Hoyes Michalos and Associates Ontario Personal Bankruptcy Blog

You, Bankrupt: New Study Reveals That the Average Bankrupt Looks Like You and Me

2008-03-31T05:44:00.004-04:00

What do you think a bankrupt person looks like? Do you think they are unemployed and "down and outs"?

I personally compiled statistical data on everyone who recently filed personal bankruptcy or a consumer proposal with Hoyes Michalos, and in our just released study, The Face of Bankruptcy - You May be Similar to the Typical Bankrupt Person, we reveal that the average bankrupt looks very much like the average Canadian.

Joe Debtor, as we call the average bankrupt, is a male, 42 years old. He has one dependent living with him, either a spouse or a child. His take home pay is about $2,071 a month. Even though we call him Joe Debtor, almost half of all bankrupts are female, and they range in age from their early twenties to over 80 years old.

The average bankrupt has total unsecured debt of over $51,100, including $18,335 owing on credit cards, $13,365 on bank loans and lines of credit, and $5,276 in taxes owing. Our study shows that 33% of these individuals stated that lay-off or reduced incomes contributed to their financial problems, 16% stated that a relationship break up was a primary cause, and 40% admitted that they were over-extended and mismanaged their finances.

Most Canadians in financial difficulty are good, hard working people, but due to divorce, job loss and over use of credit are forced into bankruptcy. They do not follow the typical stereotype of the average bankrupt; in fact, they look like the average Canadian.

If you have more debts than you can handle, you are not alone. Call us today at 310-PLAN (that's 310-7526, no area code required in Ontario), or e-mail us to arrange a free initial consultation.

Personal Bankruptcy Rate Increases in Ontario in 2007

2008-03-21T15:25:00.001-04:00

The number of personal bankruptcy and consumer proposals filed in Ontario reached a record 42,434 in 2007, an 8.2% increase over 2006 levels.

That total is made up of 31,409 people who filed personal bankruptcy in Ontario in 2007, an increase of 5.2% over 2006, and 11,025 people who filed a consumer proposal in Ontario in 2007, an increase of 17.5% over 2006 levels.

Canada wide personal bankruptcies were up less than 1%, and consumer proposals increased by 10.6%. It appears that places with a large manufacturing base, like Windsor, suffered more than places like downtown Toronto, were most jobs are in the service sector.

Detailed statistics by city can be found on our personal bankruptcy statistics page, and more analysis can be found in our 2007 personal bankruptcy statistics analysis.

As the economy continues to worsen, we will probably see increasing bankruptcy rates in 2008. If you are experiencing financial problems, don't be a statistic; call us today at 310-PLAN, or e-mail us to arrange a free initial consultation.

Douglas Hoyes and Ted Michalos Testify in Ottawa

2008-02-08T13:32:00.001-05:00

On February 7, 2008, Ted Michalos and Douglas Hoyes appeared as expert witnesses before the Senate Standing Committee on Banking, Trade and Commerce to provide our testimony on bankruptcy reform, and the proposed changes to the bankruptcy rules in Canada. (A picture from the broadcast of our appearance is shown.)

As readers of the Hoyes Michalos Blog will recall, back on December 15, 2007 I posted an article detailing the new bankruptcy rules, and on February 4th I announced our trip to Ottawa.

Despite very bad weather that cancelled our flight and left us with an eight hour drive in a blizzard to Ottawa, we arrived and spent over an hour testifying before the Senators.

In my opening remarks I reminded the Senators that people who get into financial trouble "are real people who in many cases have lost their jobs, gone through a marriage break-up, suffered through an illness, and after these personal tragedies they are faced with an insurmountable burden of debt.

These are not bad people. We believe it's important that when Parliamentarians draft bankruptcy legislation they remember that real people are affected."

We were the first personal bankruptcy trustees to appear before the Committee, and I believe our comments where well received. I'm not naive enough to believe that our testimony will change the course of bankruptcy legislation in the future, but I do believe that the Senators have a better understanding of the plight of the average Canadian who gets into financial difficulty.

Please see our bankruptcy video page for clips of our testimony in Ottawa.

Off to Ottawa to Fight For Fair Bankruptcy Rules

2008-02-04T20:11:00.000-05:00

Back in December I posted an article announcing that new bankruptcy laws have been passed by Parliament, but they have not yet come into force. In an effort to ensure that the rules are fair and balanced, the Senate Banking, Trade and Commerce Committee is holding hearings to review the new legislation.

Ted Michalos and I will be appearing before the Committee at noon on February 7 to provide our views on bankruptcy reform. I will post details on our testimony when we return, but here's a preview: we believe the rules should be fair to both bankrupts and to creditors, and in our view the new rules tend to help creditors more than bankrupts.

You can read our full 42 page report to the Committee by downloading the Hoyes Michalos Report to the Senate Standing Committee.

You can watch our testimony live on the Internet at 12 noon on February 7th on the Senate Website.

How will the new rules impact on you? Read our full report on the new bankruptcy laws in Canada, and check back later this week for more information on our appearance in Ottawa.

Till Debt Do Us Part - The TV Show

2008-01-21T14:21:00.000-05:00

Last month I appeared on Till Debt Do Us Part, a Reality TV show where the host helps people deal with their money problems. They wanted me to appear on the show to talk to a woman who had a lot of debt.

The show, titled Single Mom Shake Up, first aired in December, 2007, and it featured Tammy, a single mother with about $48,000 in debt.

My job was to interview her, and give her suggestions on how to deal with her debt. We spent over an hour filming the segment, but of course only about 30 seconds of it made it to TV. We talked about debt consolidation loans, debt management plans, consumer proposals and personal bankruptcy.

