Canadian Consumers Rightfully Showing Concern Over Rising Interest Rates

According to a recent Ipsos poll conducted by MNP LTD., the increased cost of borrowing due to rising interest rates is causing many Canadians to re-evaluate their relationship with debt. Seven in 10 people who responded to the survey say higher interest rates will cause them to think twice about how they spend their money, while four in 10 admit they will be in financial trouble if rates go up much further. One in three say they’ve already felt the effects of increases that took place in July and September.

Compared to previous survey results, the average household now has $149 less at the end of the month after bill and debt payments than they did in June. With more than two in five (42%) households already within $200 of not being able to pay their bills, almost one third (28%) worry future increases could push them toward bankruptcy.

Conc?erningly, the results indicate that while Canadians are going to be stressed by more expensive debt, their debt burden will likely get worse rather than better over the foreseeable future. When presented with six unpredictable scenarios, only a small percentage believed they could deal with them without taking on more debt. In fact, almost two thirds (58%) expect to take on more debt over the next year just to cover basic living and family expenses.

The issue here isn’t just the cost of debt increasing. Instead it is a combination of people not earning enough to finance their lifestyles and not having enough emergency savings to cover unexpected costs – instead using inexpensive credit to get them through. Now that the cost to service that debt is increasing, many who were already overextended to begin with are finding themselves unable to make ends meet.

The survey also uncovered how a lack of financial literacy has pushed many households into difficult situations they may not be able to recover from. Seven in 10 people responded they believe they have a solid understanding of how interest rate increases impact their financial situation, but opinions differed when respondents were asked both how they could tolerate either a one percent interest rate increase or an additional $130 in monthly interest payments. Though both represent the same value, opinions were marginally favourable about the one percent increase, yet equally negative about the dollar value. This indicates many people hesitate to make important changes until they see tangible consequences. However, by then it’s often after it’s too late.

Other key poll highlights included:

Compared to other age groups, millennials are the most likely to be feeling the effects of interest-rate increases (40%). They are also the most concerned about the potential negative effects that rising interest rates will have on their financial situation (49%). In fact, four in 10 (38%) Millennials express concern that rising interest rates could move them towards bankruptcy, more so than Gen Xers (30%) and Boomers (18%). Millennials are also the least likely of their counterparts to say they have a solid understanding of how interest rate increases impact their financial state.

Lower income earning Canadians express the most concern towards rising interest rates.

Homeowners are slightly more optimistic that they will have the capacity to absorb an interest rate increase of 1 percentage point or an additional $130 in interest payments on debt.

The prospect of rising interest rates is prompting more concern in some parts of Canada than others. Fifty-five per cent of Albertans say that if interest rates rise, they’ll be more concerned about their ability to repay their debts– ahead of those in BC and Quebec (47%), Saskatchewan and Manitoba and Atlantic Canada (45%), and Ontario (44%).

Concern about rising interest rates triggering a move toward bankruptcy is significantly more pronounced in Alberta (37%), followed by Quebec (34%), Atlantic Canada (32%), Saskatchewan and Manitoba and Ontario (23%), and B.C. (22%).

Only a minority of Canadians are confident that they wouldn’t incur more debt if faced with a change in their relationship status like a divorce (33%), unexpected auto repairs or purchase (31%), having to take three months off work due to illness (30%), a job loss or wage decrease (28%), a death in the family (27%), or paying for someone’s education (26%).


The above post originally appeared here:

Grant Bazian, CIRP, LIT, is President of MNP Ltd. Licensed Insolvency Trustees

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Canadian Problems that Infrastructure Investment Can Solve

Many advocacy groups out there today seem more focused on simply gaining attention while promoting their utopian ideals with little concern for the deeper economic impacts their positions would have on what makes Canada the Canada of today. However, there does exist out there a few champions and voices of reason.

Since 1925, the Canadian Chamber of Commerce has connected businesses of all sizes, from all sectors and from all regions of the country to advocate for public policies that will foster a strong, competitive economic environment that benefits businesses, communities and families across Canada.

It’s refreshing to see an advocacy group providing real-world, substantive, no nonsense, and pragmatic recommendations for the benefit and future of all Canadians and their quality of life.

In late July the Canadian Chamber of Commerce released a report titled Stuck in Traffic for 10,000 Years: Canadian Problems that Infrastructure Investment Can Solve, which examines how lack of proper infrastructure is leading to lost opportunities and wasted time for both Canadian companies and residents.

