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CANADA HOUSEHOLD DEBT: HOW COVID-19 AFFECTED HOUSEHOLD DEBT AND IS THERE A LOOMING CORONAVIRUS DEBT CRISIS?

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

canada household debt

Canada household debt: Pre-pandemic debt pressures

Pre-pandemic, Canada household debt was continually increasing. The number of homes carrying debt has increased significantly over the last decade. In 2012, Statistics Canada reported that for the average household, Canadian households’ debt-to-income (DTI) ratio was 150%. That means that debt was rising at a rate of $1.50 for every dollar of income. This was up from $1.10 or 110% the year before. In the first quarter of 2020, the DTI ratio hit 175.4%. The ratio had been stuck at that level since about 2016.

This increase in debt can have a negative effect on a household’s bottom line — and the larger the debt, the greater the negative effect. In this Brandon’s Blog, I discuss what has happened to Canada household debt during the COVID-19 pandemic.

How COVID-19 Affected Household Debt in 2020: Canada household debt well supported by a temporary income surge

Whether you consider the federal and provincial financial assistance given to Canadians primarily through Canada’s COVID-19 Economic Response Plan as an income surge or not, findings released by Canada Mortgage and Housing Corporation (CMHC) in November 2020 show that the government assistance did help Canadians cope with Canada household debt.

The key findings in Canada in the CMHC report were:

  • Q2 2020 Canada household debt ratio is 17% down from the Q1 ratio at 158%.
  • The DTI ratio for home mortgage debt was also down, falling from 115% to 105%.
  • These declines were a straight outcome of a boost in household disposable income.
  • The degree of outstanding Canada household debt had not changed.
  • On average, Canadian household disposable income grew by almost 11% between the Q1 and Q2 of 2020 and by 15% year over year.
  • The government’s temporary transfer of money to Canadian families had the effect of decreasing the Canada household DTI ratio to a ratio not seen since 2010.

    canada household debt
    canada household debt

COVID-19: The second wave brought uncertainty on household debt

How Has COVID-19 Affected Canada Household Debt? Around the time of the second wave, the COVID-19 pandemic had actually changed the family financial picture. The DTI ratio is a crucial indication of financial obligations as a vulnerability for primarily the financial real estate industries.

The Canada household debt-to-income ratio decreased in all significant Canadian cities in the second quarter of 2021. Under regular scenarios, such a decline would certainly indicate a general strengthening in families’ capacity to pay off financial debt. Federal government subsidies effectively supported the household lost income. This more than likely helped Canadians with lowering their non-mortgage debt throughout those months. Nonetheless, the mortgage part of Canada household debt has increased in the majority of metropolitan areas while employment has contracted.

At the same time, mortgage deferrals on mortgage payments offered by Canadian financial institutions stopped. This of course leads to worries about the ability of Canadians to stay current on their mortgage payments, even with the current extremely low-interest rates. Other government assistance programs have already ended or are coming to an end. The end of the government support programs leading to the temporary boosting of household income now brings uncertainty as to how Canadians will be able to manage to carry and pay down their household debt levels.

Canada household debt: Higher-income increases drive DTI ratios down

Statistics Canada also came out with an interesting report about the economic impacts of how COVID-19 affected household debt in 2020. The key findings of the Statistics Canada report are:

  • The gap between the lowest and highest income groups declined in 2020. As you might expect, the reason was that lower-income families received a greater share of government COVID-19 funds than higher-income households. Therefore, lower-income households saw more growth in household income than high-income earners, so, the gap closed.
  • There was a more powerful rebound in disposable income for lower-income households as well as younger households. Again, government coronavirus pandemic-related funds transfers are the reason why.
  • Lowest-income and youngest families experience the biggest decline in wages and salaries. As mobility restrictions, shutdowns and lockdowns took place across Canada, travel, food and beverage and the hospitality industries were hard hit because of closings for an extended period. These industries provided employment for many lower-income people. Layoffs resulted in declines in wages and salaries.
  • The dollars of COVID-19 assistance doled out by the federal government surpassed the losses in employment and self-employment incomes suffered.
  • COVID-19 support procedures have the biggest impact on lower-income and more youthful households.
  • Families were able to reduce monthly expenses to the point where it was less than their monthly income from all sources to boost their savings and cash balances on hand in 2020.
  • Lowest-income and youngest families saw the largest wealth gains.
  • Low lending rates facilitated home buying for lower-income and younger Canadians.
  • Lower-income families restricted their consumer debt balances on credit cards and other non-mortgage debt.
  • Younger homes restricted consumer credit (non-mortgage) borrowing in spite of higher consumer spending.
  • The biggest changes in DTI ratios occurred in lower-income and also younger families as opposed to higher-income households.

    canada household debt
    canada household debt

Canada household debt: How will COVID-19 affect financial assets, delinquency and bankruptcy?

The Canada Emergency Response Benefit (CERB) supplied financial support to Canadians who experienced negative financial impact by the COVID-19 pandemic. Eligible Canadians obtained $2,000 for a 4-week period (the same as $500 a week), between March 15 and September 26, 2020. Roughly $82 billion was paid to about 8.9 million Canadians through the CERB program which ended in September 2020.

The Canada Recover Benefit (CRB) sustains Canadians that have actually not returned to work as a result of COVID-19 or whose earnings have actually been reduced at the very least by 50%, and who are not eligible for Employment Insurance (EI). Eligible Canadians should be searching for work and accepting a job where it is reasonable to do so. The CRB gives $500 a week for up to 38 weeks. It is available only for 1 year. You make an application for the CRB for 2 weeks a time through your online CRA MyAccount. You have to wait until after you’ve missed out on 2 weeks of work to apply.

So the CERB is over. The CRB will get kicked to the CRB by this Fall. The Canada Emergency Wage Subsidy for support businesses continuing to employ people is supposed to end this June. Mortgage payment deferrals are over. Although during the first wave courts were closed so lawsuits were not advancing and at the same time collection agencies were not hounding people.

The courts have been open and litigation continuing for some time now. Over the last few weeks, people calling in to inquire about consumer proposals and personal bankruptcy have been saying they are getting calls from collection agencies looking for money, including, credit card debt payments. So pretty soon we should be back to business as usual as far as debt collection is concerned.

To date, as indicated above, COVID-19 has allowed Canadians in general to increase their financial assets and their rise in household net worth. As already described, for those lower-income families, the government support measures have actually had an increase in household income.

Delinquencies in Canada household debt have been ignored to a large extent in 2020 and bankruptcy filings were the lowest on record in 2020 in two decades. I expect that to change, as nobody is currently addressing any form of debt hangover. That is debts that people had pre-pandemic where no principal has yet been paid down and lenders have been understanding and therefore not pressing for collection. As collection calls increase, I expect that personal insolvency filings will also.

I expect that there will also be an increase in corporate insolvency filings. So far in Canada, most of the filings have been large retailers, certain cannabis companies and Laurentian University seeking bankruptcy protection in order to restructure under the Companies’ Creditors Arrangement Act (CCAA). As the economy gets better, companies will need to restart, hire more staff and generally gear up for an increase in business.

Companies will need capital to do so. Unless a company is sitting with a large cash balance, which for the majority is unlikely, they will need to tap into available lines of credit or do fresh borrowing. Lenders who have been understanding to date, may not wish to increase their exposure to certain companies or industries. If companies do not have the cash to operate, they will fail.

How will COVID-19 affect financial assets, delinquency and bankruptcy? I will now provide you with some thoughts to consider.

Canada household debt: Predictions and financial challenges for 2021

Canadians will be facing a great financial challenge as the economy rebounds from the economic impacts of the coronavirus. Canada’s economy pretty well made a sudden stop due to the COVID‑19 pandemic crisis.