For more information on the show, and for a link to actually watch the show, you can read my full article on Till Debt Do Us Part.

New Bankruptcy Rules To Take Effect Very Soon

2007-12-15T12:18:00.001-05:00

For many years I have watched with interest proposed changes to the Bankruptcy & Insolvency Act. It now appears that, finally, the new rules will become law.

Bill C-55, now known as Chapter 47 of the Statutues of Canada, was passed on November 25, 2005, just prior to the election call that ended Parliament. Because the Senate had not had a chance to review the Bill, the government agreed not to implement the new rules. After the election in early 2006 bankruptcy reform was not a priority, but Bill C-62, which contained updates to Chapter 47, was passed at Third Reading by the House of Commons on June 14, 2007, and received First Reading in the Senate on the same day.

However, the Bill died when Parliament was prorogued on September 17, 2007.

Then, on October 29, 2007 the government introduced Bill C-12, an exact copy of the previous Parliamentary session's Bill C-62, and the Bill had three readings and was passed on October 29 and referred to the Senate. The Senate Standing Committee on Banking, Trade and Commerce intended to hold hearings on the new rules lasting into March, 2008, but then, very unexpectedly, on December 13, 2007 the Senate decided to skip a detailed review of the Bill and passed it without further amendment. Bill C-12 has passed and received Royal Assent, but it has not yet been proclaimed. At this point we do not know when the new rules will come into effect; our best guess is that it will be sometime in early to mid 2008.

What does this mean to you? It means the personal bankruptcy and consumer proposal process will be changing, and it is essential that you understand the new rules before you decide how to deal with your debts. Fortunately, the team at Hoyes Michalos has been studying this legislation as it has evolved over the years, and we are ready to advise you on your options. In brief, here are some of the changes:

First, under Bill C-12, Section 168.1 of the Act is amended to lengthen the bankruptcy period in Canada. Under current rules, a first time bankrupt is eligible to be discharged after ninemonths. The new rules affect the length of bankruptcy as follows:

a first time bankrupt with no surplus will be bankrupt for 9 months (unless opposed)
a first time bankrupt with surplus will be bankrupt for 21 months (unless opposed)

a second time bankrupt with no surplus will get an automatic bankruptcy discharge after 24 months (unless opposed)

a second time bankrupt with surplus will get an automatic discharge after 36 months (unless opposed)

What does this mean? If you have income over the government allowed threshold (which for a single person is $1,797 in take-home pay per month in 2007), it is likely that length of your bankruptcy process will be extended for a further 12 months, and you will be required to continue to pay that surplus income into your bankruptcy estate for your creditors.

Second, most RRSPs will now be exempt from seizure in a bankruptcy. The only exception will be you will lose any contributions you have made in the last year, to prevent people from contributing funds to their RRSP and then immediately going bankrupt.

Third, student loans will now be automatically discharged in a bankruptcy if you have ceased to be a student for seven years (the old limit was ten years), and it is possible to apply to Bankruptcy Court to have a student loan eliminated after five years in hardship situations. This is great news if you are going bankrupt, may it may make it more difficult to deal with student loans in consumer proposals (you can read more about this in our article on student loans and consumer proposals).

Finally, under current law, a person automatically loses their tax refund in bankruptcy for the prior year(s), and the period up to the date of bankruptcy in the year of bankruptcy. Under proposed changes to section 67(1)(c) of the Act, a person would lose tax refund in bankruptcy for the entire year of bankruptcy. Thus if you go bankrupt on June 6, 2008, instead of just losing your tax refund for the period from January 1 to June 5, 2008, you will now lose your tax refund for all of 2008.

As you can see, some of the rules may help you, and others may make bankruptcy more difficult.

Again, let me stress that as I write this on December 15, 2007 Bill C-12 is not yet in effect. Stay tuned to this space for more details as they become available.

Finally, at Hoyes Michalos & Associates we believe that people who can pay a portion of their debts feel better about themselves if they can make payment arrangements with their creditors. The proposed increase in the length of some bankruptcies will no doubt cause more people to avoid bankruptcy by filing a consumer proposal, which for many people is the best solution.

I recommend that you contact our bankruptcy trustee offices for more information on the new bankruptcy rules, and to arrange for your free initial consultation with one of our professionals.

Credit Education Week in Canada

2007-11-15T15:22:00.000-05:00

Earlier this week I received an e-mail from Michelle Miranda, the manager of Credit Counselling at the Family Counselling Centre of Brant, to remind me that today is the launch of the first annual Credit Education Week, which runs from November 13 to November 16. During the launch, the results of a national consumer survey of more than 4,000 Canadians were released, and the survey showed that the majority of Canadians do not have a sufficient understanding of basic personal finance and credit.

Michelle and I have discussed credit problems many times over the years, so neither one of us was surprised that the survey found that 55% of Canadians have monthly expenses that exceed their monthly income at lease once a year, and 40% of Canadians do not pay their credit card off in full each month. Full results of the survey can be found at crediteducationweekcanada.com.

Are Michelle and I alone in believing that excessive debt is a problem? To find out, yesterday Scott Schaefer, Ted Michalos and I had lunch with Heather Cudmore, Dave Pearson, and Krista Dobson from the Catholic Family Counselling Centre in Kitchener. We discussed the survey, and they all agreed that Canadians need to take a more active role in managing their money, and taking steps to reduce debt.

