Wedding season and love is in the air: But what about the debts your fiancé is bringing to the marriage?

It’s that time of year. Happiness abounds as we celebrate the optimism and promise of nuptials—but what about the financial implications of ‘tying the knot’? If you and/or your fiancé come to the marriage with debt, it’s wise to understand the implications.

First, prior to marriage it’s important to know your partner’s attitude to money. Are they are saver? A spender? A debtor? If you haven’t had the conversation already, it’s advisable to ‘check in’ on your shared or differing values regarding finances. You want to know sooner than later if you have a similar vision and goalsregarding how you will spend and save your money. Stats confirm that money issues are a leading cause of marital strife and break-up.

It’s important to know how much debt your fiancé is bringing to the marriage. Firstly, as an indicator of their approach to money matters and also to understand the debt load they are servicing. Their current financial obligations will now impact your ‘family’ finances for day-to-day living—and, your future plans. Ask too if they are current with their obligations to Revenue Canada (CRA). You won’t be liable for any debt they have to CRA but again, it’s an indication of their approach to personal finances—and, has implication to your joint lifestyle if they have significant arrears to address. Keep in mind: financial irresponsibility canlead to a poor credit score, later affecting the probability –or ease – of buying a new home or other large joint purchase.

If you intend to register or re-register real property (home, vacation property) in joint names upon marriage, get advice from a lawyer first. Understand the implications—including the very real likelihood that each of you is then deemed to have equal, shared ownership. Consider: you may have brought more assets to the marriage and if your partner was later to go bankrupt, half of (now) joint assets could be lost.

Getting a supplemental credit card under your spouse’s existing card may seem to make sense and perhaps comes with a ‘romantic notion’ of your new status as a couple. Understand the risk: the moment you make your first purchase on that secondary card you are now jointly and severally liable for all charges on that card whether made by you or your spouse. If your spouse defaults on the credit card you are responsible for the entire debt.

Got questions? Our Trustees are available to discuss your pre or post marriage debt issues. Contact us for a confidential, no-obligation, complimentary consultation. Call us toll free from anywhere in Alberta 310 8888.

Forget any potential tax refund, what if you owe money to Canada Revenue Agency?

Are you dreaming of a tax refund? Many of us are ever-optimistic and complete our tax returns (maybe with professional help) hoping a refund might be coming our way—to fund a vacation or, likely the better choice: to pay down credit card debt.

However, you may be one of thousands of Canadians who has not yet paid any personal income tax for the 2012 tax year, and/or owes for previous years (and hopefully has a formalized payment plan in process) or, is an outlier nervously avoiding the reality of several years of unfiled tax returns.

Paying personal income tax regularly – and fully – is often the bane of the self-employed. For entrepreneurs there may be no one tasked with diligently deducting (and remitting) tax, before income or a draw from revenues is taken.

Tax debt cannot be taken lightly. CRA has unique powers to make sure they collect what people owe. Knowing that none of us like to pay taxes they charge penalties and interest on all overdue taxes. It’s a policy designed to keep us on the straight and narrow. If you do get into arrears, CRA can withhold child tax credits and GST credits until the debt is paid. They can take money from your bank account or garnishee your wages without getting a judgment against you. CRA has millions of taxpayers and they are almost always unwilling to accept less than full payment.

I say ‘almost’ because there are situations where some relief from tax debt is available.

If you owe personal income tax and cannot pay the balance in full, you can explain your financial situation to CRA and negotiate a payment plan. For example, if you owe $1,000, you may offer to pay $100 per month for the next ten months. However, even if CRA accepts your offer, you will continue to be charged interest until your debt is paid.

Another option is to make a formal Proposal to CRA. Developed with the help of a professional Bankruptcy Trustee, a Proposal isn’t bankruptcy but rather a means to explore other ways to address a variety of debt problems. Making a Proposal to creditors (banks, stores) is quite common and can be a way to negotiate lower debt amounts and/or expanded repayment schedules.

When making a Proposal to CRA it is not a ‘for-sure’ opportunity to obtain a reduction of your tax debt (and extended payment terms). You must show that your filings are up to date, not fraudulent in your representation and, that prior to your Proposal you have been a taxpayer in good standing. You have to be able to make a case for extreme circumstances hindering your ability to pay the full amount as due—and demonstrate you are truly an honest and unfortunate debtor.

The Proposal will only include taxes owing prior to the Proposal date. Tax returns due during the Proposal period must be filed as required and any tax owing paid as it becomes due. Depending on your situation, payments could be made for up to five years.

The other option to addressing tax debt is bankruptcy. It’s a common misconception that personal income tax debt is not discharged by bankruptcy. This is not true; personal income taxes are covered by bankruptcy and this solution should be discussed fully with a Bankruptcy Trustee to ensure it might be the most viable solution to an individual’s distinct situation.

And, if you haven’t filed your personal tax return for several years, get the tax package and forms for the missing tax years from the CRA. Fill them out and send them in. If there is a balance owing you will have to pay a late filing penalty of a percentage of the tax you owe plus a percentage for every month you are late. You will also be charged interest on the outstanding amount. Check the CRA website for current percentage rates and other implications. There is no escape from CRA and addressing your tax situation will bring you some relief—eventually. Make sure you file regularly in the future and maybe, one day in the not too distant future . . . a tax refund will come your way.