This has actually caused extensive income losses, producing a tough scenario for many Canadian families. This is especially true for those that are highly indebted. From a financial stability point of view, a key worry is whether homes can stay up to date with their financial obligation payments. Highly indebted Canadians may very well end up in a financial crisis.

The COVID‑19 pandemic has a worldwide reach, and its aftermath is a lot more uncertain than how we recover from a normal recession. Economic activity will most certainly rebound as mandated lockdowns are gradually relieved. However, this will likely be a slow process, implying some of the macro-financial results of the pandemic might linger.

The Bank of Canada is worried about the 2021 financial challenges for all Canadians. To what degree can homes weather the storm? Canada’s central bank says that this eventually depends on:

  • the financial wellness of households last February 2020;
  • the efficiency of Canadian government support measures and policy activities targeted at the recovery; and
  • the rate at which the labour market recuperates.

The Bank of Canada will be looking at many Canada household debt factors as the economy recovers. Specifically concerning are the more financially vulnerable households. Things that will give the Bank of Canada concern about household liabilities are:

  • Mortgagors (the homeowners) with not many financial guardrails.
  • Home equity credit lines can supply a financial reserve however at the expense of increased borrowing.
  • Will government fiscal policy aid in supporting Canadians until household income can get back to or exceed pre-pandemic levels?
  • Unemployment rates may not be a fully accurate indicator of household revenue losses.

Only time will tell how 2021 unfolds for Canadians and the economy.

canada household debt
canada household debt

Canada household debt summary

I hope you enjoyed this Canada household debt Brandon Blog post. Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

canada household debt
canada household debt
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Brandon Blog Post

DEBT COLLECTIONS NEWS: EXPECT MENACING DEBT COLLECTIONS ACTIVITY TO PICK UP AS THE ECONOMY REOPENS

debt collections
debt collections

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this debt collections Brandon Blog, please scroll to the very bottom and click play on the podcast.

Expect debt collections activity to pick up as economy reopens: experts

On March 2, 2021, The Canadian Press published an article by Salmaan Farooqui titled Expect debt collections activity to pick up as economy reopens: experts. The crux of the article is that credit specialists state Canadian consumers who owe money must prepare for debt collection agencies to increase their activities as the Canadian economy reopens.

During 2020, lenders and by extension, their collections agencies, had eased up on debt collections from Canadian households and companies. The reason for this drop in demands being made on outstanding debt was the COVID-19 pandemic. Lenders knew that all Canadians were hurting and there were even some loan deferral programs put into place.

But these credit experts are now seeing signs of debt collections picking up. Statistics Canada reported that the Canadian economy started to bounce back in January 2021. No doubt this pickup in the economic activity is making creditors consider if now is a good time to start taking action to try to collect on credit card and other delinquent debt.

As the article indicates, there is a fair bit of pent-up demand now for collection agency services. So if you are one of those expecting calls from debt collection agencies, here are some tips that they do not want you to know.

Debt collections: What is a debt collection agency?

The best answer is found in the question itself: A debt collection agency is an organization that collects debts. Now, ask yourself the follow-up question: What is a debt? It’s money that you owe to another person, company or organization.

In essence, debt collection agencies are hired by businesses and individuals to collect money that is owed to them. The agencies work for the creditors and not for consumers.

In Ontario, collections agencies or debt collectors are people or companies who:

  • obtains or arranges for settlement of debts owing to a person or company;
  • sells forms or letters claiming to be a debt collections system;
  • offers debt settlement services; or
  • buys up from lenders different types of debt that are in arrears and tries to collect on the debts.

Ontario debt collectors need to pass the eligibility requirements to register and operate a collection agency.

Debt collections: What debt collectors do

When a person or company is unable to pay what is owed, they are said to be in debt. When a creditor cannot collect the debt, the creditor may contact a debt collection agency for assistance.

A debt collector contacts the individual or business that owes the money and attempts to collect debts owed to the debt collector’s client. Debt collectors earn a commission of around 25% of the money collected. They are not allowed to harass or threaten people to get money.

In Canada, the law on debt collections and debt collectors is set by the individual provincial governments. In Ontario, the Collection and Debt Settlement Services Act, R.S.O. 1990, c. C.14 sets out all the requirements that collections agencies and each collection agent must abide by.

debt collections
debt collections

How Reputable Collectors Operate

We have all heard horror stories about collectors. Reputable collectors use their reputations to help recover funds. For example, if you are a lawyer specializing in debt collections, you use your reputation to persuade clients that you will recover the funds owed to them. If you are a supplier, you can use your reputation to persuade a debtor to pay. If you can prove your reputation, you have a better chance of collecting the monies owed to you.

Let’s say you’re a collector, and you’ve been retained to collect on a debt. The debtor has previously agreed to repay the debt but has not yet done so. What do you do next? Reputable debt collectors will first send a demand letter that also acts as a debt validation letter.

In the letter, they confirm the debt and give a certain period of time for the debtor to pay. If the debtor does not then contact the collector to try to enter into a debt settlement plan, then the collector starts calling the debtor to collect on the debt. But there’s a chance that these activities will not be enough to get the debtor to pay. In fact, the debtor might even become hostile. In that case, a lawsuit may be their next step.

What to Expect When You Have Debt in Collections

Canadian debt collectors are regulated by the province they operate in. They keep creditors from giving up on their credit delinquencies. In most cases, debt that gets to the debt collections stage is in the hands of a debt collector within a few months of the date the debt went into default. Debt collectors have the power to negotiate settlements for delinquent debt. Their success rate in collecting on debt is better than that of a creditor. The debt collector will make one or more attempts to collect on the debt, usually first by mail and then by phone.

If you have received a letter from a debt collector, or you are being sued for any outstanding debts, you are at a turning point in your financial life. You may have already begun to feel overwhelmed and don’t know where to turn. If you have been sued, the court may have already ordered you to pay. This can feel overwhelming, but there are options for you to consider.

With a debt in default, credit scores suffer. Debt collectors will report any unpaid debt to the credit bureaus, regardless of whether or not the debt is legitimate. It will negatively affect your credit score.

This is because the credit bureaus consider unpaid debt collections to be a negative financial obligation or credit risk. If you have a debt in default, you are probably worried about your credit score.

Debt collections: What Can a Collection Agency Do To Me in Canada?

A collection agency can demand payment for an outstanding debt. When the debt is handed over to a collection agency to try to recover the debt, that places a bad mark on your credit report. With you being in debt collections, you will have to pay some money if you want to settle the debt. The payment will depend on the situation, and there is a lot to consider when making a decision.

For example, you will need to consider how much money you owe and how much the collection agency will require you to pay. When you have outstanding debt, it is important that you make sure you either pay it in full if you can afford to, work out a payment plan to pay the full amount over time or, see if you can settle with the collection agency for a reduced amount you can afford to pay immediately. This will avoid the potential for the collection agency to turn the account over to a lawyer and take legal action against you.

debt collections
debt collections

Debt Collections: Can a Collection Agency Charge Interest in Canada?

The rate of interest that some debt collection agencies charge their customers is quite high. The reason is that the type of debt they are collecting, such as credit card debt, originally charged a high rate of interest on late or defaulted payments, or on the outstanding balance if you only made minimum payments.

A lot of Canadians do not know that a debt collection agency in Canada can charge interest on the outstanding financial obligation. A collection agency may be able to charge interest on the debts they are collecting. Nevertheless, this can be no greater than what was originally described in the agreement between the lender and customer.

So, while they can bill you interest just like a lender can, they cannot control how much the interest is and cannot tack on any extra charges, such as for their collection service.