The full list of topics covered in the report includes:

  • Facilitating trade through the Asia-Pacific Gateway and Corridor
  • Improved digital access and investment across Canada
  • Maximizing the potential of Northern communities and businesses
  • Enhancing the Québec-Ontario trade corridor
  • Getting oil and gas to global markets
  • Green electrification and transmission

In summary from the report:

There is an opportunity for the next decade of infrastructure investment in Canada to be truly nation changing by unleashing the private sector and targeting specific economic problems through public investment. The problems identified in this report are not the only problems in Canada that infrastructure investments should target, nor is infrastructure the sole means of solving them. However, they are important economic issues that demand federal focus to better prepare Canada for the economic, environmental and technological changes that lie ahead.

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Click here to view the full report.

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How Much Can CRA Garnish?

When you owe money, no matter how much, to any creditor, one of the most problematic forms of collection action you face is a wage garnishment. When the debt is to the Canada Revenue Agency (CRA), things become even more problematic. If you’re concerned that a CRA garnishment may be headed your way due to unpaid taxes, you may be curious about the process or wondering how much can CRA garnish.

Firstly, the process by which CRA garnishes wages is different from the process followed by other creditors. Other creditors must first obtain a judgement against you in court, thereby making you aware of the garnishment. They will also formally notify you of a garnishment. Once this has been done, your employer is made aware of the garnishment and must then forward a portion of your wages to the creditor to pay off the debt.

With CRA garnishments, no court order is required. Instead, a notice is sent directly to your employer notifying them of the garnishment. They are required, by law, to comply. If they do not, they could face legal action. Thus, many are not even aware that CRA has implemented a garnishment until receiving a paycheque that is far smaller than expected.

How much can CRA garnish? This is another important consideration when you’re dealing with CRA debt.

If you are an employee on payroll with taxes deducted at the source, CRA can garnish up to 50% of your wages. If you are a sub-contractor, or receive a different form of income, such as a pension, CRA can garnish up to 100%.

As you can see, CRA wage garnishments are serious business, and can wreak havoc on your finances in a short period of time.

This post originally appeared at:

Spergel is a Licensed Insolvency Trustee in North York, ON. Call 416-310-4321 for more information on how they may be of help if you’re having issues with CRA. At Spergel, they have over 25 years of experience dealing with CRA debts.

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Bankruptcies Drop but More Deals with Creditors

Here’s another reason for our clients to remain vigilant in both their credit granting processes as well as their accounts receivable follow-up, including outsourcing problem accounts to Case Receivable Management Inc.

Let’s start with the good news. Less Canadians are filing for bankruptcies. Yay! Now for the bad news, more are asking for help with their debt. New numbers from the Office of Superintendent of Bankruptcy Canada (OSBC) show that while bankruptcies are down, consumer proposals are up across the country.

Bankruptcies Are Down 5.8%

Less Canadians declared bankruptcy in June 2017. OSBC reported 60,459 bankruptcy filings in June, a 6.7% decline from the month before. This represents a 5.8% decline from the same time last year. Bankruptcies are a tool used by people that need immediate relief from creditors. Generally speaking, this is pretty good news for Canada.

Consumer Proposals Are Up 2.6%

Consumer proposals are on the rise across the country however. OSBC reported 62,718 consumer proposals in June, a 3.7% decline from the month before. This still represents a 2.6% increase from the same time last year. While bankruptcies are down, more people are asking their creditors for more time.

For those unaware, a consumer proposal is a formal agreement to settle debts with creditors. Basically, it’s like telling your creditors “I can pay you back, just not all of it, and I need more time.” Consumer proposals can only be filed if debts are less than $250,000.  This is a potential precursor for bankruptcies, so these are still of concern to the broad market.

The fact that more Canadians are utilizing consumer proposals is a good thing. The temporary arrangement with creditors to prevent going into full bankruptcy is a tool that those struggling to make payments should seek before dealing with the consequences of bankruptcy. How effective consumer proposals will be at staving off debt remains to be seen.

Usually there isn’t a flood of new income to help manage bills in the near future, but hopefully these people just needed a few months. Although there is increasing evidence that people are using their real estate to pay off debt, using loans secured against their equity or by utilizing reverse mortgages.

This post originally appeared in Canada’s largest independent housing news outlet

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Negotiate with CRA?

If you owe tax debt and the Canada Revenue Agency (CRA) comes calling, the best step is to pay what you owe in full. The CRA will not forget about you. It may not have contacted you until this point but, now that it has, this is an issue that isn’t going to just go away.

However, if you do not have the money to pay in full, you might be tempted to try to negotiate with the CRA. The reality is that, the CRA does not negotiate. It wants the money that is owed to it.

