On Friday I received a telephone call from Daiene Vernile, the Anchor and Producer of ProvinceWide, a news and information program broadcast at 6:30 pm on Sunday evenings on CTV Southwestern Ontario. As a service to her viewers, she will be hosting a town hall special broadcast in February on Coping with Job Loss. The entire broadcast will be devoted to exploring ways to deal with job loss during these uncertain times.

As a local broadcaster, CTV Southwestern Ontario wants to interview several local residents who have experienced job loss.

Are you willing to share your “downsizing” story on television? You would be interviewed, and specifically asked to describe your experience. Were you surprised by the termination? How is your new job search going? Are you retraining for another career? What has this meant for your family finances?

It’s obviously difficult to discuss personal matters like downsizing on television, but you will be seen by thousands of people, and it could even land you a new job! What better way to advertise your services to potential employers.

I have appeared on ProvinceWide on two previous occasions (the last time was in November, 2008 on a town hall meeting discussing the recession, called Your Money, Your Future; the attached picture is from that broadcast), and I have always found Daiene Vernile to be very well prepared and informed, so I have no hesitation in publishing this request for help with the broadcast. Ms. Vernile will not try to ambush or embarrass you; she truly wants to help people by having real people tell their stories.

If you have experienced downsizing and are available in the Kitchener, Cambridge or Guelph area to record an interview, please e-mail me with your name and e-mail address or phone number, or call me directly at 310-PLAN, and I’ll put you in touch with Ms. Vernile. Who knows, your story may help other people, and may even help you find a job!

Jane Merling

I spoke to a young woman recently that has gone through a very tough time in the past few years. She and her (now) ex spouse could not keep up the payments on their home and lost it under power of sale by the mortgagee. The house was sold at a substantial loss and as the mortgage was guaranteed by Canada Mortgage and Housing Corporation the debt now rests with them. She also has a few credit card debts and other miscellaneous debts.

She and her spouse separated and she is now struggling to live on social assistance while raising a young family.

Creditors would have a hard time trying to collect debts from her as they really have no means of collection under her current circumstances; she doesn’t have wages, so they can’t get a wage garnishment.

However, she received notice from CMHC that they will start to redirect any income tax refunds or GST credits against the shortfall from the sale of the house. As a government agency they have the ability to request that Canada Revenue Agency send these funds to them.

The debt is large and her tax refunds/GST credits are small so it could take years for this debt to be repaid, especially as interest is accumulating at an alarming rate.

She feels that she needs a fresh start after all the stress she has been through in the past few years and would really like to be able to raise her family without this old problem hanging over her head. I invited her to have a free consultation with one of our professionals to discuss her options. Filing a bankruptcy may be the right solution for her and would give her some much needed peace of mind.

This is the time of year when we are all thinking about income tax and if you are facing concerns like this please give us a call at 310-PLAN to speak with one of our professionals, or complete our on-line evaluation, or send us an e-mail for more information.

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.

Doug Hoyes, Bankruptcy Trustee

It never fails: the Hoyes Michalos 310-PLAN telephone help line and our on-line bankruptcy evaluation service get very busy in early January, as people realize they spent too much on their credit cards over Christmas.  I expect that with the continuing recession, this January will be very busy.  So before you get into financial trouble, here are my top three tips for financially surviving Christmas.

First, reduce your debt.  If you already have credit card debt, take steps to reduce it.  If you just pay the minimum balance on your credit cards you can easily spend twice as much for an item when you include the interest costs.  The real problem with high debt is that you are not in control.  The bank controls you, because they decide how much interest you pay, and when your payments are due. If you have more debt than you can handle, consider filing a consumer proposal to deal with your debts.

Second, to avoid increasing your debt this Christmas, use cash or a debit card.  Leave your credit cards at home.  You will spend less if you use cash, because it’s psychologically harder to part with “real money” than it is to swipe your credit card.

Finally, spend less.  Even if you are paying cash, keep your spending low.  Two years ago we wanted to impress everyone by flaunting our spending.  This year frugality is the new bling: the cool people are the people who spend wisely, not the lavish spenders.  Consider gifts like baby-sitting or preparing a meal.  These are gifts that are appreciated but are not expensive.  Discuss the topic with your family and friends.  They are in the same position as you are, so they will appreciate a plan where you can all avoid unnecessary spending.

A simple budget can help you keep your spending under control.

Remember, the bankruptcy rate spikes after Christmas, so now is the time to get your finances under control.  If you already have more debt than you can handle, please contact us today to discuss options for dealing with your debt, so you can look forward to a less stressful new year.

Douglas Hoyes, Bankruptcy Trustee

As predicted in previous posts, there was a massive increase in the level of personal bankruptcy filings in Ontario and Canada in September, 2009. Here are the numbers:

In September, 2009 in Canada there were 12,305 personal bankruptcies filed, a 47% increase over the same month in 2008. In addition, there were 3,160 consumer proposals filed, for an increase of 39%. Not surprisingly, the personal bankruptcy rate in Canada increased by more than the consumer proposal rate due to the new bankruptcy rules that came into force on September 18, 2009. There was obviously a rush by Canadians to file before the new rules were implemented.