Debt Collections: What Should You Do If You Are Being Pestered By a Collection Agency?

So, what should you do if they won’t leave you alone? Well, the most effective answer is to, certainly, answer them and agree to pay your financial obligations. This can be done by paying completely, setting up a payment plan, or reaching an agreement to pay a lesser amount immediately.

Each option will have its pros and cons, and its success relies upon your financial scenario as well as preferences. Typically speaking, it is best to pay the financial debt completely. However, I recognize that can be challenging, specifically if the amount of debt you owe is quite considerable. Any way that you are able to get this debt off of your credit report as well as off of your back is a good thing. Any one of the techniques I mentioned is much better than just allowing the financial debt to age and worsen.

The debt collection agencies will be calling

Information from Equifax Canada reveals that just 24 percent of debt-ridden Canadians who accessed deferral programs beginning in 2020 were able to utilize the breathing space to improve their credit situation.

So what we discussed so far is:

  • The Canadian economy seems to be starting its recovery and should show economic growth in 2021. For sure there are still people feeling pain in different sectors of the economy and we are not finished with the shutdown conditions in Toronto and elsewhere in Ontario.
  • How the debt collections business works in Ontario.
  • There are many Canadians who are debt-ridden.
  • If everyone in Canada pulled their credit report only 24% of the reports would show an improvement since the COVID-19 pandemic began.
  • The news according to the experts is that there will be growth in the debt collections industry. These businesses are going to return to make their phone calls to consumers trying to collect on old unpaid debts. They may even start legal action against some borrowers.

So what is next as the economy and consumer confidence pick up is that debt collections activities will pick up again too. What can the remaining 76% of Canadians who could not improve their situation since the COVID-19 virus hit do when the bill collectors call? There are various options for them, and the 24% that wish to still make improvements to their credit reports and credit scores. Here are some suggestions.

debt collections
debt collections

6 fantastic reasons to create and follow a household budget to track your household spending

As you know, I have written many blogs on the benefits of preparing, monitoring and following a budget for your household spending. The advantages of doing so include:

Here are 6 fantastic reasons you should have a household budget plan:

  1. A spending plan offers you control over your cash: A budget plan is a list of all sources of your monthly income and all your expenses that you need to make those monthly payments on. It enables you to plan how you will use your cash. As opposed to money just flying out of your wallet, you make willful decisions on where you desire your cash to go. You’ll never have to wonder at the end of the month where your cash went.
  2. A family budget keeps you concentrated on your financial objectives: Budgeting will permit you to fulfill your economic objectives – paying down debt should be the primary objective so that you don’t get nasty calls from the debt collectors. Then you can allocate savings for other purposes such as an emergency fund, a vacation, money for a retirement savings plan and purchasing a home. With a budget, you’ll recognize specifically what you can afford and you can choose where your cash is spent. For example, if your immediate objective is to save for that down payment on a condo or house, then you might need to abandon that vacation you intended to take. Your budget plan will inform you precisely what you can or can’t afford.
  3. A household budget will make certain that you don’t spend what you don’t have: Credit cards provide such ease of use but that is also what makes them really easy to up your spending since it does not feel like there is any real money traded in the deal. Canadians can rack up serious charge card bills and land up deep in the red before they realize what’s happened. When you create and adhere to your budget plan you have to count every little amount you spend, even if it’s a credit card purchase. You will not wake up deep in the red, wondering just how you arrived at that place.
  4. A spending plan will prepare you for the unanticipated: Every budget plan should have a rainy day fund for those unforeseen expenses. It’s suggested that you must budget for 3 months worth of costs for when there may be an unexpected layoff or various other unplanned major expenditures. Do not be alarmed; you don’t have to create that 3-month cash fund immediately. Grow your fund up gradually. If you haven’t started one yet, then even a small amount each month set aside is an improvement.
  5. A family budget minimizes stress: Many Canadians panic on a monthly basis about where the money will come from to pay their expenses. A budget will offer you peace of mind. It shows you just how much you earn and also what your expenses are. If need be you can decrease unneeded expenses or try to get added work to live within a balanced budget plan. Say goodbye to panic at the end of the month.
  6. A budget plan can help you get the retired life you’ve been dreaming of: Saving for your retirement is very crucial and your spending plan can help you save for your future. Set aside part of your revenue on a monthly basis for retirement savings. Begin early and also constantly stay with it. The money you save now will certainly determine the kind of retired life you can anticipate.

When budgeting alone is not enough and you need some debt settlement

In many previous Brandon Blogs, I have described the important role of the community-based non-profit credit counselling organization. I am not talking about for-profit debt counselling services that have inviting advertising and jingles. Those kinds of organizations you must stay away from. In fact, one is defending a class-action lawsuit in British Columbia. If the class-action lawsuit is successful, it and companies just like it will be put out of business.

These companies suck fees out of the debtor until they cannot pay anymore. Then they walk you down to their favourite licensed insolvency trustee to file a consumer proposal. Consumer proposals are the only federal government-approved debt settlement plan. Only a licensed insolvency trustee can administer consumer proposals.

You could have saved the fees that you really couldn’t afford to pay in the first place, just by going for a no-cost consultation first with the licensed insolvency trustee.

What I am talking about is the true non-profit debt counselling agency. They do not charge you fees. They can review your budget to make sure that it is realistic and give you additional help. They can also try to strike a deal with your creditors for you to either pay the full balance out over time without additional interest or penalties or, a reduced payout now.

Can you raise money on a payment plan that you can afford the monthly payments?

Should you consolidate your unsecured debts? Consolidation is the combining of unsecured debts into one low monthly payment with one creditor. These loans typically carry a lower interest rate than the original credit cards or other unsecured debts. You have to make sure that the terms of the consolidation loan are as good as or better than their current credit card terms.

When it comes to getting a consolidation loan, there are a few things you should know. First, a consolidation loan is a loan that you take out to pay off multiple other loans. Second, you may already have a consolidation loan if you have a home equity loan or a home equity line of credit. If you have an unsecured loan, you can consolidate it into a secured loan, where the creditor can take your home if you don’t pay back the loan.

Turning an unsecured loan into a secured loan is not something you should do if you are already contemplating filing a consumer proposal or an assignment in bankruptcy. However, working with your financial advisor, accountant or non-profit credit counselling services agency, you may find that the risk is worth it. That would be because your budget shows that you can afford the lower monthly payment repayment plan if you get the debt consolidation loan. It is also good if it actually helps you avoid an insolvency filing.

debt collections
debt collections

Aggressive debt collections techniques may force some into an insolvency filing

This would be the last step if any of the above options do not work for some of the 76% of Canadians with high debt levels who have not been able to improve their debt situation since the onset of COVID-19 cases. The purpose of this Brandon Blog is not to go into detail on the consumer proposal or bankruptcy processes. I have written many detailed blogs before on each of these insolvency processes. You can find them by using the search function at the top of this blog.

These two would be a great place for you to start:

Debt collections summary

Everyone is hoping that the negative effects of the coronavirus pandemic will soon be in our rearview mirror and Canada will experience continued growth. The article referred to at the beginning of this blog says that the experts feel that soon credit collectors will be increasingly active. You will start receiving those harassing phone calls again. They will be taking action from debt against you, which could even include legal action against you.

If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with theIra Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

SMALL BUSINESSES IN CANADA ACCUMULATE MASSIVE DEBT DUE TO COVID-19

small businesses in canada
small businesses in canada

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this small businesses in Canada Brandon Blog, please scroll to the bottom and click play on the podcast.

