptcy may turn out to be the best choice for you, and we will assist you with that.
In some situations, an individual can complete a bankruptcy within nine months. Some individuals, especially those with lower incomes, may feel better addressing and completing their debt obligations more quickly than the typical five-year period for a consumer proposal.

See more consumer proposals vs other debt consolidation options.

Take the Next Step!

Powell Associates Ltd. has helped thousands in New Brunswick, Nova Scotia, and Prince Edward Island overcome their debt. We understand that unexpected financial setbacks can happen. We offer debt solutions to reduce your stress and worry. Schedule a FREE CONSULTATION with one of our LITs at any time to discuss the best option to fit your unique financial situation.

Our experienced team is dedicated to finding a debt solution you can afford and will review all debt relief solutions.
There are no additional fees or interest charges. The cost of filing the consumer proposal is included in the monthly payments to your proposal.
We will meet with you as often as you need. Filing a proposal or bankruptcy is a significant life decision—we’re here to give you the tools and advice to make the best decision possible. The key is that the decision to proceed and how to proceed is yours; we will not push you into something you’re not comfortable with!
You will always receive prompt responses and resolutions from our trustees and staff.
We will always be fully open and transparent with you—your debt has already caused enough stress so you don’t need any unpleasant surprises.

“You must gain control over your money or the lack of it will forever control you.”
-Dave Ramsey

Matt Munro has been a Licensed Insolvency Trustee (LIT) since 2003 and a Chartered Professional Accountant (CPA) since 2008. This article was written by him when he was employed at Powell Associates Ltd.

The Real Cost of Not Dealing with Your Debt

admin — Fri, 06 Aug 2021 18:46:29 +0000

There are debt solutions available that will save significant sums of money for you.

Your debt is getting you down, and for good reason. You know it’s a problem, but you’ve been putting it off for months, and maybe even years. Will Rogers, the cowboy philosopher, said: “If you’ve dug yourself into a hole, the first thing to do is stop shovelling!”

“If you’ve dug yourself a hole, the first thing to do is stop shovelling.”

— Will Rogers

So it is with debt problems. You need to stop digging and start looking around to see how deep the hole is and your options for getting out of the hole. In such cases, you should learn more about bankruptcy rules and engage the services of a bankruptcy trustee to help you in these situations.

Introducing Nathan & Amanda

Let’s look at an example to see the total cost of debt. Nathan and Amanda have accumulated $32,500 in credit card debt at an average interest rate of about 20%; this doesn’t include their car loan. They have two kids and monthly combined take-home pay of $4,500.

They have kept current with their debts, and they are renters, hoping that someday, they will have saved enough for a downpayment on their own home. They’ve been able to stay current on their credit card debt, so their minimum monthly payments on the cards are only $550. This amount allows them some flexibility in their budget to deal with expenses outside their regular spending.

However, look at the table below to see what happens if they keep on this path.

Yikes!! If Nathan & Amanda continue to pay the minimum payments on their debts each month, the $32,500 in total debt they owe today will cost them $139,409 when they finish paying it off.

Minimum payments will seem like forever

Making only the minimum payments, it will take 251 months to finish paying the debt, or 20 years and 11 months! Clearly, not a good plan!

Minimum payments take a long time to pay off a debt

Let’s imagine that Nathan and Amanda decide to grind their budget a little harder and pay an additional $100 per month toward their debt. They will pay a total of $70,460 to pay off the $32,500 in debt, and it will take them over nine years. The extra payment makes a HUGE difference, as you can see in the table.

This plan is much better, but it’s still a lot of extra money going to interest payments, as it more than doubles the original debt. What if Nathan and Amanda pay the debt off in just 60 months or five years?

Payments too big can break the budget

This accelerated payment plan reduces their interest payments even more. Instead of paying over $37,000 in interest, they are now paying just over $19,000 in interest. However, it has one major drawback: the monthly payment amount. Can Nathan and Amanda adjust their budget sufficiently to make a payment of $861 per month, month after month, for five years? They might be able to pay this much for a little while, but it will be challenging to keep it up over five years.

To understand why let’s take a little closer look at their budget. With their $4,500 in monthly take-home pay, they spend nearly $4,000 on basic expenses. Rent, groceries, a small car payment, utilities, telecommunications and activities for their kids cost them $3,950 per month. By paring back on the groceries, the kids’ activities and changing their cell phone plans, they can just make the $861 payment per month work.