Here’s the scary part: for the twelve months ended September 30, 2009 the bankruptcy rate in Canada increased by 36%, and for the three months ended September 30 the personal bankruptcy rate increased by 41%. So the rate increase for twelve months is 36%, for three months it’s 41%, and for one month it’s 46%. That shows that the bankruptcy rate is increasing at an ever faster pace. That’s bad news for the Canadian economy.

In the last twelve months in Canada 148,378 Canadians have filed an insolvency proceeding (116,295 personal bankruptcies and 32,083 consumer proposals). That’s record, by a wide margin. That compares to 100,552 in the same period in 2007, and 108,807 in 2008.

In Ontario, the statistics are equally grim: In September there were 5,007 personal bankruptcies filed (the first month ever over 5,000), an increase of 49% from last September. Proposal filings were up 36%.

The government doesn’t publish statistics by city each month, but we know that in the last three months personal bankruptcies were up by 41% in Toronto, 39% in Hamilton, 55% in Kitchener, 39% in London, and 44% in Windsor.

We will continue to analyze the numbers, but the message is clear: the recession is not over, so now is the time to consider your options and reduce your debt, so that you can survive the continued recession.

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.

Canada’s third annual Credit Education Week starts next week, and it’s a great opportunity to learn more about money management. At least once a week I meet with someone who says to me “I got in to financial trouble because I never learned how to manage money.” Unfortunately in Canada our schools do a good job of teaching math and English, but there are no in depth courses that explain the pros and cons of credit cards, mortgages, car loans and how to make a personal budget. I think it’s great that there is now a week devoted to Credit Education in Canada; the more education we have in the wise use of credit, the better.

This year Credit Education Week will focus on Couples and Money. Participants can learn about how couples spend and save, and learn some important lessons that will help couples with their finances, and their relationships. Credit Education Week is supported by leaders within the financial services industry, consumer advocacy groups, community organizations and government, and as a result consumers get free access to financial advice and resources from Canada’s leading experts.

Hoyes, Michalos & Associates are not sponsors of the event, so we have no vested interest in promoting Credit Education Week. However, I strongly believe that the more we know about credit the better, so I’m pleased to help get the word out about this worthwhile event.

For those of you in the Toronto area, the Credit Education Week Canada launch will be held on Monday, November 2, 2009 from 9:30 a.m. to 11:30 a.m. at the Metro Toronto YMCA at 20 Grosvenor St. in Toronto. Alison Griffiths from Maxed Out will be hosting an exclusive panel featuring consumer reporter Pat Foran from CTV Toronto and Canada AM, and Ellen Roseman, the personal finance and consumer affairs columnist for the Toronto Star.

This sounds like a great panel. I’ve been interviewed by Pat Foran for Canada AM, so I know from personal experience that he has a great understanding of personal finance issues. Ellen Roseman has many years of experience writing about personal finance issues, and back in 2007 I even blogged about a great article Ellen Roseman wrote about credit cards in the Toronto Star, so I know she will be a great addition to the panel.

To register for the launch, RSVP before Friday, October 30, 2009 by contacting Elena Jara at 416-228-2535 or by e-mail at ejara@creditcanada.com

For more tools on money management, and for more information, go to the Credit Education Week Canada website.

There is no question that financial distress can be one of the most difficult things to deal with. Money problems are a private issue and it’s hard to tell who to turn to for help.

At Hoyes Michalos our goal is to help you to find the right option for you and your family. People I talk to worry that personal bankruptcy is the only option. Rest assured that when you call us, bankruptcy is the last option we will discuss, not the first.

As a former credit counsellor I’m well qualified to discuss how a debt management plan may be the solution to your problems. Debt management plans are great if you have a limited amount of debt, and the ability to repay your debts in full.

If you can’t repay your debts in full, a consumer proposal may be the perfect option. Like a debt management plan we negotiate a settlement with your creditors, and in most cases a settlement can be reached where you pay less than the full amount owing.

When you call Hoyes Michalos, you will speak with someone who cares about helping you find the right option. We will go over your situation with you, and if you like, we can book you a free consultation to meet face to face and review your options. There is no obligation or cost to this meeting, and you will find us welcoming and non judgmental.

If you are struggling with debt due to job loss, difficult business climate, relationship issues, or any other reason at all, let me invite you to call us. We can be reached toll free at 310-PLAN (that’s 310-7526 – no area code is required). We look forward to helping you build a plan to deal with your debts.

But remember, we can’t help you if you don’t first make the call.

So what do I do if I don’t believe the rules are fair? I follow the rules, but I also do everything in my power to change the rules that don’t make sense. Ted Michalos and I were the only independent trustees asked to testify before the Senate Banking Committee as they contemplated changes to the bankruptcy rules. We argued in favour of rules that would be more fair to the average Canadian in financial difficulty.