If you are carrying more debt than you can handle, all of the credit counsellors I talked to agreed that debt problems do not generally go away on their own, so you should take action now, before your problems get even worse. As described in our article on Debt Management Plans, one option is a debt management plan that typically involves your creditors agreeing to a reduced or zero interest rate, provided you repay them in full over no more than a five year period. For more information, contact Michelle and her team at the Family Counselling Centre of Brant in Brantford at (519) 753-4173, or Heather and her team at Catholic Family Counselling in Kitchener at (519) 743-6333, or use our list to find a credit counsellor in your city.

If you have more debt than you can repay over a five year period, then a consumer proposal or a bankruptcy may be necessary.

Whether it's a debt management plan, consumer proposal, or bankruptcy, help is available, and the sooner you get help, the sooner the collection calls stop and you can get on with your life. At Hoyes Michalos our initial consultation is always free, so to explore any of these options contact Hoyes Michalos
today.

Bankruptcy and the Learning Process

2007-10-12T12:29:00.000-04:00

I'd like to share a letter we received from one of our clients.

Choosing to file for personal bankruptcy was very difficult for her. She had been pretty down on herself for months prior to coming to see us. Now that she has filed bankruptcy, she has begun to understand the benefits of getting a fresh start. While no-one wants to file bankruptcy, it can be the fresh start that allows you to finally deal with your debt problems. Not everyone sends us letters like this.. but pretty much everyone has experiances like this.

Hi Sandra,

When I had to declare bankruptcy this past June, it was a painful, embarrassing decision that left me feeling very guilty. I felt like a failure and angry with myself for getting myself into the situation I ended up in.

Over the last couple of months, I still have residual guilt. I am not sure that will ever go away as it has had a great impact on who I am as a person, and I am reminded of my decision every single day.

My first counselling session was extremely eye-opening. I followed the counsellor's advice and documented every cent I spent, and the mere act of being consciously aware of what I was spending started me on the road of discovery, not to mention my recovery. The "why" of my spending habits was brought to the fore-front and it has taught me to be a lot more self-aware.
I further took her money saving advice and opened a savings account, and looked into ways to reduce the amount of money I pay for phone service by packaging everything for a lower monthly price.

When I saw the counsellor the second time, I was feeling a lot better about myself and my circumstances. Although I had to make a life-altering decision, it has taught me a lot about myself. I am so much more aware and that to me is more than half the battle. Thank you for allowing me to fix my rather large accumulation of mistakes.

Sincerely,

On the road to recovery

If you are having financial troubles, give us a call at 310-PLAN, or e-mail us your question, and let's get started.

Bankruptcy, Proposals, and Keeping Expenses Under Control

2007-09-24T06:06:00.000-04:00

Norma Yau, our trustee responsible for our London, Sarnia, Strathroy and Goderich offices, shares this success story:

About two years ago I met with a couple who had been referred to me from a credit counselling agency. The person whom they met at the counseling agency had worked with them before on a debt management program ("DMP"), but they had since gotten themselves into problems again. This time the amount they would need to pay would be too great for them to keep paying regular monthly household expenses. They couldn't afford both a DMP and all of their monthly household bills.

We reviewed their total amount of debt, and the payments they would need to make each month to keep a roof over their heads, food on the table and the members of their family clothed. We also reviewed the type of creditors they had and looked at how much those creditors would expect in a consumer proposal. If we could not come up with a viable proposal, their only other option was personal bankruptcy.

After talking about some of the expenses they thought they really needed but which could be cut, and discussing methods of keeping track of the money they would be spending, we worked out a plan where they would pay the creditors about 34% of the debt outstanding over a period of four years. The creditors accepted the proposal.

I am happy to report that the proposal has been going for two years now, and not once in the last two years have this couple had any bounced payments or any other problems. All of their monthly bills are up to date. Even better, when I talked to them about six months ago, they indicated all was going well and they were living without the stress of trying to juggle payments to many different creditors. I have every confidence that they will complete the proposal payments over the next two years.

They also referred their daughter and her family to see me. I always try to find the best solution for everyone. Their daughter did not need to file a proposal or a bankruptcy. I could with confidence refer her to a credit counselling agency for a DMP. Yes, they were able to help their daughter recognize that she was in trouble before it was too late, and to make adjustments to her style of living and come to us for advice while there was still time to try other options.

That's what I call a success story!

If you are experiencing payment problems, call us before it is too late! Getting advice about managing monthly expenses can sometimes be all that is needed. Call us now at 310-PLAN if you need help keeping expenses under control and getting rid of the stress of paying creditors. You can also fill out our on-line evaluation form, or send us an e-mail, so let's get started.

Number of Consumer Proposals Filed in Ontario Rises Dramatically - Is a Consumer Proposal Something You Should Consider?

2007-08-02T14:45:00.000-04:00

The number of consumer proposals filed in Ontario increased by an astounding 22% during the first six months of 2007, according to statistics just released by the Office of the Superintendent of Bankruptcy. The number of personal bankruptcies filed in Ontario increased by 5% in the first six months of this year (after falling by 4.5% last year).

Why the moderate increase in bankruptcies, but the huge increase in consumer proposals?

No-one knows for sure, but based on my observations (our team talks to over 1,000 people in financial difficulty every month) I think there are a number of factors.

First, people are more aware of consumer proposals. At Hoyes Michalos we want everyone to consider all of their alternatives before filing for bankruptcy, and for many people a consumer proposal is the perfect solution. That's why we talk about making a plan on our website, and why we talk about consumer proposals on the radio. I even recorded a short video about consumer proposals to explain how they work. (You can even see our videos on You Tube.) I believe that the more we talk about proposals, the more likely it is that people will learn about this great bankruptcy alternative.

