Tax season is in full swing now. Sands & Associates’ Vice-President and trustee Blair Mantin sat down with Vancouver’s Breakfast Television recently to share some tips on how to deal with tax debt.
If you’re researching bankruptcy in BC you’ll find an overwhelming amount of available information, whether it’s from the internet, friends and family or even a financial advisor. Unfortunately, it won’t all be true… A lot of people tend to make up their mind that bankruptcy is NOT for them simply because they heard or read the wrong thing. To help clear up some of those common misconceptions, here are 5 things you may not have known about bankruptcy:
$1,000 minimum: Here’s a number that often surprises people – $1,000 is the minimum amount a person needs to owe in order to file a bankruptcy. While it’s uncommon for someone owing $1,000 to make a bankruptcy assignment, each person’s situation is unique and sometimes a $5,000 debt load can be just as unmanageable as a $75,000 one.
No income cap: Whether you’re earning $500 or $5,000 a month, bankruptcy still may be an option for you to resolve your debts. Household income is used to determine the length of time a person will be in bankruptcy (9 months or 21 months for most cases) and also what they would have to pay on a monthly basis (surplus income). For those earning enough to comfortably pay something towards their debts a Consumer Proposal may be an alternative, but if unsuitable for other reasons, a person’s wage does not prevent them filing for bankruptcy.
Your credit will recover: Filing for bankruptcy does not mean you’re forever unable to get credit. In fact, during the time a bankruptcy is reflected on a credit report (6 years from the date of discharge in a first-time bankruptcy) it is still possible to apply for and receive credit. The vast majority of individuals who claim bankruptcy do move on to get mortgages, credit cards, vehicle loans, lines of credit etc if they choose to. Your bankruptcy will not be a ‘life sentence’ with respect to future credit.
You can own assets: There is no provision under bankruptcy legislation that strips bankrupt individuals of their assets – quite the opposite! When filing for bankruptcy there are a number of assets that are exempt from seizure and most people retain all of their assets. Even if you own something that is not considered exempt it does not necessarily mean that you would be required to part with it; quite often people will repurchase the value of the item to the trustee in order to retain it.
Yes, it covers… Some of the most common things people assume bankruptcy doesn’t cover such as: debts with Canada Revenue Agency, student loans (if you’ve been out of school for at least 7 years), outstanding MSP premiums and debt due to gambling are in fact relieved. Most debts are dischargeable through a bankruptcy, although there are some exceptions which include: court imposed fines, alimony and maintenance payments, money owing for things stolen and property obtained through false pretences. Bankruptcy is targeted at the ‘honest, but unfortunate debtor’. As long as you can comfortably say that you’ve been honest in your dealings, bankruptcy will allow you to start again fresh.
While we hope that this has helped to clear up any misconceptions, the bottom line is that if you’re looking for real solutions to debt problems it’s best to check with a reputable professional in that field (in this case a Trustee in Bankruptcy). After all, the only way you’re able to make solid decisions is with all the facts at hand, not fiction.
Centrally located in Surrey, Sands & Associates’ Surrey office is one of our busiest branches. Our staff are proud to be able to provide debt reduction, consumer proposal and bankruptcy services to residents in the area. Our Surrey office also offers extended evening and weekend meetings to those unable to receive debt assistance during standard “office hours”.
Sands & Associates president Deane Gurney brings over 27 years of insolvency experience to the Surrey office and trustee Raj Hara offers an extensive knowledge of small business and corporate financial issues. Raj is also able to assist those with debt concerns in Punjabi. Bankruptcy trustee and proposal administrator Kimberly To is fluent in both Cantonese and Mandarin and is available to meet with individuals in our Surrey office regarding their financial options.
Resident estate managers in our Surrey office include Kristine Medeiros and John Manson, with over 15 years combined consumer proposal, bankruptcy and insolvency experience.
Raj’s Top Trustee Tip: “A bankruptcy or consumer proposal are not the only options a trustee can review with you. Your initial meeting with Sands & Associates is a general conversation about your financial options, which include credit counselling and debt consolidation.”
Your slips are all in, the forms compiled and submitted and you’re waiting for the bottom line. A triumph for those expecting money back, or a nerve-wracking wait for those with a bill – yes, it’s tax time! If you’re in the category of people who frequently owe money to Canada Revenue Agency, or even if it’s your first time on that side of the balance, read on for some tips on how to deal with your tax debt:
DO: Ask for help filing your return if you feel it’s beyond your paperwork skill-set. If your return is basic and consists of a T4 or two, chances are you could file it yourself without missing out on credits. For people who are self-employed or who have more complex finances, it’s a good idea to have reputable bookkeeper or accountant check over your return to make sure you’re getting all the benefits you may be entitled to.
