Month: June 2013

I Can’t Pay My Bills. What Are My Alternatives?

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At some point in their life, everyone is faced with financial problems and can’t pay their bills. It doesn’t matter how much you owe, or even who you owe – if you haven’t got enough money, someone is not going to get paid when you can’t pay all your bills. If it’s a short-term problem, you can probably weather the storm, but if it goes on month after month, sooner or later you’re going to face some hard choices.

What happens if I don’t pay my bills?

Depending on your general payment history, your credit report, your creditors (the people to whom you owe money) may allow you to miss a single payment and their response will be a letter politely requesting payment. If you miss a second payment, the letter will be more insistent and it might be followed by a phone call. It’s when you miss the third payment that trouble typically begins. In most cases, your account will be turned over to a collection agent for processing and you will be dealing with collection agencies from then on.

There are a number of options available to people trying to deal with their debts. It is important that you are well informed about each one of them, before you make the final decision.

Do I have to file for bankruptcy? What are my bankruptcy alternatives?

For many people, bankruptcy is the right choice. For others, various bankruptcy alternatives would work better, and deal with your financial problems more effectively than personal bankruptcy. Bankruptcy alternatives to consider would be:

What do I do now?

The purpose of this page was to make you aware of the alternatives that are available to people like you, who are experiencing financial difficulty and can’t pay their bills – including bankruptcy and alternatives to bankruptcy.

If you are experiencing money and other financial problems and can’t pay your bills, we recommend that you call one of our Ontario bankruptcy offices today to discuss your specific situation. All consultations are provided free of charge.

Don’t put off peace of mind – call today for help paying your bills.

Five Tips to Survive an Economic Crisis

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Every week our team meets with people across Ontario who are experiencing debt problems. We hear first hand stories about how hard it is to remain financially afloat when you are living paycheque to paycheque. Here’s what we’re hearing:

  • I am unable to get a reasonably priced loan for a car;
  • I can’t buy a home because I can’t save the down payment;
  • I no longer work overtime so can’t meet my bill payments anymore;
  • I lost my job, can’t pay my bills, and may lose our home.

I meet many people who are on “work share”, where they work two or three days a week, and draw unemployment insurance during their down time. 

I meet with people carrying two and three jobs in order to stay ahead.

And in the last few years, I talked with many people who were financially devastated by the shutdown triggered by COVID-19.  

For years we have been using our homes as an ATM machine. We would build up credit card debt, then re-mortgage our home to pay it off. We even saw one couple that did it five times in five years. They tried one last time, and the bank said “no”. Their incomes had fallen, and their house was fully mortgaged, so it is no longer possible for them to re-finance and repay their high interest credit card debts.

So, how can you survive an economic crisis? Here are my top five tips for surviving:

1. Reduce your debt

This is critical. If you have debt, you are not in control: debt means your creditors are in control. You must take immediate steps to reduce your debt.

If you have a big mortgage payment, car payment, or credit card payment each month, and you lose your job, you will quickly fall behind, and risk losing your house and car.

If you have no debt and lose your job, your only worry will be finding another job. You won’t have to worry about making payments and losing your home and car. With no debt, you can weather this financial crisis.

2. Learn to live without credit

This is a hard one. If you are 40 years old or younger, you have most likely used credit cards your entire adult life. You have probably never paid cash for a car, and you may just assume that it’s normal to only have a 5% down payment on a new house.

Here’s a challenge for you: talk to your parents or grandparents and ask them if, when they were young, they had a credit card. They will probably tell you that no, they paid cash for everything, including cars and houses. That meant they didn’t buy a new car every three years, and they lived in a small house, but they also didn’t have any debt payments.

Living without credit means making a budget and planning what you want to buy, and then saving money to do it. It’s a drastic change for those of us who are used to buying now and paying later, but the savings in interest payments are worth it in the long run.

3. Simplify your life

One positive outcome from the 2020 pandemic was a reduction in spending for many households. While not good for small business owners, many of us stopped visiting restaurants and made our own meals. Working from home saved money too – less gas, less clothing to buy, and again making lunch at home rather than buying lunch on the go. We even learned to make coffee by the pot rather than buying it by the cup from Starbucks.

