So why are unlicensed, for profit debt consultants allowed to run radio and television ads promising to reduce your debt, when more than 99 times out of a hundred they can’t?  Why doesn’t the government stop them?

Great question.  I was asked that question recently, and here’s my answer:

In summary: I don’t know why the government doesn’t do anything.  If there is anyone from the government reading this and they can give me an answer, please do.  Call me at 310-PLAN and let me know.

For everyone else, do your research.  Read our real life debt consultant stories.  Before you part with your hard earned money, be sure you meet with your debt consultant in person.  Don’t just talk to them over the phone; meet with them face to face so you can get a full explanation of all of your options.

If they don’t explain all of your debt management options, you are not getting good advice.  It’s as simple as that.

Jane Merling

I spoke with a gentleman recently who is struggling with an overload of debt. He and his spouse are living on a limited income from pensions and do not own property, so creditors would not be able to take collection action such as a wage garnishee or liens against assets. However, that doesn’t stop interest from accumulating on the debts or telephone calls from collectors, which can be very stressful.

The stress doesn’t stop there, as he is in rapidly failing health and is very concerned about his spouse having to deal with all this when he is no longer able to.

What should he do?

He needs relief from the stress. He needs to quiet his mind about what will happen to his spouse when he is no longer with her. He needs to channel his strength into coping with a terminal illness and making his remaining time peaceful and meaningful for his family.

She needs to concentrate on supporting her spouse as he navigates his way through some very difficult treatments for his failing health. She needs to keep her strength up and her mind clear to deal with issues that were primarily his role in their relationship. And she needs to have freedom from other stresses to cope with the inevitable grieving process.

We shared a calm and direct chat about the bankruptcy process and I answered his many intelligent questions throughout.

What I found really interesting about this dignified gentleman was that he kept thanking me for taking the time to discuss his many concerns. He was grateful to be able to speak directly to a live person and not have to go through a lot of automation and useless prompts.

I assured him that all of the highly trained professionals at Hoyes Michalos & Associates do this with every inquiry we receive.

Not all situations are as dramatic as this one, but dealing with debt can certainly be awkward and difficult. It took this gentleman a long time to “get up the nerve” (his words) to call us.

If you want to get started on a plan to deal with your debts or have questions about the process, contact us.  We’re here to help.  I know this gentleman feels better knowing his options, and so will you.

Janette Martin, North York Office Client Service Specialist

Here’s how it works: A credit counsellor will contact your creditors and help arrange a debt management plan that allows you to repay your debts in full over a period of time. This arrangement is voluntary and is not legally binding on you or your creditors. A credit counsellor is not able to settle your debts for less than the full amount owing, but is often able to negotiate a lower interest rate during your repayment period. A debt management plan will not work if you have a tax debt with Revenue Canada. A debt management plan will be reported to the credit bureau and will reflect negatively on your credit record.

If you feel that you have the ability to repay your debts in full but need help dealing with your creditors then your next step should be to contact a credit counsellor. Finding a reputable credit counsellor is not always easy. If you do an internet search for credit counselors in your area, you will likely get hundreds of hits. Word of mouth or a referral is a good way to find someone. We have a list of credit counsellors that we have dealt with personally, and we believe they are highly reputable.

When looking for a credit counselor, there are a few things to keep in mind. First of all, how much will you pay in fees? Is there an up front consultation fee? Annual or monthly “membership” fee? Monthly service fee? When you call to make your first appointment be sure to ask if there is a consultation fee.

Also, it is not a good idea to start making debt management payments until your credit counsellor has confirmation from each of your creditors that they are willing to participate in the program and exactly how much they agree to accept each month. I often meet with people that have entered into a debt management plan and after making several monthly payments, their credit counsellor contacts them to tell them that their monthly payment will need to be increased. This happens because one or more of your creditors did not accept the amount that the counsellor offered them initially and will only agree to your debt management plan if you increase your monthly payment. Beware of debt management scams where the debt consultant takes your money, but doesn’t actually do anything.