No matter how good of a negotiator you are, the CRA will not lower the overall amount of tax debt that you owe. You owe this money and the CRA wants to receive it. In fact, CRA agents do not even have the authority to reduce tax debt under the Income Tax Act. If you cannot pay what you owe and do not cooperate, rather than negotiate, the CRA will instead use its considerable powers to collect the debt. This could include freezing your bank accounts, garnishing your wages, or seizing your assets.

Obviously, you do not want it to get to that point.

Depending on your financial situation, the CRA may give you the option of paying your tax debt via a payment plan. This probably seems like a good idea at first, after all, who doesn’t want to pay their debts over time in several smaller payments rather than a lump sum? However, the reality is that, before the CRA will consider a payment plan, they will want full details of your financial life.

This might seem like a reasonable request at first, however, remember that the CRA wants its money. In fact, it wants the money owed to it first. For this reason, the payment plan that the CRA proposes may not in fact be what is best for your financial situation.

For example, assume that you owe $2700 on your credit card and spend $100 a month on credit card debt repayment. The minimum payment that the credit card company requires might only be $20. You are paying more each month in hopes of paying down your debt faster and reducing interest payments. However, the CRA might look at these numbers and conclude that you are paying $80 a month to the credit card company that you could instead be paying towards your outstanding tax debt. This means that the payment plan the CRA proposes could put you in a bad financial situation.

As you can see, if you’re not careful, you can get into trouble trying to negotiate with the CRA. If you are in a position where you cannot pay your tax debt in full, it’s best to work with a professional when working out a payment plan.

This post originally appeared at

Call 1-888-868-1400 for more information on how they can help.

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Does consumer confidence appear in your balance sheet?

A rising currency and a red-hot labor market has sent Canadian consumer confidence to the highest in three years. The Bloomberg Nanos Canadian Confidence Index a gauge based on telephone polling climbed to 60.5 in the week ended Aug. 4, the highest since July 2014 and close to a record. The improving sentiment suggests Canadians are shrugging off the impact of higher borrowing costs after the Bank of Canada raised interest rates last month, focusing instead on an accelerating economy that has driven the jobless rate to the lowest since 2008 and the purchasing power benefits that come with a higher dollar. Read more here

As consumer confidence rises so too does the appetite of consumers to borrow.   Unfortunately the confidence level of your customers cannot be magically monetized and included in your corporate balance sheet.  This is another reason we are encouraging our clients to maintain vigilance in the management of their accounts receivable.

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Interest Rate Fears Overblown?

Trudeau Officials are fearing the impact of speedy rate hikes by the Bank of Canada. Officials within Prime Minister Justin Trudeau’s government are concerned the Bank of Canada is moving too quickly to raise interest rates, fearing higher borrowing costs could inadvertently trigger a downturn. Governor Stephen Poloz raised the central bank’s key overnight rate on July 12, 2017 for the first time since 2010, and another increase is expected by the end of the year. Officials are speaking anonymously because they’re not authorized to comment and are concerned a series of rate hikes would lead consumers to claw back spending, stunting a recovery from a two-year oil shock.

While Trudeau and Finance Minister Bill Morneau have steadfastly declined to comment on monetary policy, as is customary, some officials privately think Poloz hiked too soon. The concern comes amid global warnings that an era of rock-bottom interest rates has left consumers and countries alike over-leveraged and more vulnerable than ever to hikes.

There’s no sign the government will intervene publicly in any way. The discontent however, also seems to signal that Trudeau and Morneau also don’t plan to rein in a spending program, focused on infrastructure and payments to families, that’s projected to result in deficits totaling C$102 billion over the Liberal government’s first four fiscal years. Read more here:

Irrespective of how economic events unfold we strongly encourage our clients to maintain resiliency on their aging accounts receivable in Alberta and not allow the tepid improvement in the provincial economy in the first half of 2017 in any way be misread as a signal that “happy days are here again.”

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What Does the Bible Teach about Debt?

Not only has Canada become a debtor nation, but most Canadians are drowning in debt. Our day–to–day dependence on debt begs the question: What does the Bible say about debt?

First, the Bible warns that “the borrower is servant to the lender” (Proverbs 22:7). As such, we are warned against the folly of being excessively indebted to those who may be unforgiving in their demands for repayment. We ought to take seriously the wisdom of the proverb “Do not be a man who strikes hands in pledge or puts up security for debts; if you lack the means to pay, your very bed will be snatched from under you” (Proverbs 22:26–27).

Furthermore, Scripture condemns the failure to repay our debts as wickedness. In the words of the psalmist, “the wicked borrow and do not repay, but the righteous give generously” (Psalm 37:21). Likewise, the apostle Paul urges believers to diligently repay their debts (Romans 13:8).