Small businesses in Canada introduction

Did you know that since the start of the COVID-19 outbreak 1 year ago that small businesses in Canada racked up $135 billion worth of debt to stay afloat? Seven in 10 small businesses in Canada have actually borrowed money because of COVID-19. The average is almost $170,000 per business, according to a new survey released by the Canadian Federation of Independent Business (CFIB). In total, small businesses in Canada currently owe a cumulative $135 billion.

Out of these businesses that have increased their debt, 76% say it will take them over a year to pay it off. Eleven percent of respondents worry that they might not have the ability to repay their COVID-19 associated financial obligations ever! As far as returning to normal profitability (before the additional COVID-19 debt repayment), 40% are hoping to see it in 1 year’s time, but they really worry that it will take longer.

The purpose of this small businesses in Canada Brandon Blog is to discuss how important small business really is to the Canadian economy and what options exist for businesses and companies facing insurmountable debt challenges. Sometimes I will refer to small businesses in Canada as SMEs.

Contribution of SMEs to Canadian business

The best way to describe the contribution of SMEs to the Canadian economy is by looking at the most recent facts about small businesses in Canada reported by Statistics Canada.

How many businesses in Canada are small businesses?

The widely held definition of a small business corporation is a company that employs no more than 500 people and that has a total asset value of less than $15 million. Most of us have heard that a “small business” is one that employs fewer than 50 people — and that a “big business” has more than 500 employees. But what about businesses that fall in the middle? They are not quite small, but they’re not quite big either; they all fall into the category of SMEs.

In Canada, 91 percent of businesses fall into this in-between category, and there are roughly 3.5 million businesses in total. That’s a lot of businesses to keep up with.

What is the contribution of SMEs to exports in Canada?

Small businesses in Canada are not just small versions of large companies. They are different beasts altogether, and their individual contributions to the Canadian economy are just as important as those of their larger counterparts. In fact, SMEs contribute almost 50% of the country’s exports, and if they were taken out of the picture, exports would fall by almost 40%.

In 2018, exports of items were valued at $522.8 billion, of which 41.1 percent was attributable to SMEs. More than 50,000 Canadian companies exported goods, the huge majority of which were SMEs (97.4 percent).

How many people were employed in Canada in 2019?

In 2019, roughly 16.1 million people were employed in Canada. Private sector businesses employed 76.2% of the total number. The public sector employed the balance of 23.8%.

The definition of small businesses in Canada ranked by firm size using the number of employees are:

  • Small companies (1 – 99 workers)
  • Medium-sized businesses (100 − 499 workers)
  • SMEs (1 − 499 employees)
  • Large companies (500+ workers).

What is the distribution of employment across the private sector?

The variety of people employed defined by the business size of the employer varies significantly between the private and public sectors. In 2019, 88.5% of employed individuals in the economic sector worked for small businesses in Canada, compared with 76.2 percent of those used by public companies of the same dimension.

For the five-year period 2014-2019, Canadian employment ranks had a net gain of 1,076,100. Just over 70% of this increase is attributed to the private sector employment and less than 30% to the public sector.

How many businesses appear and disappear each year?

From these statistics, we see that the contribution of SMEs to economic growth is huge. These small and medium-sized businesses make up the majority of businesses in Canada. These key small business statistics show just how important these Canadian businesses are to the survival of the Canadian economy.

An increase or decrease in the number of businesses is the net result of the appearance or disappearance of businesses over a given period. This is often referred to as “creative destruction.” Between 2001 and 2016, the business birth rate was greater than those that died, except for two: in 2013 and in 2016, when more businesses disappeared (97,151 and 95,889) than were created (95,326 and 95,176),

There are more business births each year than those that disappear, other than for 2 years; 2013 and 2016. According to a Business Development Canada report from the Business Development Bank of Canada, there are more than a quarter of a million businesses in the country at any one time each year. More than 40,000 disappear.

The report was based on data from Statistics Canada’s Business Demography Statistics, which tracks businesses based on the number of active and inactive corporations, and Entrepreneurship in Canada, which tracks self-employed and “indeterminate” businesses. The Statistics Canada information is that business formation is on the rise, and the rate of business deaths has decreased.

This variation between the average birth rate for these two sectors can be explained by the entry cost and different levels of competition. If this is, indeed, the case, higher birth rates would be observed in sectors with a lower entry cost or with a higher level of competition than other sectors.

So more small businesses in Canada appear than disappear every year according to these findings. These statistics of course were from time periods all before the coronavirus pandemic.

small businesses in canada
small businesses in canada

What proportion of new businesses survive the first 15 years?

Every year, an average of 128,000 new businesses are started in Canada. According to the CFIB, about 10% of these new businesses close their doors within the first year. By year 10, that number has risen to 25%. Those are pretty alarming statistics, no matter how you look at them.

What this means is that most new businesses are doomed to fail in their first year, and many of the rest will only survive a few years beyond that. Here are some more alarming statistics on the percent of SMEs enterprise survival rate:

  • there is a 45.8% chance that a business will survive for one year;
  • a 32.3% chance that it will survive for two years;
  • an 18.3% chance that it will survive for three years; and
  • a 9.5% chance that it will survive for five years.

How many small businesses in Canada could close permanently amid a pandemic

The number of small businesses in Canada that survive for ten years (and beyond) is quite low, so it is important to recognize those that are able to make it. So two essential business owner characteristics have to be eternal optimism and being a solid business planner when starting a new business because of the high failure rate.

Now take those long odds for a business survival rate and layer a global pandemic on top of that. The COVID-19 pandemic is nerve-wracking enough to the general public, but for many small business owners, it is downright terrifying. According to the CFIB, close to half of the country’s small businesses could close permanently. The CFIB‘s findings were based on responses from 1,800 small business owners. The CFIB called for the government to provide small business owners with the tools they need to protect themselves and keep their businesses afloat.

The Public Health Agency of Canada reported an even scarier estimate. It felt that up to 70% of small businesses in Canada could close permanently amid a pandemic. The reason? Employees and customers won’t show up. The industry sectors that will be affected the most are the ones whose employees and customers are the most mobile and those whose employees have to work in crowds, like cabs, the hospitality industry, food and beverage, and theatres.

From what we have seen so far, they are correct.

The need for government assistance for Canadian business

Given this result, the Canadian federal government is investing heavily in maintaining and creating jobs to help the struggling Canadian economy. One of its investment vehicles is Canada’s COVID-19 Economic Response Plan which I have previously written about. This program is aimed at supporting business sectors that create jobs here.

This financial help program is designed to assist businesses that are having difficulties because of the pandemic-caused state of the economy. It is intended to support businesses that create jobs. Although many of the support programs have now ended, the Economic Response Plan still has the following programs:

Saving small businesses in Canada

So before COVID-19 arrived here, the odds were always against Canadian start-up businesses having a healthy long-term survival rate. With the pandemic, credible Canadian organizations estimate that we could lose 50% (CFIB) to 70% (Public Health Agency of Canada) of small businesses in Canada.

The life support program federal and provincial governments have instituted help. Multiple lockdowns obviously do not. What is really needed is some sort of return to normal operations so that business revenue can return. Then hopefully over time, profitability will follow. But that is really outside of all of our control.

However, as a licensed insolvency trustee (Trustee), there are things we are currently doing for businesses that cannot see any short-term prospects for being able to overcome their debt problems on their own. The kinds of businesses that we are seeing fall into two categories; viable and non-viable.

The first thing I do as a Trustee is to get a good understanding from the business owner as to the history of the business and the reasons why the business owner believes the company has gotten itself into financial trouble. I also want to get a snapshot of what the assets and liabilities of the business are and I try to form an assessment as to whether the business is viable or not. Even if viable, does the entrepreneur have the energy, mindset and desire to manage a business turnaround. Finally, I need to understand the cash flow requirements of the business and is there a source of funding.