Second, almost everyone who files a consumer proposal has a job, and many own a house, and they don't want to risk losing their house, or a portion of their income, in a bankruptcy.

Finally, most people I meet want to pay their debts, they just need a bit of a break; that's what they get with a consumer proposal: the ability to make one monthly payment to deal with their debts.

I predict that the number of people filing consumer proposals will continue to increase for the remainder of this year, as people look for a way to get a fresh start.

Want to learn more? Research your options (check out our top 50 questions and answers, and then fill out our bankruptcy evaluation form, or send us an e-mail, or call us today to set up a free, no obligation initial consultation, and let's get started.

If only she had done this years ago...

2007-07-23T10:29:00.000-04:00

I have a story to tell you; the story is true, but the names have been changed for privacy reasons.

This is a story about Mrs. B. She is in her 50's, divorced and has no dependants. Mrs. B's financial difficulties started 18 years ago. She separated from her husband, who subsequently went bankrupt and saddled her with their joint debts. She raised her infant son, worked two jobs and managed to purchase the condo she owns jointly with her sister, which they both live in.

During all these years, she made payments towards her old debts, but never paid them off in full. She never had enough extra money to make a big dent in the outstanding bills.

Over the past few years, the number of hours given to her at work had decreased. She was still working her two jobs, but with fewer hours. This is when the financial pressure started to increase. She found that she had to start using one source of credit to pay another. Her liabilities had now grown to just over $70,000. The balancing act continued until she ran out of credit to meet her payments. That is when she called me.

We sat down and looked at her financial situation. She had a few small assets: a 10 year old car and an extremely modest RRSP. But what she did own was a 50% interest in her condo with her sister, which was practically debt free. This was the key that would unlock her financial mess.

If Mrs. B and her sister were to sell the condo, after paying real estate commissions, legal fees, a penalty to break the mortgage, and paying off the mortgage, Mrs. B's share of the proceeds would be about $40,000, which is obviously not enough to repay her $70,000 in debts.

Fortunately, there is a way to use the equity in her condo to offer her creditors a proposal; a deal to pay them something, not everything, but more than what they would receive in a bankruptcy, and Mrs. B did not want to have to file for bankruptcy after coming this far in her life.

At Hoyes Michalos we have a network of professionals we can call on to help solve financial problems, so I put Mrs. B in touch with a mortgage broker who was able to find a lender willing to provide enough financing to pay her creditors the equity in the condo.

Here's what we did: her share of equity in the condo was $40,000, so the mortgage broker arranged a $40,000 mortgage. Mrs. B then offered her creditors a $40,000 consumer proposal.

The creditors were better off because they received this equity without a fight, with little delay and without the additional costs that would have been incurred if Mrs. B were forced to sell the condo. Mrs. B was better off because the monthly mortgage payments were far less than what she was paying in monthly minimum payments, and she was able to keep her condo, the roof over her head.

I asked Mrs. B why she hadn't tried to get help sooner. She said that she never thought things were that bad that she couldn't manage them. She now wishes she had sought help years earlier; the stress on her was great, but she managed to live with it year after year. Now the stress is gone.

Would you like me and the team of professionals at Hoyes Michalos to put our experience to work for you? Mrs. B learned that the sooner you ask for help, the sooner we can work out a solution, so if you have more debt than you can handle, please give our office a call today at 310-PLAN (that's 310-7526; no area code required anywhere in Ontario, and your call will be routed to our nearest office), or fill out our no-obligation bankruptcy evaluation form, or e-mail us today, and let's get started.

Joe Has Change in his Pocket

2007-07-16T13:13:00.000-04:00

Joe (not his real name) came to see me; he was looking somewhat depressed.

Joe had a good job, but he had a huge amount of debt. Joe told me that things had been going well for many years, but then his marriage ended. His wife had always taken care of the finances, so when she left, Joe had no idea where the money went.

Joe's son was living with him, and with two mouths to feed, and without his wife's income to help, Joe began to rely on credit cards to pay his day to day living expenses. He fell deeper and deeper into debt.

When he came to see me, he was afraid that he had fallen so far behind that his creditors would take him to court and garnishee his wages. He didn't know what to do.

He felt completely hopeless.

I started by telling him that I understood the pain he was feeling. I have met with hundreds of people over the years who work hard, but for some reason have nothing to show for it at the end of the week. They live from paycheque to paycheque.

I also told Joe that my job is not just to be a shoulder to cry on. My job is to give practical advice on ways to get out of debt.

I pulled out a blank piece of paper and asked Joe to tell me everything he spends money on each month. He listed his rent, grocerices, car insurance, gas for the car, telephone bill, and hydro bill each month. He also showed me some recent pay stubs so we could figure out how much he makes each month.

What did we find? Based on what Joe was making, and what he told me he was spending, he should have had about $500 left over each month. But he didn't.

So I dug deeper.

I asked him to describe his typical day. He told me that he got up early each morning to drive to his job in Toronto. On the way to work he stopped at the coffee shop for a cofee and a muffin.

"Stop right there", I said. You didn't mention the coffee shop earlier.

It turned out that Joe stopped for a coffee and muffin on his way into work, and also went to the coffee shop at this morning coffee break, at lunch, at his afternoon break, and on his way home (he had a long drive each day). He was spending about $3 on the way to work, $4 for his morning coffee break and snack break, $8 for lunch, $3 in the afternoon, and $2 on his way home.

That's $20 per day, five days a week, or over $400 per month at the coffee shop!

