Financial stress and strain is no light matter, and if you’re struggling to pay your bills and feel like your debt is overwhelming you, then know that you’re not alone. It can be understandably hard to have a positive outlook when faced with difficult debt. You’re worried about how you’re going to pay your bills, maybe you’re taking out short-term loans to cover costs, your wages are being garnished, or maybe you’re dealing with frequent and frustrating calls from collection agencies.
The good thing is that you’re not alone. There are professionals who are willing to offer you a hand in getting back on track with your finances. If we look at global economic trends, a recent report by The Organisation for Economic Co-Operation and Development has suggested that economic growth is slowing down. How does this affect Canadians? The report states that: “the Canadian economy was resilient in 2018, but troubling signs lay ahead” with hints of a decline in growth in 2019.
With possible difficulty on the horizon, now is the time to take charge of your personal finances. You can regain control over your money and set yourself up for future success. Maybe you’re in a position where you can’t pay your personal income tax or your corporation tax. Maybe you’re drowning under the pressure of credit card debt. When you’re struggling with debt, you need the help of a qualified Licensed Insolvency Trustee (formerly known as a bankruptcy trustee). You need someone who will take the time to fully understand your situation and present you with options for your particular circumstances. You need the help of the trustees and credit professionals at David Sklar and Associates.
Experts in Debt Management and Relief
We are a committed team of bankruptcy trustees and other financial professionals who share the common goal of helping those who are struggling with debt to reclaim control over their finances and prepare for their long-term financial dreams.
In the face of overwhelming debt, it may feel like bankruptcy is the only option, but there are alternatives. Your trustee will guide you through the pros and cons of each method of debt relief available to you. It’s possible that you haven’t even considered one common and efficient method of debt relief: a consumer proposal. It only takes one click to stop by our consumer proposal page for more info on the process, and it’s just as easy to book a consultation with one of our debt management experts.
There is lots of information about consumer proposals that individuals need to take into consideration when determining the best course of action for debt relief. But when you’re focused on climbing out of debt, knowing exactly which steps to take and how to work through the legalities of government-regulated debt relief is a big responsibility to add onto your plate. What’s more, filing for bankruptcy, filing a consumer proposal, or filing a Division 1 proposal can only be done by a Licensed Insolvency Trustee (formerly known as a bankruptcy trustee).
You need the help of a qualified debt professional to take important steps towards debt recovery, but there’s so much more that you get out of partnering with a bankruptcy trustee. When you first approach a bankruptcy trustee for help, they will assess your situation and present you with the best options for you to tackle your debt. You get a roadmap to debt relief and on top of that, you have the support of a qualified individual and the full support of their team in the form of credit counselling.
How Do Consumer Proposals Work?
A consumer proposal is a negotiation between a debtor and their creditors in which both parties agree on a sum smaller than the total amount of debt owed. The agreement will allow for the debtor to pay back the smaller sum in regular instalments over a fixed period of time. This course of action for debt relief works well for those who have a steady source of income, wish to protect assets that would otherwise not be protected under bankruptcy, and who do not consider bankruptcy a viable option.
Your bankruptcy trustee will help you determine what a fair payment plan looks like for paying back your creditors. They will take into account what you can afford as well as what the creditors are most likely to accept. As soon as you file for a consumer proposal in Ontario, the following things happen immediately:
- Any garnishments to your wages are put to an immediate stop. Any legal action and collection calls regarding debt is also put to an immediate stop.
- Your debt stops accruing interest.
- Your creditors are notified of your proposal and understand that you mean to renegotiate your debt to something that can be repaid on a fixed schedule.
Are There Drawbacks to a Consumer Proposal?
To make any major decision regarding your finances, it’s important to know all sides of the situation. There are many advantages to filing a consumer proposal in Canada and it is a great method of debt relief, but it isn’t always the best option for everyone. Your specific needs and goals should be taken into consideration when weighing the pros and cons of this form of debt relief.
Consumer proposals usually take longer to complete than a bankruptcy since your lowered debt is being paid in regular amounts over time. If your financial situation improves during the period of paying your consumer proposal, you can pay your proposal off early, which can be a relief. Still, a consumer proposal will affect your credit rating.
It is entirely possible to recover from the changes to your credit score. With a consumer proposal, you will have an R7 note on your credit report for three years after you make your last payment. You might already be unable to access credit due to a poor credit score, so a consumer proposal might compound the issue and you should talk about this with your bankruptcy trustee.
One disadvantage of the consumer proposal is that your creditors might not accept the proposal even if you are an excellent candidate and your proposal is reasonable. If you default on a proposal, then you will not be able to file for a second one, so a consumer proposal requires full commitment.