DON’T: Try to “outsmart” the government by making claims that are uncertain. If you are eligible for certain deductions or credits, by all means use them, but be wary of write offs that seem too good to be true – they probably are. Recent charitable donation schemes for example, have left many taxpayers with a large bill on their hands. As cautioned above, if you’re unsure – ask a reputable, qualified professional first.
DO: Look at why there is a balance owing and try to correct this going forward. If there’s more tax due this year because you withdrew from your RRSPs or you have more than one job and aren’t having enough tax withheld at source, make note and either set aside more throughout the year, or better yet ask one of your employers to remit a little more each paycheque.
DON’T: Stop filing altogether because you think you’ll be continually adding to the balance. Not filing returns for a long period of time can result in many other problems, such as a back-log of MSP premiums due, and not receiving Child Tax or even GST benefits that your family may be entitled to. Allowing returns to pile up year after year isn’t likely to help in the long run, and eventually it will probably just mean lost sleep down the road.
DO: File AND pay on time. Balances due must be paid on or before April 30th each year, and unless you or your spouse was self-employed your returns should be filed by then as well. Late returns can mean accumulating interest unnecessarily, as well as fines and penalties.
DON’T: Ignore the bill if you owe. Canada Revenue Agency is a powerful creditor and disregarding the balance owing you may have can result in serious collection action such as bank account seizures or even a garnishment of your pay.
DO: Be aware that there are two options for dealing with unmanageable tax debt. Both a consumer proposal, or bankruptcy can eliminate or reduce tax debt, more importantly they are the only options that can. If you find yourself in a position where the debts are out of hand, speak with a licensed trustee about your situation, they are legally empowered to assist you with Canada Revenue Agency debts.
As the expression goes, two things in life are certain – death and taxes – while we can’t control one, we can certainly help guide the other!
If you’ve been approached by a family member or friend asking for your help getting credit by having you co-sign a loan, or are considering obtaining joint credit (read: debt) with your spouse, there are a few things you should know first. Whether you’ve already co-signed, or are about to – have a read of three co-signing basics:
1. By co-signing a debt, you become equally responsible for repaying any balance to the lender. If one borrower doesn’t pay the debt back, the bank can demand that anyone listed in the loan or agreement repay the entire amount. This type of liability is known as ‘joint and several’.
TIP: When considering whether or not to co-sign a debt for someone else, think about whether or not you would be able to repay the entire debt if they other person didn’t; particularly if the entire balance is demanded immediately. How would a reduction in your credit rating or a debt collector contacting you affect you, and your relationship with the other borrower?
2. Some credit card terms may state that secondary cardholders can be held responsible for outstanding balances, even if the original credit card application wasn’t signed by them.
TIP: Don’t assume that because the card was issued to the other person and you were merely given a secondary card that this means you’re off the hook. Read all credit agreements in full carefully. If you’re unsure as to any wording or terms be sure to ask your lender.
3. All borrowers have the right to receive information from the lender about the loan. Unless you consent in writing or verbally to waive this right, the lender must provide everyone copies of the credit agreement and monthly statements.
TIP: Reviewing the monthly statements is a great way to keep track of the status of the credit, ensuring that the other borrower is making payments and that you’re aware of any changes to the terms and agreements. Get written confirmation from the lender once the debt has been repaid in full, stating that you are no longer responsible.
Co-borrowing with someone else can be a big responsibility, which can also translate into big cost if the co-signer isn’t fully informed. Whether you’re seeking credit for yourself or for someone else, always be sure of the expectations and rights of everyone concerned before signing.
While reports from two of Canada’s major consumer credit rating agencies show conflicting results, both agree that BC residents are the most indebted spenders in Canada. The Vancouver Sun reported today that Vancouver residents are carrying non-mortgage debt of roughly $40,000, making our indebtedness 40% higher than the average of other Canadians.
Sands & Associates VP and trustee in bankruptcy, Blair Mantin spoke with The Vancouver Sun about the unique situations that Vancouverites face, including the “severe mismatch between earning potential and cost of living”.
To read the full article please click here.