Is credit counselling a solution? Say you owe $15,000 to your creditors. If you decided to pay down this debt on your own over three years, you could expect payments of approximately $680 a month. If a credit counsellor could get all of your creditors to agree to stop interest and allow you to repay this debt over three years, you could expect to pay approximately $420 a month. Seems like a good solution. You know you can make payments of $420 a month because you are paying more than that each month to your creditors now. Unfortunately lot of people I meet with are unable to maintain their debt management payments because they underestimated the amount of money they have available after paying all of their living expenses.

A debt management plan is a good solution if you can afford to pay all of your debts in full, but just need a break on the interest. If you can’t repay the debt in full, a better solution may be a consumer proposal. A consumer proposal is a settlement of your debts and is legally binding on all your creditors, including Revenue Canada. A consumer proposal ensures that all of your creditors are treated fairly; one creditor does not have the ability to demand a higher payment than your other creditors. A consumer proposal can only be filed by a licensed Trustee; a credit counsellor cannot file it for you. The payments in a proposal on that same $15,000 of debt would be significantly less than a debt management plan, possibly as low as $200 a month for 36 months.

Understanding your options will help you pick the solution that works best for you. Since everybody’s situation is different and there are many factors to consider when deciding your best route, it is best to seek advice from a professional.

To find out if a debt management plan or a consumer proposal is right for you, please use our free, 10 second, on-line debt options calculator to review your options. Then call us at 310-PLAN (that’s 310-7526, no area code required, and that number works for all of our Ontario offices), or e-mail us today to arrange for a free initial consultation.

There are options, so let’s get started.

When considering your options to deal with the debts you have, many people will first explore the idea of a debt consolidation loan.

A debt consolidation loan is a loan that a financial institution will give you that allows you to group together other debts by paying them off with the loan.  For example, if you have three different debts that total $15,000 a loan company may give you a loan for $15,000 and you would use the loan to pay off the three debts with.  You’re replacing three old debts with one new debt.

Debt consolidation loans have some advantages:

• Because you now only have one payment to make, it should be easier to budget
• If the interest rate on your loan is lower than the interest rates on your credit cards, then it should save you money in interest payments
• By combining three interest rates into one, your overall monthly payment could be lower 

However, they also have some disadvantages:

• A debt consolidation loans are becoming increasingly difficult to obtain.
• You may need a co-signor. If you do, you’re now bringing someone else into the responsibility of your debt problems
• You may need to put something up as security such as your house. If consolidating debts through a second mortgage, your house will now be at risk if you don’t keep up with the payments
• The lender will want to see you have a steady income, employment and a good credit rating before considering whether or not to qualify you for the loan.
• Some financial institutions may qualify you for a loan, but at a high rate of interest.
• Debt consolidation loans require discipline. If you qualify for the loan and then you continue to incur new debts again on the credit cards, you’re essentially increasing your debt load leading to further problems.
• Your credit score will drop. Instead of having three accounts with a good payment history, you now only have one.

Sometimes debt consolidation loans won’t work for you. 

Howard Hayes - Client Services

Don’t forget, a lenders primary motivation for wanting to qualify you for a debt consolidation loan is because they believe they can money from you.

If the debt load you have is just too overwhelming and the monthly payments on a debt consolidation loan will be too high or you simply don’t qualify then you’ll need to start looking at other options.  Bankruptcy is an option, but it may not be the only other answer.

The advantages of filing a bankruptcy would be that you’d be clearing yourself of all the debts as opposed to re-financing them.  You don’t need to qualify to file for bankruptcy; it’s a choice you make.  It’s the quickest and cheapest way to clear yourself of debt problems and it legally protects you when accounts get behind and you face collection problems and the threats of legal action against you.

Many people will search for help in consolidating debts as a way to avoid filing bankruptcy and often fall into the trap of committing to a higher interest rate debt consolidation loan because the only financial institutions that will qualify you will typically charge you a higher rate of interest for doing so.  The fear of bankruptcy and the fear of losing assets will often lead people to the clutches of lenders that care more for their profits than they do about you as a customer.

The good news is that there is another way.  Consumer Proposals are becoming more and more the number one alternative to bankruptcy and the number one way to consolidate debts.