Joe didn't realize what he was spending at the coffee shop. Once he realized what he was spending, it was easy to make a plan to save money. Joe already had a coffee maker at home, and a big thermos. That night he went to the grocery store and bought a loaf of bread and some cold cuts, and he went home and filled up the coffee maker. When he got up the next morning he pushed the button on the coffee maker, and by the time he left for work he had a fresh pot of coffee, which he used to fill up his thermos. He made himself two sandwhiches and brought them with him to work. With a full thermos and a full lunch bag, he didn't need to stop at the coffee shop.

One week later I saw Joe again. He wasn't looking depressed. He was actually looking happy. He told me something amazing:

He had change in his pocket! Loonies, Twonies, a whole bunch of change!

Amazingly enough, by simply making his own coffee and lunch, Joe had managed to save a lot of money.

Now I don't recommend that we all boycott the local coffee shop. We all like a fresh cup of coffee; it's what makes us Canadian. But by actually writing down what he was spending, Joe was able to make decisions about where to cut back.

Making his own coffee and lunch allowed Joe to free up some cash, but his debts were too large. He was not able to dig his way out of debt on his own. However, with the "extra" cash he had each month, Joe was able to do a consumer proposal. We offered his creditors a plan where he paid $400 per month (the money he saved by making his own coffee and lunch) over a four year period.

They accepted the deal, and now Joe has one monthly payment, and no worries about supporting his son.

Joe is a success story, because, with our help, he was able to take control of his financial life.

Would you like to be a success story? Give our office a call today at 310-PLAN (no area code required anywhere in Toronto), send us an e-mail, or fill out our free bankruptcy evaluation form, and let's start.

Closure, Bugs and Bankruptcy in Ontario

2007-07-02T09:21:00.000-04:00

Last week I met with an elderly lady and her daughter. She had lived off credit for many years since her husband died, and now she owed many thousands of dollars on various credit cards. She has been retired for many years, and only receives a small government pension. The pension is sufficient to cover her monthly living expenses, but not enough to make all of her debt payments.

I explained that since she has no assets and only has pension income, she is basically "creditor proof", meaning if she does not pay her credit cards they cannot seize her assets (she doesn't have any) or garnishee her wages (she doesn't receive wages). She could simply open a new bank account at a new bank where she doesn't owe any money, and stop paying the credit cards.

After much thought and discussion, she said she understood what I was saying, but said she wanted to deal with her debts, even if her creditors couldn't garnishee her, and even if she had to make a contribution each month towards the cost of her bankruptcy.

She wanted closure.

I was reminded of this last night, at about four o'clock in the morning, when my young son woke me up. Apparently there was a fly or bug or something flying around his room, and he couldn't sleep. (It's interesting that when the problem is a bug that needs to be killed my son wakes me up, but when one of my boys has a bad dream and they need comforting, they wake Mom up).

I went up to his room, and we searched for the bug.

I couldn't find it.

So my son wouldn't go to sleep.

Finally, as I left his room I saw something move, so I smacked the wall with the fly swatter. I'm not sure if I hit the bug or not, but my son was satisfied. In his mind, the problem was solved.

He had closure, and he was fast asleep in about one minute.

When dealing with problems, we want closure. We want a plan. That's what we do here at Hoyes, Michalos & Associates. We review your situation, and explain your options. You might need a debt consolidation loan, or a debt management plan through a non-profit credit counsellor, or a consumer proposal, or you may need to file personal bankruptcy. Either way, you understand your options, you pick the one that best deals with your debt problems, and you get closure.

If you want closure, give us a call today at 310-PLAN (that's 310-7526; no area code required anywhere in Ontario), or complete our confidential bankruptcy evaluation form, or send us an e-mail with your questions, and let's get started.

Scott Schaefer - Our Newest Bankruptcy Trustee

2007-06-20T16:21:00.001-04:00

It gives me great pleasure to announce that Scott Schaefer has received his trustee's licence from the Office of the Superintendent of Bankruptcy (the "OSB").

This is a great achievement, for a number of reasons.

First, according to the Office of the Superintendent of Bankruptcy's web site, there are only 1,001 individuals in all of Canada that have a trustee's licence.

Second, the process to become a trustee is long and grueling. Scott has a university degree, and he is a chartered accountant. But Scott didn't stop with those two sets of initials after his name. He joined our firm in 2002, and immediately began his pursuit of his trustee's licence. Five years later, he did it!

In addition to many years of professional experience, to become a trustee you must take five self study courses (each course takes approximately 200 hours to complete), and you must pass four written exams. You then attend a one-week instensive course, which is followed by the final written exam. If you pass that, you are eligible to "sit the oral boards".

This is where it gets fun. The oral boards are an oral exam. You sit in a room with a national representative of the OSB (who sits on every oral board for every candidate across Canada), a local OSB representative, a trustee, and an insolvency lawyer. They then grill you for almost two hours on whatever subjects they choose. You must think on your feet, while conveying, in simple terms, some very difficult technical information.

Scott got through the process with flying colours.

At Hoyes Michalos & Associates we pride ourselves on having experts available to meet with you personally to help you solve your debt problems. People like Scott have excellent technical knowledge, years of experience, and the personal touch that allows all of our professionals to help you through a difficult time.

Want proof? E-mail Scott Schaefer, Trustee, today, or give him a call at 310-PLAN (no area code required anywhere in Ontario), and put his years of experience to work for you.

The Elephant Business

2007-05-25T19:30:00.000-04:00

I met with a man today who thanked me for being in the elephant business. Thinking I was in the personal bankruptcy business I was not sure what he meant.