I then analyze all this information and form an opinion as to what the realistic options are for the company and its business. Depending on each situation, the range of options are:

  • The business operations and debt levels are such that they are not serious enough and the company, over time, should be able to work itself out of a short-term cash crunch through some imaginative management of the company. Perhaps even an informal restructuring of sorts.
  • The business is viable but needs to do a formal restructuring in order to keep the good parts of the business so that it can become profitable again and continue to provide jobs to Canadians. The process would be either a Division I Proposal under the Bankruptcy and Insolvency Act (Canada) (BIA) or a Plan of Arrangement under the Companies’ Creditors Arrangement Act (Canada) (CCAA).
  • If a formal restructuring is not possible, perhaps a sale of the business assets is required and the buyer will operate the assets as an operating business. In this case, a secured creditor will enforce its security in a receivership, through either a private appointment or a court appointment.
  • Finally, maybe corporate bankruptcy is required either in concert with the secured creditor enforcement or by itself if there are no secured creditors. This would allow for the necessary protection to give the time to liquidate the assets, either as a going concern sale or a pure liquidation. The funds obtained from the sale would then be paid to the creditors, in priority of their claims.

Entrepreneurs are obviously scared of any formal insolvency proceeding

The idea of a formal insolvency proceeding makes an entrepreneur feel like a failure. I know they can feel discouraged, but the business isn’t in trouble because senior management did something wrong. You didn’t fail. Business conditions changed. Especially under today’s pandemic circumstances.

Now you’re ready to move forward with your business, but you need some help. That’s what the BIA and CCAA are designed to do; to help your business make a new start. Insolvency proceedings are there to provide a safety net for people and companies. It’s a tool that responsible people use to save a good business after a setback.

Don’t worry what your customers might think about you if your business goes through a formal insolvency proceeding. You won’t be the first and you won’t be the last.

Small businesses in Canada summary

I hope that you found the question posed in this small businesses in Canada Brandon Blog. If you are concerned because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option, call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with theIra Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

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CANADA EMERGENCY WAGE SUBSIDY: HELPING YOUR COVID-19 BUSINESS RECOVERY

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.

Introduction

Statistics Canada says the annual cost of living rate went negative in April as the economy came to a standstill in the very first full month of the pandemic. The agency says the consumer price index for April fell 0.2 percent compared with a year ago as energy rates did a nosedive. It was the very first year-over-year decline in the CPI since September 2009. As a result, on May 15, Prime Minister Justin Trudeau announced some amendments to existing Federal government support programs, including the Canada Emergency Wage Subsidy program, to help during this COVID-19 pandemic.

Millions of Canadians have actually lost their jobs due to the COVID-19 pandemic. As our economic recovery gradually begins, any place feasible to do so securely, Canadians need to return to work. Businesses opening up again safely will bring life back into the Canadian economic climate. That is exactly why the federal government generated the Canada Emergency Wage Subsidy (CEWS) (initially called the Canada Emergency Response Benefit) in March.

Canada Emergency Wage Subsidy extended

I have previously written about the federal government assistance programs to help both workers and employers. The overall umbrella name for all the programs is the COVID-19 Economic Response Plan. When the CEWS program was launched, critics quickly pointed out that it did not cover all types of businesses. They also wondered if the original program, scheduled to end June 30, was long enough to really help the economy.

On May 15, PM Trudeau introduced amendments to the program to help businesses get ready for reopening. These companies need to be able to rehire workers and with any luck perhaps hire even more than they had when the state of an emergency shutdown was declared. So, the CEWS is extended for 3 extra months to August 29. The CEWS covers 75% of an employee’s salaries– up to $847 per week – for eligible employers. For those able to additionally benefit from the Temporary 10% Wage Subsidy for a period, any credits taken under that program for a pay period will decrease the amount available to be claimed under the CEWS for that exact same time period.

The 1 part of your business your customers are most worried about

So businesses currently have some runway to get restarted. This is a good thing as businesses will certainly need funding to reactivate. Specific businesses might need a few extra staff members than they had before the shutdown. I just read this morning an article about what restaurants and other businesses may have to do to make customers feel at ease about returning.

The one area of the business that people might fear is the washroom. The article raises the following questions that should be answered before reopening:

  • How many people can be in there at one time?
  • Is every other urinal in the men’s room going to have to be sealed off?
  • Are the barriers between stalls and urinals sufficient?
  • Do the sinks have automatic taps or will patrons have to use the handles to turn on the water?

So a new job category that really hasn’t been seen much since the early 1960s might just come back – the washroom attendant. The business will have to make sure they can prove to their customers and clients that the washrooms are being cleaned on a very regular basis. Someone will have to make sure that there are only a limited number of people in a washroom at one time so that social distancing can be maintained. This could lead to new jobs!

Other amendments to the CEWS

The CEWS will ideally keep encouraging companies to rehire staff and even broaden where possible. The federal government has actually pledged, for moving forward, that it will work with company and labour stakeholders on any other changes that might be required.

Among the important things, they will certainly be looking at the 30% income drop limit for eligibility. As companies start-up, satisfying that revenue test should not be an obstacle to growth. Although all businesses require aid, certain ones could not fulfill the revenue decline test. There are two main factors. The revenue decline examination is on a monthly basis. Considering that the first half of March businesses were operating normally, many could not meet the test for that month. Startup companies probably couldn’t either.

Other businesses did not qualify not because of the revenue decline test, but because their business did not meet the original definition. So, Justin Trudeau announced broadened eligibility for the CEWS benefit. Previously, only corporations and charitable organizations were eligible employers for this wage subsidy benefit. Now the list has been expanded.

The eligible employer list has now been expanded and includes:

  • individuals (including trusts)
  • taxable corporations
  • persons that are exempt from corporate tax (Part I of the Income Tax Act), other than public institutions:
  • non-profit organizations
  • agricultural organizations
  • boards of trade
  • chambers of commerce
  • non-profit corporations for scientific research and experimental development
  • labour organizations or societies
  • benevolent or fraternal benefit societies or orders
  • registered charities
  • partnerships consisting of eligible employers

Public institutions continue to not be eligible for the subsidy. This includes municipalities and local governments, Crown corporations, public universities, colleges, schools and hospitals.

Canadian Emergency Business Account (CEBA)

In my April 13 blog, COVID 19 BUSINESS SUPPORT: CANADA EMERGENCY BUSINESS ACCOUNT REVIEW, I described the CEBA in detail, as the program then existed. On May 15, at the same time, he was announcing the extension and changes to the CEWS, PM Trudeau also announced an expansion of the CEBA program. The expansion is meant to include an important part of the Canadian economy that was previously excluded. I think the exclusion was inadvertent, in the government’s rush to get the program out. So Justin Trudeau announced that the CEBA program will also now include:

  • Sole proprietorships/partnerships.
  • Any other form of owner-operated businesses.
  • Businesses that hire contractors but not employees, so they do not have a payroll account with the Canada Revenue Agency.
  • Family-owned businesses where remuneration is paid via dividends, not salary.
  • Businesses where the proprietor uses a personal bank account for business purposes rather than a business operating account.
  • Newly created businesses.

This should go a long way to removing previous inequities in the CEBA program.

So now, the list of ineligible businesses is relatively narrow, being:

  • A government organization or body, or an entity owned by a government organization or body.
  • A union, charitable, religious or fraternal organization or an entity owned by such an organization or if it is, it is a registered T2 or T3010 corporation that generates a portion of its revenue from the sales of goods or services.
  • A business owned by any Federal Member of Parliament or Senator.
  • One that promotes violence, incites hatred or discriminates on the basis of sex, gender identity or expression, sexual orientation, colour, race, ethnic or national origin, religion, age, or mental or physical disability, contrary to applicable laws.