In other words, in some ways, our lives slowed down and became much simpler.

How much of this change in lifestyle can you take advantage of long-term? 

Living without credit means simplifying your life. It provides a similar spending restriction that we were forced into by the pandemic.

How can you do this?

Review every dollar you spend every month, and ask yourself: “Do I really need that?” For example:

  • Do I need to pay for 3 streaming services that I never watch, or would one do?
  • Would I be better off if I sold my house and rented? Your house might not be quite as nice, but you would have no worries about mortgage payments, property taxes, repairs, and maintenance, or a crashing real estate market.
  • Do I need a new car every three years, or would an inexpensive used car get me to work just as well?
  • Alternative: do I even need a car? How much money could I save by taking public transit, walking, riding a bike, and just renting a car or taking a taxi when needed?

If we can learn to live with less, our lives will have less stress, and we will have less debt to worry about.

4. Start working on Plan B

It’s possible that your world hasn’t changed yet, but the world around you has changed, and eventually your world will change too.

What will you do if you get downsized at work, or if your hours are reduced? Can you get another car lease when your current lease expires? What would you do if you couldn’t sell your house for more than the amount owing on the mortgage? What if the economy does collapse?

While these are not pleasant things to think about, it’s important to start thinking about them and start making a “Plan B”. You need a plan for the following:

  • If you lost your job, where would you work? Always have an up to date resume ready, and always keep your ears open for other opportunities.
  • Consider starting a home-based business in your off hours. If you have a hobby that could become a business, consider making that a second source of income.
  • Consider getting a part-time job if hours are reduced at work. That way, if you do lose your primary job, at least you will still have some income.

5. Reduce your expenses

Every month I meet with dozens of people who have gone through a job loss, or a marriage break up, or even medical problems that have forced them to cut their living expenses to survive. Here’s my final tip:

Don’t wait until you have to: cut your expenses now. Use the extra cash to pay down debt, or to build up some savings.

Think about this: If you earn $2,000 per month and it costs you $2,000 per month to live, you have no margin for error. If you can reduce your expenses to $1,800 per month, you have some wiggle room; missing a day of work won’t destroy your monthly budget. Here are some easy strategies for cutting expenses:

  • Cut back to only basic service on your cable TV (you don’t watch all of those channels anyway), or unplug completely and make the switch to Netflix or CraveTV;
  • Cut the non-essentials on your home phone service;
  • Make your own coffee. Okay, I know this is a hard one, since we Canadians are addicted to coffee, so try this: pull out the coffee maker you got for a wedding present, and buy a tin of ground coffee from your favourite coffee shop; then, before you go to bed at night, fill up the coffee maker. When you get up in the morning, push the button. You can now drink twice as much coffee for half the price!
  • Combine your car trips; do all of your errands and once to save on gas;
  • Consider big lifestyle changes, like moving closer to work so you can walk or take public transit.

Here’s the point: the world has changed, but you are still the boss of your own life. You can set your own destiny, so make a plan to reduce debt, use as little credit as possible, and plan for the future.

What do you do if you are already drowning in debt, and cutting expenses won’t help? You need professional advice, so email us or give our debt help line a call at 1-866-747-0660 and ask us whether a consumer proposal or a personal bankruptcy is necessary to deal with your debts.

There are options, but you are the boss, so only you can make the call. If you are burdened with debt, make the call today.

What are My Options When In Debt if My Income is from Social Assistance, Pensions, or Support Payments?

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If you have debts that you are unable to pay, and you don’t receive wages, here’s what you need to know:

First, if you don’t pay your credit cards or other unsecured debts, your creditors can take you to court, sue you, and attempt to garnishee your wages. However, if all of your income comes from social assistance, government pensions, or child support, you have no wages to garnishee. Credit card companies are not able to get a court order to allow them to garnishee social assistance payments, government pensions, or support payments; they are only able to garnishee wages.

Second, if you decide to go bankrupt to deal with your debts, you are required to pay the trustee’s costs to administer your bankruptcy. The minimum cost of a first bankruptcy is $200 per month for nine months. While bankrupt you will also lose your tax refunds and GST credits, which increases the cost of your bankruptcy.

