Archive for April, 2006

One concern that many individuals from Kitchener, Ontario have is: what is the impact that a personal bankruptcy or a consumer proposal will have on their spouse’s credit rating?

First of all, credit ratings are individual specific, that is, they only report the history of one person. The spouse’s name may appear on the credit rating under the information section. Therefore, the filing of personal bankruptcy or a consumer proposal by one spouse will not directly affect the credit rating of the other spouse.

The issue of concern is what debts are joint or co-signed. This would include any secondary credit cards on the main account. If the debts are joint, that means both spouses are responsible for the debts, jointly and severally. If only one person files a personal bankruptcy or a consumer proposal, the other party can be held responsible for all of the joint debts.

For more information on credit rating, please see Equifax at www.equifax.ca and/or Trans Union at www.transunion.ca.

At Hoyes, Michalos in Kitchener, Ontario, we work with many couples to review their debt situation and develop a plan for the future which deals with their past debts. To review your situation further, please e-mail us a question or call our Kitchener office at 747-0660 or 310-PLAN.

As a Chartered Accountant with an income tax background, I meet with many people from Kitchener, Ontario, who owe money to the Canada Revenue Agency (CRA or formally Revenue Canada). While each person’s situation is different, the solutions available to deal with the problem are often the same. I am going to provide an example of a situation I had from a meeting today.

I met with Joe (I have left out some details for confidentiality reasons and Joe is not his real name). Joe is a roofer and works as a subcontractor for a larger company. He is paid by cheque for the time he works. There are no deductions for income tax or CPP. As a subcontractor he is personally response for the income tax and CPP on his self-employment earnings.

Joe’s expertise was roofing – accounting is not something he was very good at. His income varied by month due to the weather and demand for his services. His income tended to be higher during the summer and lower (or none at all) during the winter months.

After three years of roofing, a CRA auditor contacted him. Joe had not filed his taxes during this time. Further, CRA assessed him for GST on his income as he had received in excess of $30,000 annually. To top it off, Joe was charged penalties and interest on all of these items.

The debts that Joe owes to CRA topped $40,000. Joe currently did not have the ability to pay this debt. Joe called Hoyes, Michalos & Associate Inc. in Kitchener, Ontario to review his options.

With meeting with Joe, we reviewed the options of dealing with CRA for payments, finding a bank loan, filing a consumer proposal, or to file personal bankruptcy. We considered Joe’s future plans and goals to help him decide on a path that will deal with his past debts and allow him to have a future that he would like. Joe filed an assignment in personal bankruptcy that dealt with his past debts and gave him a fresh start. Joe now does his bookkeeping month and makes regular instalments for future taxes to prevent future tax debts.

At Hoyes, Michalos in Kitchener, Ontario, we assist many individuals work on a plan for the future and deal with their past debts. We understand that a financial strain can be a very stressful experience, so we encourage you to e-mail us a question or give our Kitchener office a call at 747-0660 or 310-PLAN to arrange a free meeting to discuss your situation in more detail.