But this budget makes no allowance for significant car repairs or out-of-pocket health expenses. Nor is there an allowance for any emergency saving if something unforeseen happens, such as a job layoff.

It’s precisely this predicament that leads thousands of Canadians each year to explore alternative ways of dealing with their debts. The most obvious choice that most Canadians know about is bankruptcy. But bankruptcy isn’t necessary in most cases, and it has the harshest possible credit rating impact.

A negotiated step short of bankruptcy

“A consumer proposal is a deal you make with the creditors. You usually pay back much less than 100% of the debt, and there is no interest.”

Another option for dealing with debt very aggressively which does not have such a negative credit rating impact is a consumer proposal.

A consumer proposal is a deal you make with the creditors to pay back some of your debt over a fixed period, generally five years. The creditors usually agree to proposals because they are getting more back than they would in bankruptcy. In a typical proposal, however, much less than 100% of the debt is paid back. Furthermore, the payment plan in a proposal carries no interest. Let’s return to Nathan and Amanda’s situation.

For comparison’s sake, let’s say they filed a consumer proposal to pay back $9,000 of their $32,500 of consumer debt. They are offering to pay the creditors a little more than a quarter of the debt. Their monthly payments in this example are $150 per month.

The table above illustrates how much better this is than the other three options—it’s a huge improvement in the total amount paid back and in the monthly outflow to service the debt. Nathan and Amanda save more than $700 per month to service their debt than paying it off in full over five years.

“Once the creditors agree to the proposal, you are free to begin rebuilding your credit.”

The biggest drawback to a consumer proposal is the adverse effect on your credit rating. However, compared to bankruptcy, once the creditors have agreed to the consumer proposal (usually 60 days after its filing), you are free to begin rebuilding your credit.

Determining if a consumer proposal is worth it in your situation depends on many factors so speaking with a professional is a must.

One crucial aspect to filing a consumer proposal: you can’t do it on your own! You must work with a Licensed Insolvency Trustee (LIT)—they are the only professionals in Canada licensed to help individuals file a consumer proposal or personal bankruptcy.

The opportunity cost

Now that you know there are debt solutions available that will save significant sums of money for you, there is another consideration. It’s referred to as the opportunity cost of money. What are we talking about here?

If the proposal allows you to save dollars that you would have otherwise spent to pay the debt, what else could you do with that money? It’s not hard to come up with a list:

Save for your retirement
Save for a child’s education
Save for a downpayment to buy your own home or renovations to your existing home
Save for your dream vacation
And on, and on

Let’s look in more detail at the first item on this list, so you can see the full impact of not dealing very aggressively with debt. What if you took the funds saved from filing the consumer proposal and invested them in your retirement?

“Maybe it’s time to stop shovelling and look at all of the options for dealing with your debt.”

The proposal saves $700 per month in cash compared to paying the debt in full over five years. Over five years, that is a savings of $42,000. If those funds are invested and receive an average return of 4% per year, the investment will double every eighteen years. If Nathan and Amanda are 37 when they file their proposal, by the time they are 64, that investment could be worth $103,518. Nice!

The question you have to ask yourself then relative to your debt is: “Is it worth it to keep shovelling??” Maybe it’s time to look at all of the choices for dealing with your debt and do something different than what you’ve been doing so far.

COVID-19 Economic Response Plan – Income Tax Deadlines Have Been Extended

admin — Thu, 26 Mar 2020 19:00:00 +0000

“To receive your refund in a timely manner you should file your return on or before the deadline and sign up for direct deposit.”

As part of Canada’s COVID-19 Economic Response Plan, the Canadian government has extended the deadline for filing individual tax returns to June 1, 2020. Taxpayers will have until September 1, 2020, to pay any 2019 income tax amounts owed.

The deadline, if you or your spouse or common-law partner carried on a business in 2019 (other than a business whose expenditures are primarily in connection with a tax shelter), is June 15. However, if you have a balance owing for 2019, you have to pay it on or before September 1, 2020.

To receive your refund in a timely manner you should file your return on or before the deadline and sign up for direct deposit. If you are not comfortable giving your bank account info to CRA then you can choose to receive your refund by check, however, this may take longer.

