Hoyes Michalos and Associates Ontario Personal Bankruptcy Blog

Douglas Hoyes, Bankruptcy Trustee

It’s that time of year again: time to make our New Year’s Resolutions. At this time of year we all promise that we will lose weight, stop smoking, and get our financial life in order. I’m not a big fan of New Year’s Resolutions. I think if you want to make a change, do it, regardless of the time of year. If you want to lose weight, isn’t the holiday season the worst time of year to do it?

That being said, the start of a new year is as good a time as any to review our financial situation, and make a plan to deal with our debts. So, for those of you who will be making Financial New Year’s Resolutions this year, here are my top five tips starting the year off right:

First, set goals. If you don’t know where you are going, you won’t get there. What are your goals? You probably have long term goals, like buying a house or car, putting your children through college, or saving for your retirement. You also have short term goals, like buying a new pair of shoes. Whatever your goals are, write them down, and make them specific. Don’t write “buy a car”. A better goal would be “I want to buy a used car for $5,000, and I will pay cash, so my goal is to save $500 per month for the next ten months.” That’s a specific goal.

Second, make a plan to reach your goals. You want to save $500 per month: how are you going to do that? Unless you can increase your income, the only way to save money is to reduce your expenses. Which expenses will you cut? You need a specific list of exactly which expenses you will reduce. For some ideas, there are lots of money saving tips on the internet.

Third, the best way to reach your goals is by making a personal budget. A personal budget is simply a list of what you make and spend each month. Unless you make a budget you won’t know what you spend, so you won’t know which expenses to cut. The best example of using a budget to analyze your expenses is the story of Joe (not his real name), who saved a lot of money by making his own coffee and bringing his own lunch.

Fourth, if you have debts, make a plan to pay off your debts. Every financial expert will tell you to start a savings plan, but if you are in debt a savings plan is not your priority: your priority is to get out of debt. Start by making a list of your debts: write down the name of the lender, the amount owing, and the interest rate. Many people have no idea how much they owe in total until they write it down. Then, prioritize your debts in the order that you want to pay them off. Here’s a tip: don’t make the mistake of trying to repay your smallest debts to get them off your books; instead, start with your highest interest rate debts. Paying off a department store credit card with a 25% interest rate will save you more money in the long run than paying off your line of credit with a 10% interest rate.

Finally, if your goal is to get out of debt, and if your budget tells you that it will be impossible to deal with your debts on your own, research your options and then get professional help. Here are some great resources:

• The Hoyes Michalos team has assembled the answers to the most frequently asked bankruptcy questions (you can read them or listen to the answers)
• Explore your bankruptcy alternatives on our bankruptcy alternatives page
• Use a Debt Options Calculator, a free tool that shows you the cost of various debt management options
• Go to the Bankruptcy Canada On-line Support Group, where you can anonymously discuss your debt problems with other people in debt
• If you prefer to learn by watching, check out Hoyes Michalos videos about bankruptcy and bankruptcy options
• Or if you prefer to listen, Hoyes Michalos on the radio answering your bankruptcy questions.

Here’s a simple New Year’s Resolution: contact us for more information. You can phone us at 310-PLAN (no area code required in Ontario), or call our office closest to you, e-mail us your question, or complete our on-line evaluation and one of our experts will contact you with suggestions for your specific situation. This can be the year you finally deal with your debt, but your fresh start will only come when you make the call.

Scott Schaefer

We receive hundreds of e-mails every day from people experiencing financial hardship. Several of these e-mails ask similar questions so we have decided to provide answers live on the radio at 12 noon on Saturday November 14, 2009.

Scott Schaefer, the bankruptcy trustee responsible for our Kitchener office, and Howard Hayes from our Cambridge office, are going to answer your questions during the hour long Ask the Experts show on AM 570 News.   570 is Waterloo Region’s All News station.

We have created an e-mail address to allow youto send in their questions.  Send us your questions, and will will answer them  live on the Ask the Experts radio show.

Howard Hayes

If you have a question that you want answered, or you think other people would like to have answered, please e-mail us your question today.