The process can take up to five years, but it only takes three months of missed payments to consider a proposal no longer legally binding. Missing three months of payments without filing an amendment to your consumer proposal will mean that your creditors are free to take legal action against you to claim the amount of debt they are owed.
You Owe Taxes to the CRA
Springtime means many things to many people, but for all Canadians, it means that it’s tax season. During tax season, we learn about what tax debts we owe to the Canada Revenue Agency (CRA) and other tax authorities. Our taxes depend on many things like income bracket, the province we live in, our assets, and so much more. For some, the reality of tax season is that it’s a time where we discover how much we owe to the CRA. Sometimes we get caught off guard: there was a change in a property tax rate or an amendment to what qualifies as a deductible.
Those who are self-employed have the responsibility to personally moderate the income they generate over the year in preparation for paying income tax. Self-employed individuals have to independently account for HST and they have to make their own Canada Pension Plan contributions. For those who are struggling to make their regular payments for rent, mortgage, debt, loans, living expenses, and more, to find out that you owe money to the CRA come tax season can end up being a significant financial burden.
Tax Debt is Unsecured Debt
Any personal tax debt that you accrue qualifies as unsecured debt, meaning the debt is not attached to any asset that a creditor can claim in the case that you cannot make your payments. Unsecured debt also exists in forms such as credit card debt, utility bills, lines of credit, and payday loans.
If you’re in a situation where your debt is too large and it has become overwhelming, you may be relieved to know that any money that you owe to the CRA can be covered by the method of debt relief known as a consumer proposal.
How Consumer Proposals Work for Tax Debt
A Licensed Insolvency Trustee can help you assess your options when it seems like you don’t have any options for handling your debt. If you are overwhelmed by debt and can’t afford to make your tax payments to the CRA, then one of the bankruptcy trustees at David Sklar and Associates can show you how a consumer proposal can reduce your debt. For those who are insolvent, a consumer proposal can completely turn the tables on debt. Here are some of the ways this method of debt relief works for those who are dealing with insolvency:
- You get to pay your debt in small, manageable, monthly amounts for a fixed period of time (up to five years).
- As soon as your proposal is filed, collection calls come to an end and debt collectors no longer contact you.
- Keeps interest from growing on your debt.
- Reduces the total dollar amount of your debt and allows you to negotiate with your creditors to pay an amount you can afford.
Bankruptcy trustees give you the tools and information you need to make an informed decision on how to tackle your debt. A trustee is also the only person who can manage and file your consumer proposal. That’s why it’s important to work with someone who is knowledgeable and empathetic who you can relate to easily and who understands your situation.
Can the CRA Reject a Consumer Proposal?
Consumer proposals abide by the rules and regulations of the Bankruptcy and Insolvency Act, which gives creditors the right to refuse a consumer proposal. When you file a consumer proposal with the Office of the Superintendent of Bankruptcy, your creditors have 45 days to determine whether or not they want to accept.
Your proposal gets accepted after the majority of your creditors vote on it. What constitutes a “majority” depends on the total sum of how much you owe. In the case of a consumer proposal in which the CRA is one of your creditors, whether or not they can reject your proposal depends on how much of the total owing debt is made up of debt owed to the CRA. As one party, the CRA may not have the sway to reject the proposal by themselves.
The CRA will vote on whether or not to accept a consumer proposal in the case of an individual claim, but it is ultimately the decision of the majority of your creditors on whether or not the proposal as a whole is accepted.
All of your tax returns need to be current and up to date before you file for a consumer proposal in Ontario. Any outstanding taxes can result in delays in getting your proposal approved during the time that you take to file your taxes, which could culminate in the CRA rejecting your proposal after all. That’s why it’s so helpful to team up with a credit professional like the trustees at David Sklar and Associates for guidance and support through every step of your debt relief journey.
Rebuild Your Credit After a Consumer Proposal
The consumer proposal is the path that you take to eliminate your debt in order to get a clean slate for moving forward. Once your proposal is paid in full, the consumer proposal stays on your credit report for three years. Some who file a consumer proposal will try to fulfil their obligations as quickly as possible so they can rebuild their credit rating sooner.
The credit counselling that you will receive as part of your debt recovery plan will help you get back on track and develop healthy spending and saving habits. To rebuild your credit, you need to monitor your credit report as you move forward in order to spot any errors or omissions. You may want to apply for a secured credit card so you can start to re-establish payment patterns and develop a positive history of making your payments.
You Can Free Yourself from Debt After All
Finally, you have to keep all your bill payments current and you should pay all your credit card balances in full every month. Avoid collecting unwanted interest and only spend what you can. A good budget and the support of friends and family will help keep you accountable as you develop financial habits, preparing yourself to achieve your long-term financial goals one day. It’s possible to climb out of debt and get a new lease on life. Put your trust in the hands of a qualified bankruptcy trustee and start your path towards debt relief today.