If you owe them

If you owe income taxes it must be paid on or before September 1, 2020, to avoid getting charged interest.

If you have an amount owing and cannot pay it in full by the deadline, you will be charged compound daily interest. Generally, You can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CAN NOT be claimed as a deduction on the following year’s income tax return.

What happens if you’re late?

“You have until June 1, 2020, to file your 2019 income tax return, you can avoid the late-filing penalty by filing your return on time.”

If you owe tax for 2019 and you file your return for 2019 after the due date, you we will be charged a late-filing penalty. The penalty is 5% of your 2019 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If you were charged a late-filing penalty on your return for 2016, 2017, or 2018 your late-filing penalty for 2019 could be 10% of your 2019 balance owing, plus 2% of your 2019 balance owing for each full month your return is late, to a maximum of 20 months. “ Yikes! “

A large income tax debt is one of the first signs of financial hardship to come and shouldn’t be ignored. Putting it on your calendar and getting filed and paid on time will save a lot of stress and could prevent bigger problems down the road.

For more information direct from CRA:

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

Once you file a consumer proposal or personal bankruptcy, we deal directly with your creditors on your behalf. Your unsecured creditors are required to stop contacting you or continuing legal proceedings against you. Contact us for a free consultation.

We offer free consultations to review your financial situation and practical debt resolution options. Contact us to discuss your situation over the phone, a video chat, or in-person in Saint John, Moncton, Fredericton, Charlottetown, Dartmouth, or Miramichi.

What Happens to Student Loans in Bankruptcy?

admin — Thu, 14 Jun 2018 15:56:04 +0000

It is that time of year again when a new crop of graduates are entering the workforce and when others start considering taking on a loan to pay for school in the Fall.

It is very common that a student who has finished a college or university program will have some amount of student debt. Sometimes, that amount can be significant and can be the source of stress and anxiety.

“owing the government money has its own special consequences”

Student loans, as we define them, are those that are either directly from or guaranteed by a governmental body. If those loans fall into arrears, a debtor is left owing money to the government; and owing the government money has its own special consequences. For example, if you are in arrears for your student loans, the Canada Revenue Agency can begin keeping your annual income tax refunds and quarterly HST refunds. This can be a source of stress for individuals who depend on those refunds.

So what about the honest but unfortunate debtor who needs to file for bankruptcy or a consumer proposal while owing student loans? Student loans have some unique provisions for how they are dealt with in bankruptcy.

Once upon a time, it was a trend for students to borrow large student loans in order to get an education but file for bankruptcy immediately after graduation in order to take advantage of the bankruptcy system. So, the Government got wise to that idea and implemented a ten-year rule in 1998 which was later reduced to a ‘seven-year rule’ in 2009.

If you have been a full- or part-time student in the seven years prior to your bankruptcy or consumer proposal, you will not be discharged from a student loan and payments will resume as soon as you are done.

However, there is some potential relief if your student loan is caught by the seven-year rule. If you have filed for bankruptcy or a consumer proposal and it has been five years since you have been a student, you can make a “hardship” application to the Court to have your student loan discharged.

If you can demonstrate to the Court that you have acted in good faith with respect to the student loan and you will continue to experience financial difficulty if forced to continue making payments, the Court can grant an Order discharging the debt in full.

The strictest reading of the Bankruptcy and Insolvency Act does not specifically deal with the person who borrowed money for school a long time ago, didn’t finish paying off that loan, and then returned to school more recently.

In New Brunswick, the seven-year rule applies to different loans for different education periods separately. This means that if you have a student loan from a program that was from more than seven years ago and a completely different student loan from more recent studies, the older loan can be discharged in a bankruptcy or consumer proposal.

Student loans give access to education to people who may not be able to otherwise afford it. But taking a student loan is a special financial commitment and students should know what they are getting into, if not before they accept them, certainly before they start building a career to pay them back.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of significant financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

A Little Extra Time for Self-Employed People to File

admin — Thu, 17 May 2018 16:08:27 +0000

The April 30, 2022, personal tax deadline is approaching. However, for self-employed individuals (if you or your spouse or common-law partner carried on a business in 2021), the deadline to file for you and your spouse is June 15, 2022.

Even though the return is not due until June 15th, you are required to pay your income tax debt by April 30th. These dates also apply to filing your GST/HST return if you are an annual filer for GST/HST purposes.