Summary

I hope you found this Canada Emergency Wage Subsidy Brandon’s Blog helpful. It should be of particular interest to contractors, developers and builders in Ontario.

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Revenue and cash flow shortages are critical issues facing entrepreneurs and their companies and businesses. This is especially true these days.

If anyone needs our assistance, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Stay healthy, well balanced and safe and secure everyone.canada emergency wage subsidy

 

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CANADA BANKING INFO COLLECTION: YOUR EXPECTATIONS VS REALITY ACCORDING TO JUSTIN TRUDEAU

Canada banking info collection: Introduction

On October 29, 2018, the Hon. Candice Bergen (Portage– Lisgar, CPC), stood in Parliament during Question Period. She talked to troubling reports this previous weekend that Statistics Canada was taking part in Canada banking info collection without the consent of the people whose info was being asked for.

Statistics Canada notified financial institutions, charge card businesses as well as credit reporting companies that it anticipates them to turn over individual financial information of a minimum of half a million Canadians without their consent or authorization. Financial institutions will not be able to tell their customers about the government demand for their financial transactions.

The noticeable issue is, that with the lengthy history of federal government personal privacy violations, Canadians are appropriately stressed over both the collection as well as the security of their individual economic deals. Ms. Bergen needed to know why the Liberals are accumulating the individual information of Canada without telling them.

Canada banking info collection: PM Justin Trudeau reacts

Our PM reacted by stating that the federal government is ensuring that the individual information of Canadians is secured. Stats Canada will certainly make use of the anonymized information for analytical functions only. No details will be revealed.

He stated that he understands (which is a way of repeating rumours or hearsay, or worse, that he truly does not understand whatsoever) that Statistics Canada is proactively involved with the Privacy Commissioner’s office, to make sure Canadians’ financial details stays safeguarded and private. High-grade and prompt information is important to guaranteeing that federal government programs stay pertinent as well as efficient for Canadians.

Canada banking info collection: Ms. Bergen had not been pleased, and neither ought to we

Ms. Bergen responded that the Liberal federal government strategies to get access to the individual details of Canadians without their knowing about it or permission. This consists of details like payments, internet purchases, charge card purchases, cash withdrawals and e-transfers between members of a family.

She wants to know if the Prime Minister will do the right thing. Will he guarantee Canadians that this invasion into their lives will be stopped?

Canada banking info collection: PM Justin Trudeau reacts by attempting to fault the Conservatives

Our PM reacted by stating that Canadians appropriately expect that federal government agencies like Statistics Canada will collaborate with the Privacy Commissioner. He said that Stats Canada will make certain that Canadians’ exclusive lives are shielded. Good words up until we hear that CRA obtained accessibility to the info, or even worse, cyberpunks!

Then for the good part. PM Trudeau said to the House of Commons and all Canadians that it was the Conservative federal government that selected to end the long-form census as a method of protecting an individuals’ exclusive info. So our PM is saying that in some way our private financial transactions is a straight substitute for basic analytical demographics? I don’t think so.

PM Justin Trudeau after that doubled down by stating that the Conservatives’ assaults on information and privacy continue.

Canada banking info collection: Mr. Alain Rayes (Richmond– Arthabaska, CPC)

Mr. Alain Rayes also participated. He repeated that Canadians expect the federal government to secure their private details, yet the Liberals wish to gain access to private information on 500,000 Canadians without their approval. They intend to consider loan repayments, ATM withdrawals, credit card transactions, financial institution money transfers and social insurance numbers.

Exactly how can the Prime Minister warrant these activities, which are plainly an offence of Canadians’ personal privacy?

Canada banking info collection: Blah, blah, blah.

Prime Minister Trudeau responded with more of the same. He said again the government will constantly make sure (a warranty?) that the individual information of Canadians is safeguarded. He said that Stats Canada will make use of the anonymized information only for analytical goals. No details will be revealed (does analytical purposes only include analysis by Canada Revenue Agency?).

He repeated that Statistics Canada is proactively involved with the Privacy Commissioner’s workplace on this task and is dealing with it to make certain Canadians’ info continues to be secured and private.

My personal view is that the primary federal government program that would certainly most take advantage of understanding my private financial information is the income tax collection system in Canada!

Canada banking info collection: The law

The Personal Information Protection and Electronic Documents Act (S.C. 2000, c. 5) (PIPEDA), Canada’s federal private sector privacy legislation, was specifically amended on the issue of privacy. Schedule I of Section 5 of PIPEDA states that:

“4.3 Principle 3 – Consent
The knowledge and consent of the individual are required for the collection, use, or disclosure of personal information, except where inappropriate.” (emphasis added).

What is one of the exceptions?

4.3 Principle 3 – Consent
“Note: In certain circumstances personal information can be collected, used, or disclosed without the knowledge and consent of the individual. For example, legal, medical, or security reasons may make it impossible or impractical to seek consent. When information is being collected for the detection and prevention of fraud or for law enforcement, seeking the consent of the individual might defeat the purpose of collecting the information.”

So, looking at the exceptions, this only bolsters my hunch. I am convinced this is not only to evaluate the viability and effectiveness of existing social programs. Rather, it will be used to evaluate and amend the effectiveness of tax investigation programs. This will provide direct new information to the Canada Revenue Agency to bolster current and start new investigations. That is why the information is being collected without Canadians’ consent to invade their privacy.

Canada banking info collection: May I have this dance?

Justin Trudeau just kept dancing and blaming Conservatives. This new invasion of privacy really doesn’t have anything to do directly with insolvency. However, if I am correct in my guess, and the information is going to be used by CRA, then it may well.

People may very well have engaged in tax evasion. I, of course, do not condone it. Criminal charges aside, Canadians who evade taxes and get caught will now have a huge income tax bill to pay. Many won’t be able to.

There will be many high tax debtors who will not be able to afford a voluntary payment with CRA. Such a voluntary payment plan will need you to pay your original income tax debt. You will not get any reduction in all penalties and interest. So you will be paying in full to Her Majesty. For those who will not be able to afford such a voluntary payment plan, bankruptcy is definitely not your first option. You would have to look at a debt settlement restructuring proposal as a first choice. Bankruptcy should be your last option.

Canada banking info collection: What about you?

If you have received legal advice that you don’t really have a case, or you can’t afford to fight it out in Court or pay the income tax debt that renders you insolvent, then you need the help of a professional trustee.

The Ira Smith Team has years of experience of negotiating with CRA on behalf of tax debtors. If you are an individual person and owe CRA and your other creditors, other than for any loans secured by your home, less than $250,000, you can enter into a consumer proposal debt settlement plan. If you owe more or are a corporation, we can still negotiate with CRA and restructure you with a restructuring proposal debt settlement plan.

Our approach for each file is to create an end result where Starting Over, Starting Now takes place. This starts the minute you are at our door. You’re simply one phone call away from taking the necessary steps to get back to leading a healthy, balanced hassle-free life, recover your money and move on to the next investment opportunity.

In conclusion, call us today for your free consultation.canada banking info collection ira smith trustee

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BABY BOOMERS CHARACTERISTICS: BABY BOOMERS DIVIDED ON WHETHER OR NOT TO DOWNSIZE

baby boomers characteristicsBaby Boomers characteristics: Introduction

There are now some new Baby Boomers characteristics. Baby Boomers are now between the ages of 54 and 72. Their new characteristics are now defined by definitely not being a one-size-fits-all group. The broad range in their ages and stages has divided them on whether or not to downsize.