He explained that when we first met, he felt like he had a big elephant on his back. His marriage had ended and he had lost his job, and he was drowning in debt. He had found another job and he was back working again, but he still had more debt than he could handle. Every month he sent as much money as he could to all of his creditors, but it was never enough. They kept asking for more, and with his living expenses and child support payments, he couldn't keep up.

He felt like his debt was an elephant on his back.

When I first met with him I told him the first step was to figure out where he was spending his money. I helped him make a budget. By writing down his expenses he was able to find areas where he could cut back and save money. By getting his expenses under control he was able to manage his regular monthly expenses, like rent and food. My job was then to help him deal with his debts.

I explained various options to him, and after discussing them he decided that a consumer proposal would best help him deal with his debts. I worked with him to decide what he could afford, we filed the proposal, and it was accepted by his creditors. He now makes one manageable monthly payment, and all of his debts are under control.

The elephant is off his back.

We were able to help him, and we can help you, so if your debts make you feel like you have an elephant on your back, give us a call us at 310-PLAN (that's 310-7526, no area code required, anywhere in Ontario), or complete our one minute on-line evaluation and one of our professionals will contact you to set up a no-charge initial consultation to help you get the debt elephant off your back.

Dealing With Debt - Live on the Radio

2007-04-02T06:38:00.000-04:00

Ted Michalos and I were guests on two live call-in radio shows on Saturday morning. We started the day appearing on The Experts Show on AM 640 in Toronto at 10:00 am, and then at noon we were guests on Ask The Experts on 570 News in Kitchener.

The theme of both shows was debt, and our goal was to give listeners some strategies for dealing with debt.

One of the callers said that he owed $65,000 to Revenue Canada. His problems started while he was out of work while he recovered from heart surgery. He was not able to pay his taxes, and now he owes taxes, penalties, and interest. Many people we help have had health problems that lead to financial problems. We have also helped many people deal with tax debts.

We told the caller that if he cannot afford to continue paying Revenue Canada in full, one option would be to get a debt consolidation loan. Unfortunately with his high level of tax debt, that may not be possible.

A consumer proposal is another option, and is best suited to someone with sufficient income each month to create a repayment plan. Without sufficient income, the final option is personal bankruptcy.

During both shows we emphasized that even though you may feel "stressed out" and overwhelmed by debt, there are solutions. You are not alone. Our professionals are here to help you make a plan to deal with your debts, so call us at 310-PLAN, or complete our one minute on-line evaluation and one of our professionals will contact you to set up a no-charge initial consultation to help you make a plan to deal with your debts.

Bankruptcies Decline Despite Rising Debt Levels

2007-02-05T05:48:00.000-05:00

The Office of the Superintendent of Bankruptcy just released statistics showing that the number of consumer bankruptcies and consumer proposals fell in Canada in 2006 by 4.3%, the first decline since 2002 and the largest decline since 1998, even though the level of debt is rising. Consumer filings in Ontario declined by 2.1% in 2006.

The declining bankruptcy rate in the face of the increase in debt is largely due to a strong labour market. The unemployment rate in Canada declined for the fourth consecutive year to 6.3%, and is now at a 30-year low. Ontario's unemployment rate is also 6.3%. The tight labour market also helped median hourly wages increase by 2.6% in 2006. These factors, combined with low
interest rates, are making higher debt loads manageable for the "average" Canadian.

However, for every $4 the average Canadian earns in a year, they now have $5 in debt. Why should we care about high debt levels? For people living paycheque to paycheque, rising debt levels mean an increasing number of Canadians are only one or two missed paycheques away from financial disaster. A recent Bank of Canada survey found that the proportion of highly vulnerable debtors (those whose debt payments exceed 40% of gross household income) has risen by 23% in the first six months of 2006 (from 2.6% to 3.2% of the population).

Each week I see an increasing number of Ontario residents with high debt who live paycheque to paycheque, and any drop in income could lead to serious financial problems. With these massive levels of debt, the average resident of Ontario cannot financially survive even a temporary job loss. If you have more debt than you can handle, don't wait for your financial problems to improve on their own. Give our office a call today at 310-PLAN (310-7526 in Ontario), or e-mail us your bankruptcy question, and let's get started.

Creditor Proofing: Getting Professional Advice Before It's Too Late

2007-01-12T12:26:00.000-05:00

I have on many occasions reviewed an individual's financial situation, and it never ceases to amaze me that proper planning is not put into place to avoid personal financial disaster. None of these techniques are illegal, but if they are not put into place early enough, they are of no use.

1. Before you start a business venture or get involved with any financial transaction that involves risk, get professional advice. And if you didn't understand me the first time, I will repeat myself: get professional advice. Your accountant, your lawyer or a bankruptcy trustee are valuable resources to help steer you away from trouble. The time to ask for their help is before you find yourself in a financial mess, not afterwards when you are asking them, begging them, to bail you out.

2. If you are going to start a business, make sure it is incorporated, and not a sole proprietorship. With a sole proprietorship, the company's debts are your debts. With a corporation, the debts stay with the company; they are not transferred to you personally. (There are some exceptions to this rule; please refer to point #1, and get professional advice.)

3. If there are valuable assets in your family, i.e., matrimonial home, cars, etc., have them owned by the family member with the least amount of risk. If one spouse owns a business and the other is a salaried employee, it should be obvious to you who has more risk. If both spouses have risky situations, consider a family trust. (Please refer to point #1, and get professional advice.)