A Consumer Proposal is a legally binding settlement of debts.  Proposals can be filed with the help of a trustee.  It allows you to offer payment terms to the people that you owe money to that you can realistically afford.  You’re allowed a maximum of five years in which to complete a proposal and there is no interest charged on what you repay.   In the same way a debt consolidation loan groups all your debts into one payment, a Consumer Proposal does too except this time, instead of paying the principal debts plus interest, you’re only paying back what you offer to pay back.

Sounds too good to be true? Well consider the position of the people you owe money too.  If you don’t qualify for a debt consolidation loan, and as much as you may want to still avoid a bankruptcy, they want to avoid it too.  They’d rather accept a Consumer Proposal that is offered on the premise that they’d rather get something back that nothing.

Finding ways to solve a debt problem is never easy.  Here at Hoyes Michalos & Associates Inc we recognize that no two people’s debts problems are exactly the same and therefore the best solutions for a debt problem will depend entirely on your specific circumstances.   As such, we always recommend that you contact us right away and speak to one of our professionals about your situation and we’ll go over all the options you have.  Whether you just want to talk on the phone or book an appointment to come in to one of our offices for a chat, it’s a free service we offer and there’s no obligation.  Contact us by email or call today at 310-PLAN and let’s get started.

If we first understand why a creditor issues a garnishee and how they go about it, then we can understand how to deal with a garnishee. A creditor (like a bank or credit card company) goes to court to get a garnishee because they have not been paid, they have been ignored, or you cannot arrange a satisfactory repayment arrangement with them. For banks, credit cards and the like, issuing a garnishee is a last step because they are required to go to court, get a judgment and have the garnishee issued. The Ontario Wages Act usually keeps the rate of the garnishment to twenty per cent.

The best way to stop a bank or collection agency from garnisheeing your income is to be proactive. That means talking to the creditor prior to them getting to the point where they have no other choice but to put a wage garnishment into play. Often creditors take action because they do not know about what’s going on in your life, except the fact that they are not being paid. They do not know about the layoff, or the sickness or the other circumstances that make paying the creditor impossible. If your circumstances change, contact your creditors and tell them; do not wait for them to call you after the account has become delinquent. The sooner you call, the more time you will have to work with your creditors.

If you haven’t communicated with your creditors, they will notify you that they are taking you to court to get a judgment against you. There is the name of a law firm and phone number on the legal documents. Before things get worse, call and see if you can still work out a payment arrangement. If so, there will be no garnishee. If not, your creditors will get judgment against you and collect on this judgment by way of a garnishment.

Once a garnishment starts, other than paying it in full, there are only two ways to stop the garnishment: file a consumer proposal or file bankruptcy, both of which must be filed by a licensed trustee (such as our team here at Hoyes Michalos).

Once a private sector creditor (a bank or credit card company) notifies you that they want to get a judgment against you, do not ignore it. When you find out that a payment arrangement is not possible or if you know before that you cannot afford a payment arrangement, call us at 310-PLAN. We will review your situation and work with you to find the best and most affordable solution for you and your family situation.

We will help you make a plan. Often that plan will involve a consumer proposal. A consumer proposal is often the best alternative because the monthly payments you will have to make are usually lower than what would be required in a bankruptcy, and the creditors get a partial payment of the balance. However, if a consumer proposal is not possible because your income is too low, then a bankruptcy may be the only remaining option.

Others may claim that they can have a garnishee released, but if their offer is less than what the garnishee would generate, the likely answer would be no. A Trustee must file either a Consumer Proposal or a Bankruptcy. If these are your only alternatives, contact us and we will help you with your problem.

In this article we have discussed banks and credit card companies. The rules for a Canada Revenue Agency (CRA) garnishment are different, so if you have CRA tax debts, please call us at 310-PLAN today for more information.