Baby Boomers characteristics: The issues

Baby Boomers are healthier and working longer than previous generations; as a result, they’re not ready to sell their homes and downsize or move into retirement facilities. Others may not want to sell and downsize because of the hot housing market. And there’s a significant generational change that is preventing Baby Boomers from downsizing – their kids haven’t moved out.

Baby Boomers characteristics: Some stats

Statistics Canada reports that just over 33% of young adults, aged 20 to 34, lived with their parents in 2016. In Ontario, the number was higher – 42.1%.

According to a survey by Royal LePage:

  • 59% of Baby Boomers are renovating rather than moving
  • 52% of Baby Boomers say they won’t be downsizing
  • 18% of Baby Boomers said they didn’t expect their children to leave home before the age of 30
  • 9% of Baby Boomers said they didn’t expect their children to leave before 35
  • In Ontario, 50% of Baby Boomers would help their children buy a home
  • 44% of Baby Boomers would be willing to contribute up to 25% of the cost of their child’s home

Baby Boomers characteristics: Baby Boomers not downsizing

Although economists expected Baby Boomers to downsize in large numbers, that just isn’t happening. With the relatively new phenomena of adult children living at home, Baby Boomers are making the decision to renovate instead of move.

Downsizing is increasingly shifting to their 80s when they can no longer care for their homes. Although it’s a generous thought to help your children buy a house, Baby Boomers really need to consider whether or not that makes good financial sense for them or can potentially jeopardize their retirement. In addition, helping your children purchase a house that they can’t afford may do more harm than good.

Baby Boomers characteristics: Some Baby Boomers need a financial plan

If you’re in a financial quandary because you’ve helped your adult children purchase a house, or if they now find themselves with a house they can’t afford, seek professional help immediately. Ira Smith Trustee & Receiver Inc. is a full-service practice serving people just like you throughout the Greater Toronto Area (GTA) who need a plan for Starting Over, Starting Now. Give us a call today. We can give you peace of mind and set you on a path to debt free living.

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THE COST OF LIVING IN CANADA: 6 REASONS THE COST OF LIVING IN TORONTO CAUSES DOWNSIZING

the cost of living in canadaThe cost of living in Canada: Introduction

If you’re a Toronto resident then you’ve seen the cost of living in Canada continuously rise. However, the cost of living in Toronto has risen over 20% faster than in the rest of Canada. And, the cost of living is now 36% higher than it was in 2002.

The cost of living in Canada: What StatsCan says

According to Statistics Canada, a few categories were responsible for most of the gains – gasoline, food from restaurants, passenger vehicles, homeowner replacement costs and mortgage interest costs.

The cost of living in Canada: 6 Reasons The Cost Of Living In Toronto Causes Many To Downsize Their Life

In the last 10 years, the cost of living has skyrocketed. In 2008, Toronto’s living wage – the minimum amount necessary for an individual to meet their basic needs – was $16.60 per hour or an annual income of $34,000.

Since then:

  1. The cost of childcare in Toronto has risen by roughly 30%
  2. Rent has gone up an average of 13%
  3. Public transit cost has increased by 36%
  4. The average price for a 1 bedroom condominium downtown is about $400,000
  5. An average price for a single detached home $1.2 million
  6. The average price for a litre of gasoline is $1.37/litre (with predictions that it could soon reach $1.50/litre)

The cost of living in Canada: How much do you need to live comfortably in Toronto?

According to a report by the Toronto based think-tank, the Wellesley Institute, a single person between the ages of 25-40 would need to make between $46,186 and $55,432 – after tax – to live the good life in the Greater Toronto Area.

They arrived at that figure by first accounting for the basic costs of survival, like food and shelter, and then considering the costs associated with quality of life categories like social participation, which includes things like hobbies, travel and socializing.

“This figure indicates the total cost of supporting an individual’s ability to thrive, which is defined as meeting their basic material needs, enabling connections to community and family, supporting educational and professional advancement, and ensuring long-term financial security,” the report states.

The cost of living in Canada: Is the cost of living forcing you to change your lifestyle?

For many, the answer is yes. You can’t cut down or out on necessities like housing, food, transit, and daycare. But, you can:

The cost of living in Canada: Change your lifestyle before too much debt ruins your life

Changing your lifestyle to live within your means is the smart thing to do, or you could end in a debt spiral. If you’re already there, the Ira Smith Team can help.

We can’t lower the cost of living or find you a fantastic, cheap place to live, but we can help you solve your financial problems. Give us a call today because with immediate action and the right plan you can be back on your feet financially Starting Over, Starting Now.

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ANNUAL COST OF LIVING: WHY EVERYTHING RISES BUT YOUR SALARY

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annual cost of living

Annual cost of living: Introduction

We all read the headlines. The annual cost of living is rising, interest rates are rising, house prices are rising, food prices are rising, everything is rising; everything except for our paycheques. How can Canadians expect to keep up with their financial obligations when their paycheques are the only things that seem to be frozen in time?

Annual cost of living: The Canadian consumer price index

According to Statistics Canada, the consumer price index is:

“…an indicator of changes in consumer prices experienced by Canadians. It is obtained by comparing, over time, the cost of a fixed basket of goods and services purchased by consumers.”

Statistics Canada measures the consumer price index against the year 2002. So as the base year, the 2002 consumer price index is the 100% level. The consumer price index has risen steadily every year since then. The annual average Canadian consumer price index for 2017 was 130.4%. The January 2018 Canadian consumer price index was up 1.7% as compared to January 2017. So, as you can see, up is the only direction our expenses go.

Annual cost of living: Frozen salaries breed discontent

This situation has created a great deal of dissatisfaction among employees. According to a poll conducted by Indeed (a major world-wide job hunting site):

  • 83% of Canadians are dissatisfied with the pay they’re receiving
  • More than 50% of employed Canadians are definitely going to ask for a raise this year
  • “There’s no money in the budget” is the top reason for why requests for a raise are rejected, accounting for 63% of rejections (women hear this excuse far more often than men — 77% of the time, compared to 54% for men
  • The average employee plans to ask for a raise of nearly $12,000, though 23% said they wanted a raise of $16,000 or more (Indeed cautions that when asking for a raise to do your research into the current pay scales for your job)

Annual cost of living: Unemployment is down and salaries are stagnant

Even though Canada has added 423,000 jobs over the past year and the unemployment rate has fallen to 5.7% (the lowest since 1976), salaries haven’t kept up. It seems that employers have gotten away with it by hiring temporary and/or contract workers. So, while your cost of living increases, your salary doesn’t.

Annual cost of living: What happens when the rising costs force you to go deeper into debt?

We wish you luck in getting your pay raise! But, if you’re one of the many Canadians who can’t keep up with your bills now and are feeling that pain, the Ira Smith Team can help.

Debt won’t eliminate itself. You need a professional trustee who understands your pain and can explain all of your options and come up with a solid financial plan for moving forward Starting Over, Starting Now. Give us a call today and book an appointment for a free, no obligation consultation. You’ll be happy you did!

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HOLIDAY SPENDING MISTAKES IN CANADA: 12 SECRETS TO SOLVE THEM

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Holiday spending mistakes in Canada: Introduction

Other than for some last-minute small items, your holiday spending is complete. The credit card bills will arrive next month. You will soon find out if you made any holiday spending mistakes in Canada.

Maybe you overspent and will now have too much debt you won’t be able to repay. Perhaps you spent wisely, but it will put you over the top given your current debt level. Regardless, you now need to know how to help yourself financially from holiday spending mistakes in Canada.