“Contrary to popular belief, the interest you pay CANNOT be claimed as a deduction on the following year’s income tax return.”

If you have an amount owing (of more than $2) and cannot pay it in full by the deadline, you will be charged compound daily interest. The current interest rate is 6% (per annum) and changes quarterly. Generally, you can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CANNOT be claimed as a deduction on the following year’s income tax return. The fact that the interest is not deductible can effectively double the rate as compared to deductible interest, depending on your tax bracket. 6% does not appear to be an unreasonable rate but, because it is not deductible makes it very expensive.

What happens if you’re late filing your return? Even if you cannot pay your full balance owing on or before April 30th, you can avoid the late-filing penalty by filing your return on time. Take note of the penalties:

If you owe tax for 2021 and you file your return for 2021 after the due date of June 15th, you will be charged a late-filing penalty. The penalty is 5% of your 2021 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.
If you were charged a late-filing penalty on your return for 2018, 2019, or 2020 your late-filing penalty for 2021 could be 10% of your 2021 balance owing, plus 2% of your 2021 balance owing for each full month your return is late, to a maximum of 20 months.

Like interest on amounts owing, penalties are not deductible for tax purposes, so the penalty rates above are effectively doubled if you are in the highest tax bracket. The penalties are easily avoided by getting your return filed on time. You have five and a half months after December 31st to get the return done and filed. This really should be lots of time.

A large income tax debt (including penalties and interest) is one of the first signs of financial hardship to arise and shouldn’t be ignored. Besides the money stress, dealing with CRA and their collection calls and procedures can cause significant additional stress.

Avoid all the stress by putting filing dates and reminders on your calendar, budget for payments, and get returns filed and debts paid on time. Easier said than done? Not everyone likes carrots but most of us prefer to avoid “the stick”.

For more information direct from CRA:

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of significant financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

Income Tax Deadlines Are Coming Soon But Why Do They Matter?

admin — Thu, 12 Apr 2018 16:05:21 +0000

For Canadians, April 30 is the official deadline to file your personal income tax return with the Canada Revenue Agency and once you have completed your return, you will either be entitled to a return refund or have an amount owing.

The deadline, if you or your spouse or common-law partner carried on a business in 2021 (other than a business whose expenditures are primarily in connection with a tax shelter), is June 15. However, if you have a balance owing for 2021, you have to pay it on or before April 30, 2022.

If you owe them

If you owe income taxes it must be paid on or before April 30 to avoid getting charged interest.

If you have an amount owing (of more than $2) and cannot pay it in full by the deadline, you will be charged compound daily interest. Generally, You can make arrangements for monthly payments as long as the debt is paid before the next income tax deadline. Contrary to popular belief, the interest you pay CAN NOT be claimed as a deduction on the following year’s income tax return.

What happens if you’re late?

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“Even if you cannot pay your full balance owing on or before April 30, 2022, you can avoid the late-filing penalty by filing your return on time.”

If you owe tax for 2021 and you file your return for 2021 after the due date, you we will be charged a late-filing penalty. The penalty is 5% of your 2021 balance owing, plus 1% of your balance owing for each full month your return is late, to a maximum of 12 months.

If you were charged a late-filing penalty on your return for 2018, 2019, or 2020 your late-filing penalty for 2021 could be 10% of your 2021 balance owing, plus 2% of your 2021 balance owing for each full month your return is late, to a maximum of 20 months. Yikes!

For more information direct from CRA:

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of significant financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

New Payday Loans Rules as of January 2018

admin — Fri, 26 Jan 2018 17:36:05 +0000

The following article by Matthew J. Munro, CPA, CGA, CIRP, LIT, was published in the December 2017 issue of the District News. in New Brunswick, Canada.

Payday loan shops are everywhere now, including the Internet. I have to assume that they are highly profitable businesses and that the demand is there for their services. However, I see the proliferation of these businesses as clear evidence that the number of people experiencing financial difficulties is growing.

The payday loan industry has been substantially unregulated in New Brunswick but that changed on January 1, 2018, with the implementation of the Cost of Credit Disclosure and Payday Loans Act. The new legislation requires all payday loan or similar businesses to be licensed in the Province.

