During the early days of the mortgage business, brokers would require a lot of paperwork…
Now you can listen to our blog, “Get Debt Forgiveness in Canada in 2021” while on the go.
If you’re in debt, you could need debt forgiveness rather than a repayment plan. Answering three questions can help you figure it out:
- Are you only making the bare minimum payments on your bills each month?
- Does your debt amount rise as a result of you borrowing more money each month to cover your bills?
- Are you delinquent on payments or relying on payday lenders to make ends meet because your current debts are too high to bear?
If you responded yes to any of these questions, you may be eligible for debt relief.
Debt forgiveness refers to a reduction in the amount you owe, either partially or completely. In exchange for a new payment plan, creditors agree to cancel part or all of your financial obligation.
If you have a lot of debt and are looking for debt relief, you’ve undoubtedly realized that you won’t be able to budget your way out of it. You may have been turned down for a debt consolidation loan or been told you don’t qualify. Both alternatives can assist you in managing your debt, but none reduces the overall amount you must repay.
Only three reputable debt forgiveness programs exist in Canada, all of which offer some type of payment forgiveness.
1. Plan for Debt Management
Technically, a debt management plan, or DMP, is not a debt forgiveness program. It’s a repayment strategy. It does offer interest relief, but you must return the entire principal amount owed.
It’s simple to figure out your payments in a DMP: multiply the entire amount of your current obligations by the number of years you have to pay them off. Your credit counselor may suggest a three-year plan if you can afford it. If you can’t afford it, they may suggest spreading the payments out over a period of up to five years.
Simple consumer debt, such as credit card debt, bank loans, and bill payments, can be addressed through debt management plans given by not-for-profit credit counseling companies in Canada. If you have college debt, tax debt, or payday loans, a DMP will not benefit you.
Your creditors’ participation is likewise entirely voluntary. If one of your creditors refuses to forgive a portion of your debt, they can opt-out. This is why most payday lending companies refuse to participate in the program.
2. Consumer Proposal
A consumer proposal is the only formal, legal debt forgiveness scheme accessible in Canada.
A consumer proposal is a debt settlement program overseen by Licensed Insolvency Trustees and supervised by the Bankruptcy and Insolvency Act.
Your trustee will meet with you to assess your financial situation and determine how much you can afford to repay. They will use this information to assist you in negotiating a settlement with your creditors. While the amount you pay will vary depending on what you own, how much you earn, and even who your creditors are, settlement reductions of up to 80% of the entire amount owed are fairly uncommon.
Find out how much you’ll have to spend. Use our debt forgiveness calculator to see what your alternatives are.
All unsecured creditors are bound by a consumer proposal. Most unsecured debt, including payday loans, is eliminated as a result.
Forgiveness of Student Debt
Start with the government’s Repayment Assistance Program if you’re having trouble paying back your student loans. If this isn’t enough, or if you have other unsecured obligations, a consumer proposal for student loans may be an alternative. If you have been out of school for seven years, your student loans will be canceled.
Forgiveness of Tax Debt
Revenue Canada, too, must abide by the provisions of an agreed proposal, which implies that CRA tax debts such as HST, source deductions, and income tax must be eliminated.
A consumer proposal does not contain secured obligations like your mortgage or vehicle loan. The majority of people choose to keep their home or car by continuing to make payments. If, on the other hand, you find that you can no longer afford your vehicle payments, you can surrender it and any gap will be reimbursed as part of the proposal.
3. Bankruptcy for Individuals
If you can’t afford to make a partial repayment arrangement to your creditors, you may need to contemplate bankruptcy. Your creditors forgive or write off your debts in bankruptcy in exchange for you surrendering non-exempt assets and making monthly payments based on your income.
Do I have to report any canceled debts that have been written off on my tax return?
No. This only applies to Canadian corporations. As part of a bankruptcy or proposal, your personal debts are forgiven, and you get a fresh start.
Is it necessary for me to be concerned about my credit report?
Your credit report will include all debt forgiveness schemes in Canada.
A DMP and a consumer proposal will both appear on your credit report as an R7 repayment plan and will stay on your report for three years after they are completed. A bankruptcy will appear on your credit report as an R9 and will stay on your record for 6 years after you’ve been discharged.
If you responded yes to any of the three questions at the beginning of this post, you probably don’t have decent credit in the first place. You can’t borrow any more since you have too much debt currently, even though you have a decent credit score today because you haven’t missed a minimum payment. A debt forgiveness program allows you to restart your financial life, allowing you to better manage your finances, save money, and develop a better credit history for the future.
Be aware of debt forgiveness companies that aren’t reputable
Debt settlement firms have essentially vanished in Canada as a result of recent regulatory developments.
Companies that advertise government debt relief programs, on the other hand, are not regulated to do so. They offer to guide you through the procedure and demand a large upfront cost to gather information.
Never pay a fee upfront for a debt relief program. Licensed insolvency trustees across Canada provide unrestricted, no-cost consultations.
What should I do next?
If you’re having difficulties paying your bills, remember that ignoring the situation and borrowing additional money isn’t the answer. Make an appointment with a Licensed Insolvency Trustee in your area immediately. We’ll assist you in determining your debt forgiveness alternatives so you can get out of debt.
The Bottom Line
At Lionsgate, we specialize in helping people obtain funding private mortgages for land purchases as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, leave us a message and we will try to connect you with local realtors and sourcing for financing.
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