Holiday spending mistakes in Canada: You are not alone being in debt

Are you fighting financial threats daily? Do you wish you could unlock how to help yourself financially? If so, you are not alone. Lots of Canadians have fought the good fight to barely survive. There have been many articles in the media of the dangers of living with way too much debt. Many Canadians are living paycheque to paycheque.

The Bank of Canada has warned Canadians for years now. With the rate of interest having been so reduced, Canadians have taken on much debt. Now interest rates are beginning to rise. You have to know how to help yourself financially, so that you will not only be able to make your minimum payments, but you will also be able to start reducing your debt. Your holiday spending mistakes has now increased the pressure on you. I do not want to see anyone living this way.

Holiday spending mistakes in Canada: Who this information will help

You know you have debt troubles and this information will help if you:

  • often pay expenses after the date they are due;
  • on a regular basis write cheques that don’t clear your bank;
  • use room from one charge card to get a cash advance to pay the minimum due on a different card;
  • get telephone calls from a debt collector;
  • routinely ask pals or relatives for money;
  • utilities are threatening to cut you off;
  • cannot live to a balanced budget based on your current family income;
  • need to take a second job just to meet normal daily living expenses;

Holiday spending mistakes in Canada: Statistics Canada reporting

Statistics Canada reported that on average, at the end of 2016, Canadian families have a debt-to-income ratio of $1.67 for each dollar of after-tax revenue. At the end of the second quarter of 2017, they report that the ratio has risen to $1.68. Although Canadians’ net worth is also rising, primarily due to rising housing prices. So now housing prices have dropped, yet the debt remains.

If this sounds like how you have lived, then you need to take corrective action now from your holiday spending mistakes before it is too late. Bankruptcy should not be your first option. There are bankruptcy alternatives which include credit counselling, debt consolidation and a consumer proposal.

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Holiday spending mistakes in Canada: Our 12 secrets on how to help yourself financially

If you are living in a debt threatening zone, it is currently the time to act to turn things around. Consider the following 12 secrets to stop your debt from spiralling out of control.

  1. Safeguard Your Health – Make sure that you are taking good care of yourself and your health, both physical and mental. You won’t be any good to yourself or your family if you are ill.
  2. Don’t Talk Yourself Out of What You’re Worth – Don’t put up with the things as they are of your job without seeking out new opportunities. Don’t sell yourself short. Make sure you understand if there are opportunities awaiting you that will pay you more than you are currently earning. Stay current on your marketable skills.
  3. Keep It Simple – Don’t over-complicate things. Don’t get involved with difficult payment plans. Put yourself in a position where if you need an essential item, you can pay for it. Don’t get sucked in by sexy advertisements for things that have long-term payment plans.
  4. Give to Your Future Before Giving to Others – There are many worthwhile causes that clamour for our money. Make sure your own house is in financial order before you give to others. Volunteer your time and not your money. You will find it very rewarding and you will be helping both yourself and others at the same time. Just say no to relatives and friends who ask you for money, until you have no debt yourself.
  5. Make Savings Automatic – Otherwise known as pay yourself first. Set up a special bank account and have the same percentage hived off of your paycheque every payday. Do not touch the funds in that special bank account, until you have enough money to invest in a safe investment. Have this money work for you over and over.
  6. Control Your Impulse Spending – Make sure that you have a monthly budget and follow it. Your budget should account for all your necessary living expenses for you and your family AND allow the percentage you are hiving off each pay period for your investment savings account. If there is anything left over, this balance should be used for debt reduction. Don’t buy on impulse as you will regret it.
  7. Evaluate Your Expenses, and live frugally – We can all get by on less than we think. This ties back into your budget. Make sure that your necessities of life and your regular payday savings are all accounted for. By cutting out expensive daily coffee drinks and other non-essential items, you will be surprised how much you will have leftover for debt reduction.
  8. Invest In Your Future – Upgrade your skillset. Take a course that will make you more marketable. Make room in your budget for this type of expense, as it will generate more income for you for the long-term future.
  9. Keep Your Family Secure – Involve your entire family in the family budget process. Everyone needs to be on the same page and working towards the same goals. Meet regularly to go over your real performance as compared to budget. When everyone knows the plan is working, they will all feel secure and try even harder.
  10. Eliminate And Avoid Debt – Make sure that you are not taking on any new debt. Use budgeting to make sure that you allow a certain amount out of your monthly budget for paying down debt. Even small amounts add up over time. You will see and feel the difference it makes in your life.
  11. Use The Envelope System – Set up a separate envelope for each of your weekly necessities, based on your budget. Only take out enough cash for those amounts and place the right amount of cash in each envelope. Do not use credit cards to pay for the necessities; just use the cash in each envelope. Make the cash in your envelopes last the entire week, then rinse and repeat.
  12. Pay Bills Immediately And Automatically – If you don’t like the envelope system, here is another idea. Pay as much as you can online from your bank account. Set up regular automatic monthly payments so that the bills are paid. You can also use this method for your regular payday savings account. Make sure you budget properly so that you realize what money is coming out of your account in a month automatically so that you don’t overdraw your bank account.

Holiday spending mistakes in Canada: Will you need immediate help from your holiday spending mistakes?

These 12 steps will ensure that you get back on the road to financial health as soon as possible. You can recover from your holiday spending mistakes.

If you find that you have too much holiday or other debt, debt collectors are harassing you and you can’t keep them all happy, then you need to take more action. I say more action because it will be in ADDITION to the above 12 steps. What you will need to do is to immediately speak to a professional trustee.

The Ira Smith Team has a cumulative 50+ years of experience helping people who are facing a financial crisis and we deliver the highest quality of professional service. Make an appointment for a free, no-obligation appointment today and Starting Over, Starting Now you’ll take your first steps towards financial freedom. We can devise a plan so you can come back from your holiday spending mistakes in Canada.

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THE NEW ECONOMIC ATTACK IS ON CANADA MIDDLE CLASS

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Canada middle class – what is your definition?

My definition of Canada middle class is the group under a new economic attack because of housing costs. Affordable rental housing for Canadians has become an oxymoron in term. In fact, rental housing has enslaved young Canada’s middle class, forcing them to spend so much of their incomes on a place to live, that many are in danger of becoming homeless.

What Statistics Canada says

According to the experts, spending more than 30% on housing is unaffordable. This doesn’t take into account food, clothing, transportation or any of the other necessities of life. According to data from Statistics Canada:

  • There are more than 4 million renters in Canada
  • Over 40% of all renter households are spending in excess of 30% of their gross income on rent
  • 20% of all renter households are spending in excess of 50% of their gross income on rent which housing advocates say puts them at high risk of becoming homeless
  • In Vancouver and Toronto, 45% of renter households are spending more than 30% of their income on rent

Not just a big city problem for Canada middle class

The lack of affordable rental housing is not a problem exclusive to the big cities. Renters in small cities across Canada are also struggling financially. In the Toronto area, average rents are higher in the suburban communities of Milton and Vaughan than in the City of Toronto. And, Mississauga ranked among the worst cities in the country when it comes to a shortage of affordable rental housing.

Traditionally people rented apartments to save money and eventually buy a house. With young Canada middle class enslaved by rental prices, buying a house isn’t even on their radar; keeping a rental roof over their heads is a primary concern.

What to do if you have debt problems

Are you living paycheque to paycheque because you’re enslaved by rental prices? We can’t help you find a cheaper place to live, but we can help you deal with what may seem to be insurmountable debt. Call Ira Smith Trustee & Receiver Inc. today. We’ll review your file and come up with a plan so that you can be Starting Over, Starting Now.

Call a Trustee Now!