4. I only have one thing to say about personal guarantees: don't. You went to the trouble of incorporating your business, and now you are going to undo all the good you did by exposing yourself personally. Personal guarantees will be requested by landlords, suppliers and banks. Just say no. But sometimes you can't, so if you do, don't offer up the personal guarantee of the spouse who you put all the assets in their name to protect the assets from your creditors. Also, leave yourself an escape clause; you may be able to have the personal guarantee you offered up cancelled when the business grows.

5. If you are investing money into your business, document it by way of a promissory note and secure it with a general security agreement. Not six months or a year after you invest the money, but from the very moment you put the money in. Your lawyer should prepare the paperwork for you. If the company is ever forced into liquidation, you will at least have a better chance of getting these monies back.

6. Make sure your business' government accounts are paid in full. This includes payroll source deductions and sales taxes (GST and PST). These accounts attract personal liability for corporate directors if they are not paid.

7. Consider splitting your business assets up into different companies. There is no reason why the land and building can't be owned by Company A, the equipment by Company B, while Company C conducts business with the outside world. Your accountant and lawyer can structure this to avoid putting your valuable assets at risk.

8. Insurance. Not much more needs to be said. If you have an insurable business risk, make sure it is covered.

9. While there are discussions underway to amend bankruptcy laws to offer creditor protection to all RRSPs, they are not in place as of yet. Some RRSPs do offer creditor protection, namely those offered through insurance companies where the proper beneficiary is designated. Check with your financial advisor on this one.

None of the above is a substitute for professional advice. Before embarking on any of these strategies, get professional help, i.e., see point #1.

Bad news at Christmas time.

2006-12-18T17:36:00.000-05:00

In Southwestern Ontario, the news lately has not been good. Yes, the Christmas sales are coming, but the jobs are going.

Plant closings have been announced in St. Mary's, Stratford, and St. Thomas. Added to the ones announced about 1 month ago in Sarnia, Strathroy and St. Thomas, this adds up to a lot of jobs. To make the situation more difficult, the new Toyota plant in Woodstock and the surrounding feeder plants will not be running until long after the announced closings. It also appears the Ford plant in Talbotville may be in trouble even after all the "good news" this summer from the "brass" in the company and the union.

Many of the plants that are closing are in the automotive industry and over the past 10 years Southwestern Ontario has moved from a vibrant, secured place of employment in the automotive sector to one of uncertainty and layoffs and of course job losses.

For the employees of these businesses to get the news at this time of year must be a double worry. How will they afford to pay their Christmas purchases? If they lose their job next year, how will they afford to feed their families?

If you are in this position, you need a plan. You need to discuss your situation with people who care about helping you over a long period of time. You need to find out what options are available to you.

Call our offices at 310-PLAN and talk to one of our professionals and if necessary, make an appointment to discuss the issues in detail. Enjoy the Christmas season and the start of a new year by knowing that you are taking the steps necessary to solve the problems that may occur in the new year. We look forward to helping you plan those steps.

How do I determine how much money to offer in a proposal?

2006-12-12T16:08:00.000-05:00

The first step to filing a consumer proposal is to offer your creditors more than they would receive if you either filed for bankruptcy or sold all of your assets to pay them. For example, if have debt of $50,000 and investments of $20,000, the creditors will not likely accept anything less than $20,000.

The next step is for us to look at the voting history of your creditors. Some creditors will vote against a proposal unless a set of conditions are met. When we meet, we can review our experience with the creditors' voting history with you.

The final step is to look at what your budget can afford. If according to your budget you can afford to offer $500 monthly, but you only offer $300 monthly, the creditors will probably offer a counter offer of $500 monthly.

Call us at 310-PLAN or email us to book your appointment to review your individual situation.

I hope the light at the end of the tunnel is not the train.

2006-11-22T16:53:00.000-05:00

Everyone deals with financial troubles at some point in their life. Maybe you have lost your job, became ill or been injured, suffered the separation of a long term relationship or just did not manage your money well. The reasons are many.
But if you are facing the prospects of not being able to pay your bills you have to do something now.
I meet with people every day who have had some event occur that tipped them into financial trouble. Many of them just carried on as if nothing had happened hoping that "everything will work out" Usually they use credit to cover day to day living expenses until things get back on track. Sometimes this works out, all too often it does not and the result is an big problem. Mounting debt, collection calls, legal action are all possible results of the accumulation of debt as a result of a "life changing event" such as those mentioned above.
The most important thing to do if you have had some event affect your finances is make a plan. When your future is at stake don't "hope" everything will work out, you have to take action. Create a budget, contact your creditors and try to make more manageable payment arrangements before you can't make the payments.
You have a better chance to get through the trouble as long as you take control early and plan, you may have to make some hard choices but better you make them than having those choices forced on you.
Finally, if you can't get things under control get some help. Credit Counseling, a proposal to creditors or even bankruptcy may be viable options to solve your problems.

If you think you need some help call us at 310-PLAN we can help you make sure that the light at the end of the tunnel is your freedom from debt.

Bill Clinton, The Middle East, and How to Make a Plan to Deal With Your Debt

2006-11-09T12:05:00.000-05:00

If you have a lot of debt and creditors are calling, you have two choices: deal with them, or ignore them. Ignoring them may work for a while, but eventually it is in your best interests to make a plan to deal with them.

I had two interesting experiences this week that illustrate the different approaches possible when dealing with people, and how making a plan to deal with them is usually the best option.

