Posted on Wednesday, October 19, 2005Tax returns not filed?One type of situation that we see at Hoyes, Michalos & Associates Inc., is when an individual has not filed his/her income tax returns in the past few years as the returns will likely result in a tax debt that the individual could not handle along with his/her other debts.Tax return debts occur for various reasons, including self-employed income with no tax withholdings, cashing out RRSP's, working more than one job, receiving pension income, and other situations. If there is a tax balance owing on an outstanding income tax return and it is filed late, Canada Revenue Agency (CRA) will automatically charge a 5% late filing penalty and then accrue interest & penalties on the unpaid balance. We always recommend that you have your outstanding tax returns prepared and filed so that the debt is known and a plan to deal with debt can be arranged. If the tax debt and your other personal debts become unmanageable, there may be a formal option available for you to get a fresh financial start. To discuss your situation in detail, please contact us or call 310-PLAN. Posted by Scott Schaefer, CA @ 4:50 PM
Posted on Monday, October 17, 2005Disclosing Your DebtsMany times when I am meeting with someone who has financial difficulties, they wish to keep one of their credit cards, or keep paying one of their creditors themselves.Bankruptcies and proposals done under the Bankruptcy and Insolvency Act ("BIA") must include full disclosure of all assets and liabilities. The BIA was designed to be a transparent process that treats each creditor equally. Thus you cannot pick and choose which creditors you wish to include in the process; you must disclose all of them fully. Even secured debts such as mortgages and car loans, and non-dischargeable debts such as student loans are listed so they are aware of the process and can file the necessary paperwork to confirm their documents are in proper order. If you do not disclose all your creditors, there is the chance they will find out after the process has started and you will again be faced with phone calls and threats of legal action. Although those creditors are captured under the bankruptcy/proposal process, there may be questions as to what else you did not disclose. Finally, if a creditor is only aware of the bankruptcy/proposal when the process is completely finished, if there were monies paid to your other creditors, that creditor is entitled to obtain from you the percentage amount of monies paid to the other creditors. It would be much better to have those monies paid out of the funds received by the trustee rather than by you after the bankruptcy or proposal process is finished. Should you wish to discuss this issue or your financial situation, please e-mail us or call us at 310-PLAN. Posted by Norma Yau, Trustee @ 1:52 PM
Posted on Sunday, October 16, 2005My Spouse Is Considering Filing For Bankruptcy - How Will That Affect Me?Your assets and liabilities are separate from those of your spouse. They will not be affected by your spouse's bankruptcy.Where it becomes complicated is when you and your spouse have liabilities and assets in common. For example, if you and your spouse both signed for your line of credit, then your spouse will be relieved of their responsibility to repay that loan by filing for bankruptcy, but you will not. You will have to repay the loan in full. It can really become complicated when you and your spouse own assets jointly. For example, lets say you and your spouse jointly own your family home and there is $20,000 of equity in the home. Well, your spouse's 50% is worth $10,000. The bankruptcy process requires the trustee to collect that $10,000. As you can see from the above, these situations require professional advice. If you find yourself in this predicament, call or email us so that we can meet with you to work out a plan. Posted by Benny Mendlowitz, CA CIRP, Trustee @ 10:14 PM
Posted on Wednesday, October 12, 2005Do I need to include all my creditors and can I keep my credit cards?Often people ask me at a first meeting or consult, when we discuss their options, if they need to include all the people they owe money to, including family and friends and also if they can keep a credit card.The answer is a simple one. You need to include all debts in a proposal or a bankruptcy. Both are formal proceedings that allow you to get a fresh start from all debt so you will want to include all the people you owe money to in order to get that fresh start. There is little point "cherry picking" and being potential stuck with a debt after you have completed the bankruptcy or proposal. Including debts to friends and/or family is difficult, however, it could potentially be more difficult down the road if you have excluded them and there is a falling out between the parties. You do not want to be responsible for the debt after you have completed your bankruptcy or proposal because you deliberately excluded someone. As for keeping a credit card, I get asked this question most often if people have points they have accumulated on the card and they owe no money on the card at the time of the bankruptcy or proposal. Credit cards, the actual card itself, is the property of the credit card company that issued it to you and it needs to be returned to that credit card company when you file for bankruptcy or a proposal. So unfortunately, even with points and no balance, the card needs to be returned. Posted by Sandra Sykora, Trustee @ 1:41 PM
Posted on Monday, October 03, 2005Student Loans - Can They be Included in a Proposal?We see debtors in financial trouble who owe money for student loans, in addition to other debt such as credit cards. Sometimes they are able to file a consumer proposal instead of a bankruptcy.While changes to the rules have been proposed, as I write this only student loans older than 10 years old are automatically discharged in a bankruptcy or proposal. (Note: for an update on the new rules, go to www.student-loan-bankruptcy.ca. What does that mean? In a proposal, student loans can receive a share of the proceeds, but once the proposal is over, they can pursue you for the rest of the money they are owed. Even worse, we have recently noticed a trend that student loans, when held by certain banks, are voting no to most proposals. In some cases, this means the proposal is rejected. If you have student loan debt you can't pay, contact us to review your situation. We will meet with you and help you decide whether or not a proposal is the best option for dealing with your student loans. Posted by Rebecca Martyn, CGA, CIRP, Trustee @ 3:45 PM
Posted on Saturday, October 01, 2005Bill C-55 Receives Second Reading in the House of CommonsIn a previous Hoyes Michalos Blog article I described the government's proposed changes to the Bankruptcy & Insolvency Act, contained in Bill C-55. In summary, the government has proposed to create a Wage Earner Protection Plan that will pay workers up to $3,000 of unpaid wages if their employer goes bankrupt. Other aspects of the proposed changes include reducing the period that will automatically discharge a student loan (from ten years to seven years; more information can be found at http://www.student-loan-bankruptcy.ca/), and an increase in the length of some bankruptcies.Bill C-55 received Second Reading on September 28 and September 29, 2005 in the House of Commons, and has now been referred to a Committee of the House to study it further. It is assumed that the current minority government will want to pass this legislation, primarily because of the Wage Earner Protection Plan, prior to the next election, expected in late winter or early spring. In the debate the Minister stated he wanted Bill C-55 passed "in the next number of weeks". Stay tuned to the Hoyes Michalos Bankruptcy Blog for further updates. Posted by J. Douglas Hoyes, CA, Trustee @ 10:18 AM
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