Finally, whether in the theocracy of ancient Israel or the democracy of modern day Canada, God’s people are called to be good stewards of the resources with which he has entrusted them. If we lend we should do so with kindness, and if we borrow we should do so with prudence.

Whether secular or spiritual it is difficult to argue against the wisdom above from the Holy Scripture.

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Canadian Income Tax: Happy 100th Birthday!

Canadians will be interested (though probably not happy) to know that this year marks the 100th anniversary of the federal income tax. Conservative Finance Minister Sir Thomas White introduced it for debate July 25, 1917, three years into the First World War, just days after Parliament adopted compulsory military service. What conscription did for young men the income tax was to do for wealth.

Conventional wisdom says the tax was to be temporary. In fact, Sir Thomas said only that he hoped Parliament would consider it again after the war ended. Parliament did consider it. And we’re still paying.

The tax started as a levy on the very richest Canadians. In the early years, as few as one in 50 people paid. As late as 1938, only 2.3 per cent did. Now three-quarters of Canadians file returns, if only to take advantage of such benefits as the refundable GST credit.


Our top rate used to be middle-of-the-road in the G7. After last year’s federal budget, Ontario’s top rate of 53.5 per cent is below only Japan’s and France’s. Of the top 10 marginal tax rates in North America, seven are in Canadian provinces. B.C.’s lowest-in-Canada top rate of 47.7 per cent is higher than in 42 U.S. states. And top rates for U.S. states start at over $500,000, in some cases almost $1.5 million. In most provinces, by contrast, the top combined federal-provincial rate starts at $200,000.


Ottawa and the provinces together get more than a third of their revenues from income tax. The average OECD country gets less than a quarter. Only four of 35 OECD countries (the U.S., Australia, New Zealand and Denmark) rely on income taxes more than we do.


The 1917 income tax act comprised just 3,999 words and was only 10 pages long if you put it on a standard Microsoft Word page with 11-point font. The latest version contains more than a million words and takes up 1,406 such Word pages.


Just filling it out your taxes, or paying someone else to fill them out for you, now averages more than $500 a family in time and outlay. And that cost is regressive — a higher share of income for poorer than richer people.

Then there’s the economic cost from distortions in effort, investment, saving and education because of high marginal rates. Bev Dahlby of the University of Calgary estimates that in all provinces except Alberta a dollar of new income tax revenue creates more than a dollar of economic cost, so that the total cost exceeds $2 per every new dollar raised. In Ontario, the cost is almost $7 for every new dollar of revenue raised.

After 100 years it’s likely time for a change.

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Bankruptcy and Insolvency Act offences — types, detection, penalties

The Canadian bankruptcy regime was designed with two key purposes in mind – provide options to ‘honest but unfortunate’ debtors struggling with an unmanageable financial load and create an orderly means for creditors to recover amounts owed them. With the potential for abuse ever present, the Office of the Superintendent of Bankruptcy (OSB) has ways and means to detect and deal with offenders.


What constitutes a bankruptcy offence?

The common theme pervading bankruptcy offences under the Bankruptcy and Insolvency Act (BIA) is the intent by the debtor to deceive creditors and escape repayment with impunity. Offences can involve:

Documentation – falsifying a statement of account or hiding or destroying related documentation

Property – hiding or removing property or disposing of it at unfair, below-market values before or after bankruptcy

Credit – obtaining credit or good using false representations or without duly disclosing the bankruptcy to the creditor

BIA investigation – failing to cooperate fully and honestly with BIA examinations

Detection methods

Although the OSB has detection programs in place, bankruptcy offences are often discovered through complaints made by creditors. The Licensed Insolvency Trustee (LIT) may also uncover reasons for suspicion during the course of the bankruptcy process. The OSB may also learn of underhanded dealings through help by the members of the public.

Whichever means by which an offence comes to light, it must undergo examination by one of three special investigation units and always in association with the Royal Canadian Mounted Police (RCMP).

Serious Penalties – Case By Case

Offences under the BIA are punishable in a number of possible ways. Past cases have often involved imprisonment or other restrictions on personal liberty, such as probation, house arrest or curfew orders. Penalties may also include orders to perform community service or prohibitions from applying for credit. In most cases, the fraudulent bankrupt is ordered to pay amounts in restitution to the trustee.

The RCMP regularly reports bankruptcy fraud convictions on its website and its annals should serve as a warning to those who are tempted to use bankruptcy as an all-expense-paid free ride out of debt.

The original article was posted on and is available here:

Gehlen Dabbs is a commercial litigation law firm, with a primary focus on insolvency solutions and commercial disputes. They can be reached at 604-757-9380.

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