My first experience was a meeting I had with a debtor and a creditor. Not surprisingly, the creditor was upset because he was owed money. The debtor, due to a failed business and job loss, did not have the money to pay. The creditor thought the debtor had money, so he took him to court and sued him, in an attempt to garnishee his wages. Our meeting was the first time they talked face to face. By the end of the meeting it became apparent that what the creditor wanted most, other than his money, was an explanation of how the problems started. Had the two parties sat down and discussed the problem, the situation would probably have never gone to court, and a suitable resolution might have been possible.

Unfortunately, once a wage garnishment starts, personal bankruptcy is often the result.

My second experience happened yesterday, when I had the pleasure of attending a fundraising luncheon for the Catholic Family Counselling Centre, the only non-profit credit counseling agency operating in Kitchener, Cambridge, and surrounding areas. Also in attendance were financial professionals from other credit counseling agencies, including the Family Counselling Centre of Brant.

The guest speaker was Bill Clinton, the former U.S. president, and he told an interesting story about his dealings with Yassar Arafat and Ariel Sharon in the year 2000, trying to bring peace to the Middle East. He told the story of Ariel Sharon's proposed visit to a site considered sacred by Arafat's people. Mr. Sharon made the visit not to upset Mr. Arafat, but rather as a show of strength to members of his own political party, who viewed him as weak.

President Clinton advised Mr. Arafat not to over-react, but instead to meet with Mr. Sharon face to face, peacefully, to work out their differences. For political reasons Mr. Arafat refused to do so, and as a result we sit here today, six years and one Middle East war later, still waiting for peace in the Middle East.

My point is this: we all need a plan, whether it's to deal with our creditors, or to try to bring peace to the Middle East, and all plans start with dialogue. Without dialogue and a plan, no solutions will be found.

I have no idea how to bring peace to the Middle East, but I do know how to give you peace when dealing with your creditors: start by talking to them. Tell them your situation; tell them how much you can afford to pay them each month, and see if you can work out payment terms with them.

If you can't reach an agreement with them, get help in your negotiations with a credit counselor in Ontario, or give us a call to talk about helping you negotiate a legal settlement (called a consumer proposal) to deal with your debts.

It is possible to work out a plan to deal with your debts, but it all starts with you. You need to make that first call. We want to help you make a plan, which is why our phone number is 310-PLAN (no area code required), so call us or e-mail us today, and let's get started.

Filed under credit counselling, consumer proposal, personal bankruptcy, Bill Clinton

Choosing Your Trustee

2006-11-05T20:58:00.000-05:00

I am often asked what someone should look for in choosing a trustee. I think the most important aspect of choosing a trustee is the personal contact you will have with the trustee at the outset of your file. You will be making one of the most important decisions of your life; you want the expert advise of an experienced trustee, not a clerk or junior staff member.

You want to walk away from your initial assessment with a clear understanding of your options and the process. If you have questions and they haven't been answered, then that trustee is not right for you. If you feel like a number and not a person, you have met the wrong trustee. If your trustee has shown an interest in your situation and has developed a plan that's right for you, you have found the right trustee.

At Hoyes, Michalos you will always be meeting with a trustee who is experienced, qualified and understanding of your situation. We pride ourselves on our ability to meet individuals, assess their financial situation and find a solution to their problem.

For help with your financial situaiton, call us at 310-PLAN or contact one of our trustees.

Bankruptcy and Employment

2006-10-19T18:40:00.000-04:00

A recent question by email to me was: How will bankruptcy affect my employment options?

This is a good question but one that is hard for a trustee to answer by virtue of the numbers of jobs and types of employment available. There is no way a trustee could know if bankruptcy would affect every type of job that is out there.

What we should tell you is that some fields of employment and some jobs require that you are not a bankrupt. This might mean that you cannot file for bankruptcy while you have that job or you cannot take employment for a certain job if you are bankrupt. Most of those jobs would mean dealing with money or having some type of trust capabilities that are necessary in the job.

For example, a lawyer who is self employed and handles their own trust accounts cannot be bankrupt and deal with those trust funds. It used to be very difficult to get a job in any casino if you were not discharged - now if you are working for a casino and file for either bankruptcy or a proposal you must disclose the information to them immediately. Many types of accounting jobs will not allow you to work if you are bankrupt. I once had a student who was refused a scholarship because she had filed for bankruptcy.

If you are in a financial situation where you are looking at personal bankruptcy, a better option might be a consumer proposal. But the first step is to take a look at what the requirements for your job are and know how an insolvency (this means bankruptcy or proposal) might affect it. If you are planning a career in a certain field, also review the requirements before filing. Then come to see us at Hoyes, Michalos & Associates to discuss your situation and set up a plan that will allow you to continue without problems in your chosen employment.

Call us at 310-PLAN.

How does bankruptcy effect my credit rating?

2006-10-11T15:54:00.001-04:00

We frequently get asked how bankruptcy effects a credit rating.

According to Equifax, a bankruptcy gives you a R9 rating and it stays on your record for 6 years after discharge for a first time bankruptcy and 14 years for multiple bankruptcies. The ratings range from a 1 to a 9. 1 being the best and 9 the worst. Each time a payment is late your credit rating gets worse, for example from a R1 to a R2 when one payment is late. There is also a note on your file about the bankruptcy. This note is purged from your record 6 years after discharge.

A consumer proposal gives you a rating of R6 and is on your record for 3 years after it is paid in full. If you are concerned about faster improvment of your credit report, a consumer proposal can give that to you.

The important note is that if you are behind on your bills, you already have negative notes on your credit rating. You need a plan to deal with your situation before creditors take you to court and garnishee your wages.

Call us at 310-PLAN to develop a plan that's right for you.