So, does cutting back mean you can’t enjoy Christmas this year? Absolutely not, but we really do need to be thoughtful and intentional in our approach to the festive season. And, we may have to rethink what enjoying Christmas is really all about. Even though retailers would have us think otherwise, Christmas really isn’t just about the gifts. Here are some tips and suggestions:

What we can do:

1. Look at your budget and try to be honest about how much money you really have to spend this Christmas. Ideally, the money we have to spend is the cash that we have saved specifically for this purpose.
2. Explain to your young believers, that Santa wants to make sure that all of the children in the world get the 1 gift they really want this year, and ask them to choose what their special gift will be. Beyond that 1 special (and usually more expensive) gift, head to the dollar store and pick up some extras – dollar store finds are perfect for stocking stuffers, and the best part – you can buy a lot of stuff for very little money.
3. See if family members might agree to not buy for the adults this year. I saw a client this week who shared with me that this year, everyone in his family over the age of 16 will be buying a $20 gift certificate – all of the gift certficates will be put into a pot, and each person gets to draw their gift. What a great idea!
4. Consider a pot-luck Christmas dinner – share the costs and the work. My family and I have adopted this tradition, and it is always an overeating success – we all make each other’s favourite dishes and we have a fabulous feast.

What we should not do:

Let’s face it, most of us would like to have more money than we have. Christmas is one of those times when we are generally even more aware of this wish – we want to buy our children everything on their wish lists; we want our spouses and sgnificant others to be dazzled and overcome when they open that special gift. Unfortunately, most Canadians are not in the position of being able to do it all. And, this is where Christmas can get tricky and even very risky. Credit cards can make it easy for us to have it all, but the problem is that “Having it all” in December sometimes turns into “Losing it all” in February or March.

That’s not to say that making Christmas purchases on credit is a bad thing. Sometimes it’s not – if you can manage to pay the debt off in no more than a few months, then it may be a reasonable plan, but if you can’t pay it off on a timely basis, or worse yet, you already have substantial debt that is already a burden, adding to the problem is simply not a good idea.

I know that is not easy, and life’s financial burdens can weigh that much heavier at this time of year; the desire to simply worry about things after Christmas can be a powerful motivator to simply use credit to get through the season.

I’m sorry if I sound like the Scrooge in Christmas – I really don’t mean to, but I do want you to try to PLAN for Christmas this year. A PLAN can take many forms: if you have manageable debt now, don’t let impulse make it unmanageable in the future; if you are already struggling with debt, don’t make it worse; and… if the stress of debt is making it difficult for you to even think about enjoying Christmas this year, we may be able to help – for further information, please  call us at 310-PLAN, or try our free debt options calculator to review your options. Let us help you Turn the Worry of Debt into a PLAN for a Less Stressful Financial Future.

A consumer proposal is a settlement negotiated with your creditors. Here’s a simple example:

Orville and Mary Smith owe $50,000 on their credit cards, an unsecured line of credit, and a payday loan. They have jobs, but cannot afford to make all of their minimum payments each month, and they are falling behind. They don’t want to file bankruptcy, so instead they decide to file a consumer proposal, where they will offer to pay $400 per month for 50 months, for a total of $20,000. If the creditors accept the proposal, they have one affordable monthly payment, and at the end of the 50 months, their debts are officially discharged.

Sounds great! One monthly payment, the calls from bill collectors stop, you don’t have to worry about a wage garnishment, and you get a fresh start! How does it work?

The process starts by contacting the professionals at Hoyes, Michalos & Associates Inc. I suggest you start by completing our on-line, free, anonymous debt options calculator. It only takes a few seconds. If the calculator shows that a consumer proposal may be an option for you, you can e-mail us, or complete our on-line evaluation, or call us at 310-PLAN (310-7526, no area code required in Ontario) to arrange a no charge initial consultation.

At your initial consultation we will review what you own, who you owe, and what you earn and spend each month. Based on that information we will help you decide whether or not a consumer proposal is the correct option for you and your family. (If you want to speed up the process you can download our fresh start application before our first meeting).

Doug Hoyes Explains Consumer Proposals

If you decide to file a consumer proposal, we prepare the necessary documents, and you meet with us to sign them. Prior to filing the proposal, in addition to meeting with one of our client services specialists, you will also meet with one of our trustees, who are also licensed proposal administrators. They will review the process with you, and answer any further questions you may have.

As soon as you have signed the proposal paperwork, and before you leave our office, we electronically transmit your file to the government, so that we can give you your government-assigned file number. With that file number you can direct all calls from creditors to our office. As soon as you file your proposal, we talk to your creditors. In other words, once the creditors are notified of your proposal, the collection calls stop!