The new legislation is focused on curbing offensive payday loan practices by:

Prohibiting unauthorized withdrawals from a borrower’s account;
Prohibiting loan due dates that are prior to the borrower’s next pay cheque;
Prohibiting multiple or open-ended agreements that provide access to the borrower’s bank account.

Offensive collection activity is also targeted by the new legislation by:

“Even after the new legislation comes into effect, payday loans will still be one of the most costly forms of borrowing.”

Prohibiting communication or attempted communication with any person other than the borrower for any purpose in relation to the debt, or the borrower;
Except with the approval of the borrower, prohibiting communication or attempted communication with the borrower or any other person at the place of employment of the borrower for any purpose in relation to the debt, or the borrower;
Making more than one additional attempt to obtain a repayment if a cheque or pre-authorized debit is dishonored.

Even after the new legislation comes into effect, payday loans will still be one of the most costly forms of borrowing. After January 1, 2018, the maximum total borrowing cost will be $15 per $100 advanced and must include all fees, and interest. The amount of the advance can also not exceed 30% of the net pay from the borrower’s most recent paystub.

Think about this, even at the new regulated rate:

$300 loan, at $15 per $100, will cost $45 for a 14-day loan. That is an annual interest rate cost of 391% per year!

If your finances are strained, a payday loan may solve an immediate need, but, their cost will take more money out of an already strained situation and, over time, make your situation worse.

If you are using payday loans, take the time to review your situation and see what changes you can make so that you can avoid helping these businesses profit from your difficult situation.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

A Gentler Method: Why a Negotiated Consumer Proposal Can Be A More Fair and Reasonable Debt Solution

admin — Thu, 14 Dec 2017 19:16:20 +0000

If you have debt problems you also have options. A Consumer Proposal is “an offer to pay creditors a percentage of what is owed to them or extend the time you have to pay off the debts, or both” and, for some people, it can be a much better and more manageable solution than bankruptcy to resolve your debts, particularly if:

You want to pay your creditors more than they would receive if you filed personal bankruptcy.
You have high income and could not manage the surplus income payment required in a bankruptcy.
You have equity in assets that would take too long to pay within a bankruptcy.
You have been bankrupt previously.
You want to take advantage of a potentially shorter impact on your credit score.

Fair and Reasonable

You can be as creative as you want in determining the terms of a settlement put forth in a Consumer Proposal as long as it is fair and reasonable and you can get more than 50% of your unsecured creditors (by dollar-value of claims) to accept it. As long as you get over this 50% threshold, it will be binding on all unsecured creditors whether they like it or not. That sounds harsh but it’s why this method works for some.

Most consumer proposals are structured as monthly payments overtime at less than the full payout. Generally, a consumer proposal should provide a higher return or recovery to the creditors than they would obtain in bankruptcy or there is no incentive for your creditors to vote in favour of it. Once the total amount of the settlement is determined and approved, you can pay it out early if you are able to do so and this would accelerate rebuilding your credit.

Once in place, your consumer proposal payments would be paid to your LIT who handles all of the back-end administration.

The fact that you filed a Consumer Proposal will stay on your credit bureau report for a maximum of 6 years (including the time during your consumer proposal), which is a shorter period than with bankruptcy. That means a 5-year consumer proposal will stay on your credit report for 1 additional year after you have completed all of the terms of your Proposal. In clear language, a consumer proposal impacts your credit rating for a lesser period of time. Equifax Canada – How Long Does Information Stay on My Equifax Credit Report?

How a Consumer Proposal Works In Canada

In order to qualify to file a Consumer Proposal, you must have debts of less than $250,000, excluding the mortgage on your principal residence. If you are over this limit, there is another form of proposal that can be filed.

When we review your individual situation, we will consider whether or not a Consumer Proposal (or other forms of a consumer proposal) makes sense for you and review the pros and cons of a proposal as compared to bankruptcy and other non-legislated options.

The Government of Canada provides a great explanation of how Consumer Proposals work here. A Consumer Proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). Once you understand how this method works, an LIT can look at your personal situation and help you decide if this gentler method of dealing with your unsecured debts can work for you and if it is worth it.

Disadvantages of consumer proposal include how severe missed payments can be. If you fall into arrears for a total of 3 monthly payments you will end up with an annulled consumer proposal. It is best to avoid consumer proposal annulment because you end up being responsible to pay back all of the debt you had prior to your proposal, minus what your creditors received in the proposal.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming unsecured debt get fresh financial starts.

