Covid19 Pending Debt Crisis: Don’t Panic – But Use the Down Time Wisely. March 26, 2020 1:43 am Published by colleen Leave your thoughts Covid19 Pending Debt Crisis As a professional who deals with federally regulated debt elimination programs (bankruptcy and consumer proposals) we have had numerous calls from very anxious people. Its hard to believe that less than 2 weeks ago, children were still in school and excitedly planning for Spring Break. Are we heading towards a pending debt crisis? Our advice to people at this point (from a debt management issue) is don’t panic and don’t make any rash decisions just yet. Government Assistance Both federal and provincial governments have been making legislative changes daily to help ease the burden for consumers and small business. Some of the assistance to far includes: Rent relief – for consumers – in BC this is available up to $500 https://globalnews.ca/news/6731389/renters-financial-support-coronavirus/ Extension for filing and paying Personal Income Tax for 2019 https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update.html Employment Assistance – Government of Canada https://www.canada.ca/en/department-finance/economic-response-plan/covid19-individuals.html#new_canada_emergency_response_benefit Creditor Collections – Court Closures Individuals and small business are concerned about debt payments, however, many credit card companies and collection agencies have publicly stated that they will not be pursuing outstanding debts at this time. Some are offering payment relief flexible options to support individuals and businesses affected by the pandemic. If you can’t make your payments, call your creditors and discuss your options. But don’t just hide from your creditors. They to have automatic systems in place to collect from you. Banks are still operating at reduced hours. If you have debt with one bank (like a visa card or line of credit) you may want to consider opening a new bank account with a different institution. For instance, individual credit card companies will swoop into your savings accounts if you fail to pay your minimum payments on a credit card. If you switch banks to an institution where you don’t have debt, any income you earn, or government support you get will be yours to keep and will not be scooped by creditors. Even if some banks and creditors chose to try to collect by legal means, they would not be able to go to court as courts in BC are closed to all but very serious matter. So, if a creditor wants to try to have your wages garnished or seize assets, there is not much legal action that they can take at this time. Collecting for small personal debts would not be considered serious. Canada Revenue Agency – Postpones Debt Collection In order to help avoid a Covid19 pending debt crisis, the CRA has confirmed that they will not be pursuing outstanding tax debts at this time with any new actions or garnishments. However, ongoing garnishments remain. A bankruptcy or a consumer proposal still provides the best way to have any CRA ongoing garnishments removed. Once a bankruptcy or consumer proposal are filed, a Stay of Proceedings is invoked and all legal action against a debtor is stopped (stayed) But now is also the time to file any outstanding returns (prior to 2019). Use your down time wisely. Often, we deal with debtors who have been delinquent on filling and paying their personal income taxes. It may be that in order to access the new legislative support payments for both federal and provincial governments, individual Canadians who have been chronically non-compliant with the tax system may not qualify for such support. To qualify for federal assistance, it is reasonable to believe that there will be some requirement to confirm your income (and your family’s income) with CRA. For instance, the GST and Canada Child Benefit as it appears that their systems will be issuing some of the payments to individual Canadians. https://www.canada.ca/en/department-finance/economic-response-plan/covid19-individuals.html Commercial Landlords Commercial landlords generally have rights under their lease agreements to collect rents, start legal action, or seize goods on the leased premises. If you are a small business owner but not able to operate during this time of crisis, your best bet is to talk to your landlord to see what provision for rent that you can agree upon. At this time commercial landlords will be experiencing significant rental issues, and most will be willing to negotiate. A tenant that can pay a reduced rent, or possibly continue after a few months of no rent, will be significantly better than no tenant at all. But review your lease for your options and discuss with your legal counsel or a licensed insolvency trustee. Small Business If your business was a viable business before the crisis, it is likely that it will be viable again. You may just need a helping hand to get things started again when this crisis is over. Consider Negotiating with landlords for reduced or postponed rent Apply for wage subsidy for employees https://www.canada.ca/en/revenue-agency/campaigns/covid-19-update/frequently-asked-questions-wage-subsidy-small-businesses.html Cancel or park expenses that are not being used – utilities, cell phone, vehicles, internet, advertising. You will need to look at each of these types of agreements to make sure you understand the consequences of each decision that you make. Defer as many expenses as possible. If and when things get better, if you have a viable business and you are one again up and running you may find that the debt level is more than you can pay back. If that were to happen, you can always have an option to file a proposal to your creditors to reduce the debt you owe. Focus on What You Can Control For the time being, focus and what you can control such as staying indoors and practicing social distancing. Set a routine for yourself and your family. Purchase the goods that you need to stay healthy and safe. Know that Canada has incredible safely support systems and legislation which more being enacted every day. We can help. We are able to talk to you on the phone or via video call to help outline your debt options. Tags: consumer debt issues, covid 19, covid 19 debt crisis, debt crisis?, small business covid 19 Recent Posts Canadian Insolvencies Have Hit a 20-year Low Bankruptcy Discharge Handbook The Great Deferral – Effects of Covid-19 on Personal and Business Bankruptcy Covid19 – Debt Crisis – Help Available. Covid19 Pending Debt Crisis: Don’t Panic – But Use the Down Time Wisely.