By law the creditors have 45 days to vote on your proposal. Each creditor gets one vote for every dollar they can prove that you owe. If 50% + 1 of your creditors vote in favour of your proposal, the proposal is approved, and all creditors are bound by it. That means that even if some creditors vote against your proposal, if a majority in dollar value accept it, the proposal is accepted.

What happens if more than half of my creditors vote “no”?

If more than half of the creditors vote against the proposal, we will contact them to confirm that they understood the terms of the proposal (since the proposal you offered should generate more money for the creditors than if you filed bankruptcy). We will also ask them if they wish to propose alternate terms. For example, if you offered $300 per month for 50 months, they may counter by asking for $300 per month for 60 months. You can then either reject or accept their counter offer.

At some point in 2011 Hoyes Michalos will file our 10,000th proposal, so obviously our longevity indicates that we have a very high success rate when filing proposals. In the vast majority of cases, if the proposal is reasonable, and if there are no unusual circumstances, your proposal should be accepted.

From your point of view, you have two important duties:

First, you will attend two credit counselling sessions. These sessions are designed to teach you some money management techniques, to help you avoid money problems in the future. The first session will occur within the first two months after filing, and the second session will generally occur between the third and seventh month. Each of the two sessions lasts for between 45 minutes and one hour, and they are all private sessions.

Second, you are required to make the agreed upon payment each month. We will set up your payments using our pre-authorized payment system, so your payments will be debited directly from your bank account, so you have no worries about bringing in cheques or making cash payments. We even let you decide the payment schedule. For example, if your proposal is for $400 per month, we can set it up so that you are paying $100 per week (if you get paid weekly), or $200 bi-weekly (if you get paid bi-weekly). I personally encourage weekly or bi-weekly payments, if it matches your pay schedule, because then in a month when you get your extra paycheque, you are making an extra payment in your proposal, and your proposal gets paid off faster.

In summary, for many people a proposal is a great way to have one manageable monthly payment to deal with their debts. If you want a fresh start, to find out more try our on-line, free, anonymous debt options calculator, then e-mail us, or complete our on-line evaluation, or call us at 310-PLAN (310-7526, no area code required in Ontario) to arrange a no charge initial consultation, and let’s get started.

You know you have a lot of debt, but you don’t fully realize the seriousness of your situation until you start getting calls, at home or at work, from bill collectors, looking for money. It’s not just the phone call that spurs people to action; it’s also the threat that the collection agent will take you to court and try to garnishee your wages.

One method collection agents use to emphasize this threat is to send you a letter with a Draft Statement of Claim, which is a document made to look like a court document. Since you probably don’t routinely see court documents, you may not realize that you are only being threatened with a lawsuit; you are not actually being sued, at least not yet.

Last week I received a phone call from Mark Silverthorn, a lawyer who has launched a one-man crusade against Draft Statements of Claim. He believes that in Ontario it’s actually illegal for collection agency lawyers to send Draft Statements of Claim, and he asked for my help in exposing this practice.

So, last Friday, I asked our videographer to film me interviewing Mark Silverthorn about this collection agency “dirty trick.” As you will see from the video I’m obviously not a professional interviewer, and I don’t have access to fancy television studios to make a high quality video. However, I believe we were able to explain the issue, and possible solutions.

I ended the video by explaining that if you are being harassed by collection agents it’s probably because you owe money. Collection agents don’t normally just go away on their own, so if you can’t make payment arrangements directly with them, I strongly recommend that you call our office at 310-PLAN (310-7526, no area code required in Ontario), or complete our on-line evaluation, or e-mail us, and one of our professionals can walk you through your options, including a consumer proposal.

You don’t need to feel threatened by collection agencies. There are options for dealing with your debt, so contact us today, and let’s get started.

Credit Education Week Canada

Credit Education Week Canada launches its 4th annual weeklong event on November 15, 2010. This is a free event that “promises to teach you everything you need to know about managing your money and taking control of your financial future”. The Language of Money is this year’s theme, and will provide visitors with information on a variety of topics such as “Consumer Credit Pitfalls” and “Helping Consumers make informed financial decisions”.