If you can’t wait until Saturday, or you want to discuss your situation off air, call us at 310-PLAN (no area code required) or e-mail us today.

Over the past month I have received a number of calls from reporters asking for my thoughts on the economic crisis.  I’m always eager to share practical advice on how to deal with debt.  On November 8 I appeared on ProvinceWide on CTV Southwestern Ontario on a show called Your Money, Your Future (you can watch a clip by clicking on this ProvinceWide link).  I advised everyone to reduce their debt, and make a plan to stay out of debt in the future.

This morning I also appeared on Canada AM in a report by Pat Foran, who did a great story on How to Survive the Crumbling Economy.  I gave the same advice: reduce your debt, and have a “Plan B” in case your situation gets worse.

You can read more in our article on Surviving the Economic Crisis.  Mr. Foran led off his report by noting that consumer bankruptcies are way up, and he’s right.  In Ontario, personal bankruptcy and consumer proposal filings in Canada are up 8% over the last year,  18% over the last three months, and were up 32% in September 2008 as compared to September 2007.  Clearly the economy is in bad shape.

I agree to appear on television not to spread doom and gloom, but instead to spread the word that there is help available.  If you have more debts than you can handle, take action now.  Give my office a call at 310-PLAN (no area code required anywhere in Ontario) or e-mail us and we will explain your options for dealing with debt.  There is help available, but only if you take the first step and contact us today.

It seems that every time we open a newspaper or turn on the news we hear more stories about banks failing, bailouts, higher unemployment, and other economic bad news. All of this bad news is starting to take it’s toll on our outlook on our economic future. I have met with many people over the last few weeks who have told me they are very worried about the future, and they don’t know what to do.

My advice to everyone is the same: The most important action you can take now to protect your personal finances is to reduce your debt. In a recession, debt is a killer.

If you earn $2,000 per month, and your rent, food and other monthly living expenses are $1,800, you are in good shape. But, if you have $500 per month in debt payments, you’ve got a problem. That’s why getting out of debt is so important; it gives you the flexibility to survive the recession.

For more information, please read our article Five Tips to Survive the Economic Crisis, and then give us a call at 310-PLAN if you have any questions.

As people get older, their lives can become both more fulfilling and more challenging. Retirement brings the freedom of not having a set schedule but can also lead to a number of difficulties, including financial ones.

Working at the Hoyes, Michalos & Associates offices in Kitchener and Barrie, I am hearing from more and more people who are concerned about their aging parents getting into serious financial debt.

The trouble is this: Many seniors are living on a pension income that barely covers their living costs such as rent and food. Often, those who are aging are in need of many medications and it seems the government has cut-back on what is available free or at a reduced cost. This leads to a situation where seniors are unable to cover their monthly living expenses as well as the cost of their prescriptions and are forced to use credit cards in order to get by.

In addition, taxes are not always deducted from CPP and old age pension cheques, so often Canada Revenue Agency (CRA) comes to the person at the end of the year asking for these taxes. They will then use their credit card to pay the CRA for these taxes as well. If the pension was taxed at the source, this would not happen however, it would mean a less income each month to put toward other things because taxes would be taken off each month. It is easy to see how senior citizens are at an increased risk of creating huge credit card debt that they will be unable to pay back. Making the problem worse is that many older people believe it is unacceptable to speak about their finances and are very embarrassed that with all of their life experience and after having raised their own family, they have now found themselves in financial trouble.

If you are concerned about your parents’ finances, or you are a senior who needs help getting out of financial trouble, please know that at Hoyes, Michalos & Associates we understand how easy it is for even the most experienced and hard-working individuals to find themselves in debt. We are committed to helping you get out of financial trouble in a way that works for you.

When you contact us, we will walk you through all of the options that will be available to you or your parents so you can make them feel more prepared and comfortable if they would like to come and see us. If you would like to speak to someone now, call 310-PLAN (no area code required) or send us an e-mail and we will be happy to discuss your situation and options with you, and set-up an initial consultation free-of-charge at one of our bankruptcy offices in Ontario.

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.