Therefore, for many people who do not have wages to garnishee, the correct option is to NOT go bankrupt until you return to work. There is a cost to bankruptcy, and you are protecting yourself from creditors that cannot, in most cases, garnishee your income.

If you have no assets and if you do not earn income from employment, our advice is as follows:

  • First, to protect yourself it is often wise to open a new bank account at a new bank. If you have a Visa card at XYZ Bank and you don’t pay them, it is easy for XYZ Bank to go into your bank account at XYZ Bank and get their payment. That’s why you want to bank at a bank where you don’t owe any money.
  • Second, bankruptcy may still be an option for you. If the stress of the phone calls is more than you can handle, you may decide it’s worth it to pay the money to go bankrupt to stop collection calls. If you have family or friends that can help you with the payment it may also make sense for you to go bankrupt.

If you are considering bankruptcy as a way to deal with debt and still have questions, please contact us today.

Stopping A Wage Garnishment with a Consumer Proposal

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consumer proposal stops virtually all attempts to garnish wages in Ontario. As a legal proceeding under the Bankruptcy & Insolvency Act, filing a consumer proposal provides you with the same protections you would receive in a bankruptcy, without filing for bankruptcy.

At Hoyes, Michalos & Associates Inc., if you file a consumer proposal with us at 9:00 am, by noon that same day we can usually have a court order faxed to your employer, stopping the wage garnishment.

That’s right: in most cases we can notify your employer to stop a wage garnishment within a matter of hours after you have filed a consumer proposal.

The most common exception would be wages garnished for child support or spousal support, which cannot be stopped by the filing of a consumer proposal.

Who can be Prevented from Garnishing your Wages in Ontario with a Consumer Proposal?

A consumer proposal will stop garnishments obtained by:

  • Banks;
  • Credit card companies;
  • Canada Revenue Agency;
  • Pay day loan companies;
  • Credit unions; and
  • Virtually all other types of creditors.

What’s the Catch?

The catch is that we can’t notify your employer to stop the wage garnishment until you have officially filed your consumer proposal. You must take action immediately.

Stopping your Ontario wage garnishment, can be accomplished within the next few days.

Contact us today for a free consultation about how we can stop the garnishment and help you eliminate debt so you can get relief.

How do I Stop a Wage Garnishment by Making a Deal with My Creditor?

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If a creditor has already gone to court and obtained a garnishee summons allowing them to garnishee your wages, the wage garnishment will only stop once it is paid, or if the creditor agrees to stop it.

You can attempt to make a deal with the creditor. Here are two ways you can do this.

Approaching Creditors On Your Own

Call the creditor, or the creditor’s lawyer, and offer to make a settlement.

You could tell them that you agree to pay the balance owing, and you will provide them with post dated cheques to repay the debt.

It is possible that if you speak directly with the creditor, they may agree to alternate payment arrangements

However, in our experience, it is highly unlikely that a creditor will agree to stop a garnishment once a garnishee summons has been ordered. Here’s why:

You owe the creditor money. They tried to collect with phone calls, letters, and collection agents, and they were not successful. They then spent the money to go to court to get a garnishee summons. Now they are receiving money from your employer every time you get paid. Why would they cancel a sure thing (money from your employer) in exchange for possible payments from you, probably for a lesser amount than they are getting already?

Clearly, it is unlikely they will agree to that type of deal.

Making A Settlement Offer Through A Consumer Proposal

Trying to negotiate directly with the creditor is worth a try, but if it doesn’t work your next option would be to consider a consumer proposal.

A consumer proposal is a formal debt settlement process under the Bankruptcy and Insolvency Act which means it provides you with the benefit of a stay of proceedings that stops most garnishments.

There are several benefits of dealing with a garnishment through a consumer proposal including:

  • The wage garnishment can be stopped immediately. Once you file your employer will be notified right away to stop taking money from your pay.
  • You can make a settlement to deal with the debts subject to the garnishment.
  • You will also deal with other outstanding debts you may have, giving you a fresh financial start.
  • A consumer proposal allows you to keep any assets you own including a home.

If you are threatened with a wage garnishment, or are currently being garnisheed, we recommend that you contact us today to review your options.