Learn more about consumer proposals vs other debt consolidation options.

Reset and Restart: Personal Bankruptcy and the Relief from the Stress of Unmanageable Debt in Canada

admin — Thu, 14 Dec 2017 18:52:11 +0000

Bankruptcy is usually the last choice for most individuals. It is good that this process is available because, without it, there might be no relief from the stress of unmanageable debt.

Personal bankruptcy provides a financial reset when other options are not practical. Even if you don’t want to use bankruptcy to resolve your situation, you should still understand how it works. Don’t ignore the option just because of the “B” word.

When assessing an individual’s financial situation, we review all relevant facts about assets, liabilities, income, family situation, the cause of financial difficulty and outlook for the future. These are all considerations in determining what options are practically available so that you can choose the one that is best suited to you.

Will I Have to Give Up My Assets?

In most cases, you do not have to give up any assets (unless you want to) if you go through bankruptcy. If there is equity in assets, you will have to pay the equity into the bankruptcy.

If your income is above a certain threshold, you will have to make payments based on your income level. How your assets will be dealt with and how much you will have to pay will be reviewed with you before you file for bankruptcy so you understand exactly how bankruptcy would work for you.

Counselling and Support For a Better Future

The bankruptcy process also provides individuals with two (2) counselling sessions to help you understand how you got into financial difficulty, improve your basic budgeting skills and provide you with information on understanding and starting to re-build your credit.

Sometimes, bankruptcy can actually be the most efficient way to get you back on your financial feet and start to rebuild your credit.

Try not to be afraid of this or any other option. Whether bankruptcy or another method is best for dealing with your debt, the goal for everyone involved is to give you a new beginning and a better future!

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of major financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.

The End of a Business – Corporate Bankruptcy in Canada

admin — Mon, 04 Dec 2017 16:52:00 +0000

The End of a Business – Corporate Bankruptcy in Canada

This won’t be fun. Shutting down a company is rarely a “favourite” option but in a mature country like Canada, we have experience and methods to end a company and deal with its assets.

A Canadian Company Can Face Corporate Bankruptcy Either Voluntarily or Involuntarily

In order to become bankrupt voluntarily, the board of directors passes a resolution authorizing the company to file for Bankruptcy. Any company that owes at least $1,000 and is unable to pay its debts as they become due, or that has assets which at fair value are insufficient to discharge all of its liabilities, can file for Bankruptcy.

A company becomes bankrupt involuntarily when a proposal put forth by the company is rejected by its creditors, or if one or more creditors apply to the Court for an order to put the company into Corporate Bankruptcy.

Regardless of how a company becomes bankrupt, it is required in Canada to have a Licensed Insolvency Trustee (LIT) in Bankruptcy directly involved in the process.

Corporate Bankruptcy Will Be the End of the Company’s Existence.

Generally, upon the company becoming bankrupt, the Trustee will take possession or control of the company’s assets.

“Good to know! In exceptional circumstances, a bankrupt company could make a proposal in order to exit bankruptcy. Creditor approval is required for this to occur.”

Secured creditors, providing that they have properly registered their security, are generally entitled to obtain possession of their collateral from the Trustee and then proceed to realize (sell or liquidate) that collateral to recover their loans.

The Trustee will proceed to “realize” upon the company’s other assets (those not held as security for a loan) in consultation with the inspectors of the bankruptcy estate. The Trustee will also review all claims filed against the bankruptcy estate and admit them or disallow them, in whole or in part. Once all of the assets have been liquidated and claims determined, the Trustee will make its final distribution to creditors and proceed to close the administration of the bankruptcy estate.

The company will end. It’s not a good time, but there is a way out of a bad business situation in Canada.

Interesting Note: There are different types of bankruptcy. Learn about the different types of bankruptcy here.

Powell Associates Ltd. is a Licensed Insolvency Trustee. We are experienced, hands-on insolvency practitioners who understand the personal impacts of significant financial stress;

You won’t be stuck in an assembly line process.
You will expect and receive prompt responses and resolution of issues from our supportive and experienced team.
We will review your debt solution options, including filing a consumer proposal or personal bankruptcy.
We help Canadians with overwhelming debt get fresh financial starts.