Ted Michalos, CA, Trustee : Recent Articles

Ted Michalos, Ontario Consumer Proposal Administrator

So, you go to your barber and start talking to him about your debts – you’ve got lines of credit, credit cards, income taxes – you name it, you owe it. You talk some more and your barber says, you should file a consumer proposal. Go and see this guy. Great, your problem is solved. Then the barber says, “that will be $15 for the haircut and $750 for the financial advice…”

Would anyone out there pay him?

Of course not, but those same people will answer an ad for a “debt consultant”, meet with them a couple of times and then hand over hundreds, perhaps thousands of dollars to be told the same thing – you need to file a consumer proposal. Go and see this guy…”

“This guy” is a licensed trustee in bankruptcy. Here’s the foolish part – you can easily find a trustee on the internet or even in the phone book, you don’t need to speak to a debt consultant first, you certainly don’t need to pay a debt consultant a ridiculous fee. In fact, we have a list of all of our licensed Ontario bankruptcy trustees right here on our web site.

If you want proof – go and speak to the debt consultant, but before you pay them any fees or sign any agreements, call a trustee yourself. I’m willing to bet donuts to dollars that the trustee will give you similar, if not the same advice, and they won’t charge you a fee to speak to them.

If that sounds like too much work then simply ask the debt consultant if the procedure they are recommending for you is called a consumer proposal. If it is, ask them if they are a licensed trustee and can therefore provide this service. When they tell you that they are not, ask them what their fee is for?

It’s your choice and it’s your money, but it seems to me rather foolish to pay your barber hundreds, perhaps thousands of dollars to be told to go and see someone else…

Don’t be an April Fool. If you have debts, call us, or e-mail us, or complete our free on-line bankruptcy and consumer proposal evaluation, or use our free on-line debt options calculator to review your options. Either way I guarantee that my firm will never charge you an up front fee, so with us, you will never be the fool.

You have seen the ads that promise to "reduce your debt by up to 70% without filing bankruptcy." The ads sound too good to be true, and they make you wonder who you are dealing with. How can someone running an ad in a newspaper make such a bold claim?

The procedure they are "selling" is often a consumer proposal and the claim of 70% debt reduction is often correct. Most people that file a consumer proposal repay about 30% of what they owe.

The second half of the claim, "without filing bankruptcy" is also true. A consumer proposal is a legal procedure administered by licensed trustees in bankruptcy who also serve as consumer proposal administrators, but it is not bankruptcy.

Where the people running these ads run into trouble (and that is not to suggest they are breaking the law because as far as I can tell they aren’t) is the fact that they charge you a fee for their services when all of the information they provide and the assistance that they give is available free of charge from trustees in bankruptcy.

Let me say that another way: the service these companies provide is to help you assemble the information necessary to file a consumer proposal. They can’t actually file a consumer proposal themselves, as only licensed consumer proposal administrators can do that. So once they have gathered up all of your information and you have paid them their fee, they refer you to a trustee to prepare and file the consumer proposal. What they don’t tell you is that if you had called a trustee directly there wouldn’t have been this extra fee – they would have provided the same service without the fee.

So who are you dealing with? Well, the companies running these ads call themselves debt consultants. There are no regulations for this industry as until some one thought up this “scam” a few years ago the industry didn’t exist. If there are no regulations then there is also no government oversight. If you decide to deal with one of these companies and something goes wrong, your only recourse is through the Courts. Given that you called them because you were in financial difficulty, what are the chances if something goes wrong you can afford to take them to Court? For most people the answer is slim or none.

So, if you are going to have to deal with a licensed trustee to file a consumer proposal, and the trustee won’t charge you an extra fee to help you assemble the information required to prepare a consumer proposal, why exactly would anyone ever deal with one of these companies?

The answer for some people is that they saw an ad, and responded to it, without asking any questions. For other people they use a debt consultant because they were afraid that a trustee would only talk to them about bankruptcy, and wouldn’t mention other alternatives, like a consumer proposal.

Don’t be fooled. Before you sign any agreement to help you deal with your debts, and before you hand over any of your hard earned (and in short supply) money, ask the person if the solution for you is to file a consumer proposal. If it is then ask them if they are a licensed trustee. If they are not then there really isn’t any point in dealing with them further.