When reviewing the new bankruptcy rules that were set to come into force on September 18, 2009, we noticed a big problem: Without warning, the government decided to require all bankrupts to disclose their highest level of education. It became a requirement that you were forced to disclose to your creditors if you were a high school dropout, or if you didn’t finish university. Governments often make stupid decisions, but this decision was about as bad as it gets.

I understand that if you are going bankrupt, you must disclose your debts, and your assets, and your income. Without that information your creditors cannot evaluate your case. But do your creditors need to know whether or not you graduated from high school? Probably not.

Although no-one from the government will explain it to me, I assume that some bureaucrat somewhere decided it would be interesting to do a study of education levels, so they quietly slipped it onto the paperwork bankrupts must fill out.

I found that to be offensive, and most people we dealt with found it very embarrassing having to declare their educational status.

As soon as we discovered this dirty little trick, we took action.

On September 10, 2009, I sent an e-mail to the Superintendent of Bankruptcy (the government official responsible for administering all bankruptcy rules) asking why this requirement was implemented, and stating my objection to it. (About a week later one of his staff replied to me that they were “working on it”).

On September 14, 2009 we issued a press release in an attempt to bring attention to this new rule.

Over the next few days we spoke to the media, and continued to make calls to the government in an attempt to get them to change this rule.

Then, finally, on Saturday morning, September 26, 2009 we received word that the government had quietly changed the rule. Debtors were no longer required to disclose their educational status on their bankruptcy paperwork. Interestingly, the government did not admit to the mistake; they have to this day not issued any official communication on the matter. I was informed by the company that makes the computer software we use; the government told them the form was changing, and they told us.

It would be nice if the government would issue an apology for the mistake, but I’m satisfied that the rule was changed.

[UPDATE: Posted September 30: the government didn't apologize, but they did publish their justification for their actions; you can read it on the OSB web site]

I don’t take credit for the rule change. I made my views known, and fortunately many others did as well, which forced the government to change.

Our commitment will continue to be very simple and straightforward: we will explain all of the rules, and follow them, and continue to fight for changes when we believe the rules are unfair.

Want proof? If you are having financial problems, call our office today at 310-PLAN, or try our free on-line evaluation (we will respond to your request in a few hours during the day), or e-mail us for more information or to set up a free initial consultation. We will explain your options, and we will explain the rules, and then you can decide what option will work best for you. And I’ll keep fighting for fairness for all Canadians in financial trouble.

Not surprisingly, the government’s electronic filing system felt the strain, and it was down from late Thursday night until 8:30 am today, September 21. In other words no-one was able to go bankrupt on Friday September 18, the day the new rules came into force. By my estimate Thursday was also the busiest bankruptcy day in Canadian history, with over 1,700 individual Canadians filing bankruptcy, which again is more than three times a normal day’s volume. The irony of course is that Friday was the slowest day in Canadian bankruptcy history: with the government’s system down, no-one filed bankruptcy.

What does the future hold? I have three predictions:

First, I believe that personal bankruptcy filings in Ontario, and consumer proposal filings, will remain at record level for many more months. For the twelve months ended July 31, 2009, the most recent period for which statistics are available, there were over 140,000 Canadians that filed a consumer proposal or bankruptcy. That’s a 32% increase over the prior twelve months, so there is no doubt that the economy is still in very bad shapes, and insolvencies will continue at a high level. If I had to make a prediction I would predict that filing will be in the range of 150,000 per year for at least 2009 and 2010. After that, they may decline slightly if the economy improves, but significant declines won’t happen until our debt levels decrease.

Second, I predict that the percentage of consumer proposals filed will increase. Under the new rules, in a first bankruptcy if you have more than $200 in surplus income, the length of a bankruptcy is increased to 21 months (from nine months). That means the cost of bankruptcy is higher, so many people will choose to file a consumer proposal as an alternative to bankruptcy. I have always supported consumer proposals as an alternative to bankruptcy, so that will be good news for many people.

My third prediction is that I will be spending more time looking at calendars and doing math. As noted above if you have $200 per month of surplus income, on average, during the first six months of your bankruptcy, the bankruptcy is automatically extended. The surplus income calculation is relatively easy if you are paid a fixed salary, or get a pension, since your income doesn’t change each month. But, if you are paid weekly or bi-weekly, your income changes when you have a five or three paycheque month. As a trustee I now must look at the calendar to see when you will have those extra paycheque months. If you have one of them during the bankruptcy period it may not increase your average surplus income, but if you have two or three of them during the first six months of your bankruptcy, your surplus income may be pushed over the $200 per month limit, causing an increase in the length of your bankruptcy. The entire Hoyes Michalos team of trustees will be working extra hard over the next few weeks to become familiar with the math necessary to help you estimate your future income, including your extra paycheque months.

We are in for challenging times ahead, but our commitment remains the same. We will review your options for dealing with debt in detail, and help you understand the implications of your decision. The math may be slightly more complicated, but our goal is to help you find the solution that works for you, so contact us today, and one of our professionals will be pleased to meet with you to help you get a fresh start.