18 Oct 2021 Derek L. Chase, CPA, CA, LIT
With the rising cost of living due to inflation, and with several Government COVID pandemic financial assistance programs drawing to a close, you may be wondering what happens next with your personal finances. Will you be able to find the help you need? Can you get financial assistance or debt forgiveness through a debt relief program?
A quick look back into history shows that debt settlement of some form has always existed. One ancient manuscript indicates that debt forgiveness was mandatory every seven years. The echoes of this still exist today through the statute of limitations. In BC, you can find this in the Limitations Act. If no one has contacted you in a long time about your debt you may want to check this out.
At other times in history, things were not so pleasant and a person could find themselves in debtor’s prison.
Thankfully, current Canadian debt relief programs are well thought through by the Federal Government and are an important part of a modern economy. Government debt relief programs are available coast to coast and are designed to help you get a fresh start and reorganize your finances.
Important Terms to Know
Let’s look at some important terms to know when it comes to debt settlement in Canada:
1. Debt Consolidation
This is a phrase that can apply to several different situations. Any time you can combine your unsecured debt into one payment you have consolidated. This can be useful if you can do so with a modest interest rate and only have one payment to make per month.
Your current financial institution is a logical place to ask about this. The tough part is that it can be difficult to qualify for and the payment may still be too much to handle. Under this option you are still required to pay 100% of your debts plus interest.
2. Credit Counselling
This is another fairly generic term that can be used for anyone providing you advice about your credit. Often, this will involve taking a good look at your current and projected monthly income and expenses and providing suggestions. We regularly do this in our financial counselling sessions.
3. Consumer Proposal
This is a Federal Government debt settlement program that has been growing in popularity for the last several years. Under this program you are allowed to make an offer to your creditors to repay a portion of what you owe over time.
To make sure that proper standards are followed, this must be filed by a Licensed Insolvency Trustee (LIT). At Chase & Associates we offer a free initial consultation so that you can find out if this powerful Canadian debt forgiveness program will work for you.
4. Bankruptcy
This is also a Federal Government regulated option that allows a person to get a financial fresh start while retaining a variety of assets called exempt assets. Sometimes this can be the most practical option depending on a person’s monthly cash flow. This also must be filed for you by an LIT.
Debts That Can Be Included
A Consumer Proposal is the most popular and effective debt relief program in Canada. You can use this program to consolidate a number of different types of debts such as:
- Credit cards
- Lines of credit
- Income tax arrears
- GST/HST arrears
- Bank loans
- Payday loans or instalment loans
What About Student Loans?
Canadian student loan forgiveness is available, however, there are special rules that you should be aware of surrounding how long you have been out of school. We would recommend getting confirmation so you can be confident as to what was your last day in school. Generally, the length of time rule is as follows:
- Out of school for over seven years – when this is the case filing for either a Consumer Proposal or a Bankruptcy will extinguish your student loans.
- Out of school for less than seven years – under this scenario, a Consumer Proposal or a Bankruptcy will only provide temporary relief as the student loan will survive the process.
Repayment for student loans can be a tricky area to make a decision. You may also find some relief by contacting them directly and asking for payment deferral or forgiveness.
Also, student loans rules can be impacted by Court cases across the country. We would encourage you to contact us to take advantage of our no cost initial meeting if you would like to find out more.
Income Tax Forgiveness
Yes, there is such a thing as taxpayer relief. It does not take long for unfiled personal income tax returns or unpaid taxes to create a situation where Canada Revenue Agency starts the process of applying heavy penalties and interest.
These add on to a person’s income tax bill and often can make a balance grow at a rate that is impossible to catch. You can apply for income tax interest relief through the government’s fairness program or file a notice of objection to their assessment. Both of these may help. We would recommend talking to a CPA to see whether they would work for you.
The Income Tax Department at CRA is not allowed to take an offer of a percentage on the dollar if you yourself called them up.
They are allowed to take a percentage on the dollar, paid over time, if you file a Consumer Proposal. This will also prevent them from seizing your bank accounts or from putting a garnish on your pay.
It is best to act sooner rather than later in these cases.
Who Can You Trust?
The internet can be a murky place filled with false promises. There is no restriction as to who can hold out the promise to help you reorganize your finances. For all you know, you could be engaging with someone in Texas. Who can you trust? Here are a few reasons you can trust a Licensed Insolvency Trustee:
- Licensed and regulated by the Federal Government
- Members of the Chartered Professional Accountants of Canada
- No funds required to meet or start the process
- We are available to meet face to face, if you so desire
You can rest assured that the oversight provided by the Federal Government and the Chartered Professional Accountants of Canada will ensure that you are treated well and within the guidelines of the law and the ethical requirements of both regulators.
Check out our client reviews to see how we treat people.
Contact Us: Ask Us About Canadian Debt Relief Programs
We often meet with people who are feeling a tremendous amount of stress. By the time our meeting is finished, and they understand all of the facts, we often hear something like:
“I wish I would have talked to you a lot sooner. I feel so much better!”
There is no cost to our initial meeting where we can help analyze your finances and let you know if a Consumer Proposal (or any of the Canadian debt relief programs we mentioned above) is right for YOU!