Want to find out more? Call Hoyes, Michalos & Associates today. You can reach us at 310-PLAN (no area code required anywhere in Ontario), or call your local Hoyes Michalos office, or you can e-mail us, or even fill out our free evaluation form and we will respond with some personalized suggestions to deal with your debts. We are licensed by the federal government as both trustees in bankruptcy and consumer proposal administrators, and we do not charge an up front fee. We will explain to you, in detail, all of your debt management options, so that you can make an informed decision. No high pressure ads. Just information from licensed professionals.

In my last post about collection agencies I discussed a letter of direction from the Ministry of Small Business and Consumer Services Debt Recovery Regulation Unit to the collection agency industry in Ontario.

In this letter, the Ministry told the collection agencies operating in Ontario to stop sending people “draft” legal documents with their collections letters as this practice was deemed deceptive – it was a trick designed to scare people into making their payments.

After some comments and calls were made to our offices, I decided it might be helpful to warn people of some of the other common tricks that collections agents have been known to use to scare people – if you know something is a trick then you can either lodge a complaint about the agency or at the very least recognize the trick for what it is, a tactic designed to scare you…

So what are some of the more common tricks used by collection agencies?

First,  not disclosing who they are: many collection agents fail to mention the fact that they are a collection agent working on behalf of someone else.  When they call they simply tell you they are calling on behalf of “Big Bank” Visa.  The impression they give is that all of your dealings with the bank are in jeopardy and that if you don’t clear things up immediately the bank will take actions against you.   Well, the bank has already taken action – they’ve assigned the debt to a collection agency that is supposed to advise you in writing BEFORE they start calling that the bank has assigned your debt to them.  The banks do this because they don’t want to be the ones yelling at you to pay – it’s bad for their image.  In fact, if you send notice to the bank that controls your Visa that a collection agency in their employ is acting improperly there’s a good chance that agency will lose the bank’s contract.  Something to think about next time one of these agencies calls and is less than polite to you.

Second, providing incorrect advice:  many collection agencies will tell you over the phone that if you don’t make a payment by “Friday” they are going to garnishee your wages.  Well, in order to garnishee someone’s wages the agency first must take you to Court.  This involves opening a file at the Small Claims Court and you will receive a notice from the Court.  (The trick from the first article deals specifically with agencies giving you the false impression that they’ve already done this).  Once you receive the Court notice you have 3 weeks to respond.  After that it takes another few weeks to obtain a Court Order – none of this can be done quickly, certainly not by Friday.

Third, impolite (down right rude) behavior:  this is probably the thing that gives collections agencies such a bad reputation.  Many of the people in the industry think that by yelling at you, by degrading an insulting you, that by making you feel guilty about your inability to pay they can motivate you to give them some sort of payment.  Never, ever let these people get under your skin.  Never, ever yell back at them or become impolite yourself.  If someone is treating you in an unprofessional manner on the phone politely inform them that you don’t have to listen to them and end the phone call.  Many of these agencies record their calls (and they are required by law to advise you if they are) – if they can get you to sound like you are being unreasonable or rude to them it gives them a moral advantage which simply isn’t justified.  If you experience one of these rude calls either ask end the call as I have suggested, ask for the supervisor to complain and/or once the call is over lodge a complaint with the Ministry.

Here’s the contact information again for the Ministry of Small Business and Consumer Services:

Consumer Protections Branch
5775 Yonge Street, Suite 1500
Toronto, ON  M7A 2E5
Tel: 416-326-8802
Toll free: 1-800-889-9768
Fax: 416-326-8810

It is time for a reality check – if you have collection agencies calling you and sending letters then it’s time for you to consider whether or not you need some help to sort out your finances.  Collection agencies don’t call people unless they aren’t making their payments.  If you can’t make your payments then you should be speaking to a professional to determine just what you need to do to clean things up.

Many people don’t realize that they have options other than simply filing for bankruptcy.  This is another “trick” – if you don’t know you have options you won’t consider using one of them.  If you are taking calls from collection agencies, if you’re receiving demand letters in the mail then it is time to give us a call or e-mail us so we can explain to you your options and you can get a fresh start.

Many visitors to hoyes.com are experiencing problems with collection agencies. Recently, a Registrar with the Ministry of Small Business and Consumer Services Debt Recovery Regulation Unit issued a letter of direction to the collection agency industry in Ontario.