Many of this year’s topics are very timely for Canadians. This week, for example, the Canadian Association of Accredited Mortgage Professionals released its finding that outstanding mortgages are at an all time high, indicating that many Canadians are making the decision to purchase a home. Credit Education Week Canada addresses the topic of “Making Informed Homeownership Decision” at their November 16 kickoff event. So, if you are thinking about buying a home, this may be a great event to attend.

Navigating our financial system can be difficult for anyone, but can be particularly difficult for newcomers to Canada. Credit Education Week Canada 2010 focuses this year on New Comers and features speakers who will provide information about the supports available to our new Canadians.

We invite you to visit the Credit Education Week Canada website – here you will find details of the event, a directory of resources including a list of non-profit credit counselors, along with lots of tools and information on a variety of money management and planning topics.

Whether you are a newcomer to Canada or have lived here forever, we encourage you to take this opportunity to educate and empower yourself. Hoyes Michalos & Associates is here to help – if you have questions, feel free to give us a call at 310-PLAN, or complete our free on-line evaluation, and let’s get started.

I pleased to report that Ted Michalos and Douglas Hoyes actually exist. We are real people, and we both meet with dozens of people in person each week, and we talk to many more on the phone each day. We started Hoyes, Michalos & Associates Inc. back in 1999, and we both remain the owners of the firm, and actively involved in the business on a daily basis.

Why does it matter to you that there is actually a Hoyes and a Michalos?

It matters because if you decide to file a consumer proposal, or to file personal bankruptcy, you want to know that you have chosen to work with a team of professionals supervised by the two guys whose name appears on the door. You want to know that our reputation is very important, and that we will do everything in our power to administer your file in a professional manner.

You can choose your trustee. There are hundreds of other trustees in Ontario; there is no shortage of licensed trustees willing to help you with your financial problems. So why should you choose Hoyes Michalos?

Hoyes Michalos Running Team

First, we are real people, active in the community. A number of our staff participate in many community events, including the Oktoberfest 5km and 10km run held on October 17, 2010. (That’s me, Doug Hoyes, in the white shirt, along with Scott Schaefer, our Kitchener office trustee, Amie and Jennifer from our Kitchener office, Nelly from our tax group, and Ian Martin, our Kitchener office client service specialist). The Hoyes Michalos running team is our way to stay fit, and to stay active in the community. (Our next scheduled event will be the Cambridge Times Rotary Classic in May, 2011). More details are available on our community involvement page.

Second, all of our trustees and staff were hired and trained by Doug Hoyes and Ted Michalos. We believe we have assembled the “A-Team”; caring professionals who know their stuff, and are willing to take the time to explain your options in detail so that you can make an informed decision.

Third, we are one of the largest firms devoted to personal insolvency in Ontario, so we have the skill, expertise and technology to help you deal with your money problems. We are not a “one man band”. If you call our 310-PLAN debt hotline during normal office hours, 99% of the time you will get a live person who can deal with your issue immediately. You will not have to “push 1 for English”, and you will not hear a recorded message that says “please hold while we connect your call.”

Finally, even though we are a large firm with twenty consumer proposal and bankruptcy offices across Ontario, we are not a large, multi-national accounting firm. We handle proposals and bankruptcies for people, and that’s it. We don’t do audits or tax returns for large corporations. We don’t report to a board of directors in New York. We work with debtors and creditors in Ontario, and that’s all we do.

At Hoyes Michalos, we want you to solve your debt problems, but we are not going to try to “sell” you a “one size fits all” solution. A consumer proposal may be the best option; perhaps for you a bankruptcy is necessary; perhaps help with budgeting or a referral to a not for profit credit counsellor will solve your problems. We created this web site to give you the tools to research your options on your own, for free, so please take advantage of our sections on:

• consumer proposals
• personal bankruptcy in Ontario
• help in dealing with debt

Check out our debt options calculator; it takes five seconds to find out the approximate cost of different debt management options.

Then, when you have finished your research, complete our on-line debt evaluation and one of our professionals will e-mail or call you with your options. Or, pick up the phone and call us today at 310-PLAN (that’s 310-7526, no area code required), or send us an e-mail.

We are here to help you, so let’s get started.