In this letter he warned all collection agencies to stop using the “trick” of sending “draft” legal documents with their cover letters and claims to people they were contacting. These draft legal documents made it appear that the collection agency was just about to initiate legal action against the person receiving the letter – the truth was it was a simple computer template designed to scare people into making payments.

The letter from the Registrar goes further and warns collection agencies using lawyers to ensure that the lawyers comply with all of the legal requirements and restrictions placed on the collection agencies themselves. That means the lawyers must clearly disclose who they have been retained by (who they are working for). For example, just stating that they are collecting for Visa is not sufficient, the letter must state if the lawyer is working directly for Visa or for a collection agent. Similarly, the lawyers are not permitted to attach “draft” Statements of Claim that give the impression that a lawsuit is pending. Again this trick is designed solely to scare people into making payments.

If you are receiving calls and/or letters from collection agents then you probably have a debt problem. The purpose of this posting is to make you aware of some of the tricks that have been used by such agents in the past and that the government is now trying to clamp down on. If you have received such “draft” letters or letters from lawyers that don’t identify who they are working for you should contact the following government office:

Consumer Protections Branch
5775 Yonge Street, Suite 1500
Toronto, ON M7A 2E5
Tel: 416-326-8802
Toll free: 1-800-889-9768
Fax: 416-326-8810

By sending copies of your letters to the government you will help to clean-up this deceptive practice on the part of collection agencies. This number can also be used for any other complaints or concerns you may have about collection agencies in general.

Having said all of that, the truth is if you have collection agencies calling you and sending you threatening letters then it’s time you spoke to a professional about dealing with your debts. Collection agents only contact people that are having payment problems – if you are experiencing this kind of problem then you should probably contact one of our professionals for a free initial consultation. 80% of the people that contact our office don’t need to file bankruptcy – they just need to talk to someone knowledgeable that can point them in the right direction to deal with their debts.

For more information, read our report on Dealing with Collection Agencies: How Can I Stop Collection Calls?, and then contact us to arrange a free initial consultation.

It may be the last thing you want to think about on a sunny summer day, but just because you are on vacation doesn’t means your bills are going to go away.

At Hoyes, Michalos & Associates we meet with people every day that for one reason or another find themselves unable to deal with their debts. We’ve got toll free phone numbers, websites, and even this blog – all designed to provide you with enough information to determine whether or not you need help sorting things out.

We know that it can be difficult to make that first call so for the next few weeks we will be appearing live on Ask the Experts, a radio program on AM570 News, on six different Saturdays at noon. The shows will deal with various topics – all focused on providing you with the information you need to decide whether or not it’s time to get some help.

This week, I will be appearing live at noon to talk about dealing with collection agents and bill collectors. We’ve done shows on this topic before, and we’ve heard the horror stories: the collection agent that calls 10 times a day; the fellow that spends 20 minutes telling your kids what a bad person you are; the woman that tells you to go out and sell your couch or TV in order to make a payment; we’ve heard them all. On this show we will offer some strategies for dealing with collection agents.

Other topics include dealing with your home if you’re in financial trouble, how to deal with the tax man, credit cards, general questions and then finally a show dedicated to consumer proposals – the best kept secret for dealing with debt problems in Canada.

Here’s a copy of our schedule.

If you have questions that you would like answered, or if you want to share a story with our listeners please give us a call – if you’re too shy for the radio you can e-mail us a question or give us a call during the week at 310-PLAN (no area code required).

Thanks for taking the time to listen – we look forward to hearing from you.

The real question that everyone wants us to answer when they come in for a consultation is “how do I know if bankruptcy is the right thing for me to do?”

Unfortunately, no one else can make the decision for you. We can tell you how bankruptcy works, what may happen if you file, what is supposed to happen when you finish.

What we can’t do, is tell you if it is the “right” thing for you.

Like most decisions, you need to consider a lot of different things if you are thinking about filing bankruptcy. What will it cost? How long will it take? Who is going to find out about it? etc, etc.

A less obvious, but equally important consideration is “how do I feel about filing bankruptcy?” Bankruptcy is one of those legal terms that everyone has heard; most people don’t know exactly what it is, but they are pretty sure it’s not good. In other words, most people feel pretty bad about even thinking about bankruptcy.

That’s ok – no one expects you to be happy about, but you need to keep things in perspective.

The concept behind bankruptcy is that you need relief from your debts. For whatever reason (and there are many) you have accumulated more debt than you can handle and you need to find a way out.

If you’ve found your way to this website, then you are probably already falling behind on your bill payments. The phone may be ringing. You may be afraid to open your mail. The stress from all of these things already has you feeling pretty bad about yourself and your situation. Then someone comes along and suggests you think about bankruptcy – can it get any worse…

This is the turning point. Until you start looking for help to solve your financial problems you aren’t really in control. The lack of control is where most of the stress and the “bad feelings” come from.

If you’ve made the effort to find this website and you are experiencing financial difficulties then you should take the next step – book an appointment to see one of our professionals to review your situation (if you don’t live near any of our offices then find a local trustee to go and see).

Bankruptcy is not the only way to solve financial problems. Whomever you talk to will discuss 3 or 4 different ways to approach your difficulties. The solution that you pick will depend on your situation and on what makes you comfortable.

So, we can’t tell you if “bankruptcy is the right thing for you to do”.

We can work with you to help you understand your choices so that you can make an informed decision on how to deal with your financial problems. Once you make that decision some of the stress will be relieved and you will start to feel better about your situation and yourself.

In my last posting, Dealing with Debt: taking charge of the problem, I asked you to do some homework. Specifically I asked you to put together a list of all of your debts and to write down all of your monthly income and expenses.

The next step (and the subject of today’s posting) is to prepare a budget.

For some reason, the idea of a budget scares a lot of people – all we’re really talking about is plan for spending your money. We take a look at how you’ve spent your money in the past and based on that we decide how you want to try and spend your money in the future. We say try because a budget is just a tool – just becuase you’ve written down that you plan to spend $500 on groceries that doesn’t mean you are going to. It is up to you to stick to the plan, but we’ll talk more about that in the next posting.

So, what do we do with the information that you have gathered. First, set the list of debts aside, we’ll come back to them later.

Let’s start with your monthly income. Ask youself these questions about each of the income items you wrote down:

(1) Do I receive this money every month? For instance, if we’re talking about your paycheque then you probably do. If you’re talking about a GST cheque from the government then you probably don’t.

(2) Do you know which day(s) you will receive this income? For instance, do you get paid every other Friday? If it’s a government pension you might receive it on the 21st or maybe the 28th.

(3) Is it always the same amount? Does the income amount change every month (or every pay?)

Once you have answered these questions you can write down the total income you expect to receive next month. If you want to be really detailed, write the amounts down on a calendar on each of the days you expect to receive them.

The first half of your budget is done – now that wsn’t so bad was it? The next posting will deal with your expenses and things may get a little more complicated.

If you are already finding this more than you can comfortably deal with you may want to contact someone locally to give you some help.

If you found this blog you must have been surfing the net to learn more about bankruptcy and bankruptcy alternatives (for dealing with financial problems) in Canada.

This is going to the be the first in a series of self-help messages to either set you on the straight and narrow or warn you that it’s time to seek some professional help.

How are we going to do that? Well, you need to do two things for us before we can begin.

First, we would like you to take a few minutes to write down everyone one that you owe money to. It doesn’t matter if it’s your mortgage, a car lease, an overdraft at the bank, a credit card, your buddy at work, a cell phone account – whomever and whatever you owe needs to go on this list.

Second and this may be more difficult, we want you to write down how much money comes in every month (your take home pay, baby bonus, pension income, allowances, etc) and how you spend that money (the rent, the groceries, car insurance, cigarettes, coffee at Tim Hortons, etc.). If you’re like most Canadians, you don’t keep detailed records of how you spend your money so a lot of this could be guess work. That’s okay, but the more accurate you are with your numbers the better the end result will be.

If you don’t have any idea at all where your money goes then try this exercise: for the next two weeks carry a little pad of paper around with you and write down everything that you spend money on. If you buy gas write it down, groceries write it down, a candybar off the canteen truck write it down – get the idea? You’ll be amazed at how quickly the money gets spent and where it ends up going.

Once you’ve got these two tasks completed you’ll be ready to proceed with the next step – drafting a budget. You’ve probably heard of budgets in the news – governments seem to live and die by them, but can never get them right. Simply put, a budget is a plan for how you will spend your money.

The next blog will deal with the mechanics of preparing a budget – watch for it in a couple of days.