Archives for February, 2007

An opposition to your bankruptcy discharge is not a personal attack; it is a reaction to your conduct and choices that you have made before and during your bankruptcy period. An opposition is a roadblock on your path to a fresh start that requires your attention and effort to clear.

In most cases, creditors do not oppose your bankruptcy discharge. The Bankruptcy Act does however contain provisions for the protection of the interests of your creditors in order to protect the integrity of our credit system.

Any creditor with a proven claim to your estate may argue before the court against your right to an automatic discharge. A creditor who wishes to oppose and challenge your discharge must have sufficient reason to do so. Your trustee will be able to advise you at your consultation and during your bankruptcy if an issue arises which may result in an opposition from one of your creditors.

You will be given notice in writing should any of your creditors decide to oppose your discharge. You may wish to consider retaining a lawyer to represent you, as you will be required to attend Bankruptcy Court and respond to the issue(s) raised in the opposition.

A creditor may wish to oppose for reasons such as, fraud, preferential payment to another creditor, undisclosed assets, an ongoing criminal investigation, or abusive use of credit made just prior to your decision to file for bankruptcy. Your trustee can review your situation and determine if there are any foreseeable issues that may result in an opposition to your discharge.

An opposition is not the end of the road; it is a roadblock that can be cleared with effort.  Remember, the bankruptcy process was designed to give the honest, but unfortunate debtor, the chance to get a fresh start. 

Speak to a licensed trustee in bankruptcy by calling 310-PLAN to discuss any questions or concerns that you have regarding creditor opposition to bankruptcy discharge.

I get asked this question most often when I first meet with people. Many people think the only option for dealing with their debts is to file for bankruptcy. Bankruptcy is a voluntary act and only one of many options available to you if you find yourself in financial trouble. Another option is the consumer proposal, which gives you a way to deal with your debt without going bankrupt.
 

For example, I met with an individual recently and he had about $33,000 in debt. This debt was mostly credit cards and lines of credit. He had been laid off from his job about 6 months back and for a period of time needed to live off his credit cards. This is not unusual. He was now back at work and was making about $2,400 per month in take home pay, or net pay after taxes. He was single and renting his home. He had a pension plan at work, but he could not access it until he retired or until he turned 65. He owned a car, but it was older with a lot of kilometers on it, and not worth very much. He had no other assets.

He also brought a list of expenses with him and after items such as rent, food, and gas for the car, he had about $400 leftover which barely covered his credit card payments. He was juggling his payments, was not getting ahead and felt like he was falling more and more behind. 
 

When I met with him he was convinced he needed to file for bankruptcy. He just wanted his creditors to stop calling him. I reviewed the bankruptcy option, including his duties and what would happen during the 9 months that he would be in bankruptcy.
 

I also reviewed other options with him including a consumer proposal. I told him that he was eligible for this option and it might be an alternative to bankruptcy for him. I explained to him that a consumer proposal is a contract with your creditors to pay back a portion of the debt. The way it works is you propose a deal to your creditors to pay back some of the debt over a period of time. The deal has to meet certain criteria, like your debts being less than $75,000, other than a mortgage on your primary residence. Your creditors then vote on the proposal terms that you offer, which is usually a monthly payment for a period of time no more than 5 years. I told him his creditors have 45 days from the day he signed the paperwork to vote on whether or not they would accept the proposal. To have the proposal pass there needs to be 50% plus $1.00 in favour. In his case, he needed about $16,501 in “yes” votes.
 

He liked the idea of paying back a portion of the debt because he knew he had spent the money on his credit cards and wanted to take responsibility for it. We worked on his budget and came up with payment terms that were manageable.
 

He was nervous, though, about the 45-day voting period, wondering what would happen. I told him that his creditors generally needed to see that the proposal will get them more money than a bankruptcy. In his situation, with no pension available until he was 65 years old, and no sellable assets, he was in a good position for the creditors to accept. For him personally, a consumer proposal would also be easier to afford because the payments are spread over a longer period of time.  I also explained to him that if the creditors vote no, then they usually provide us with different terms that he can look at and decide on. He was happy that if they turned down his proposal, he was not automatically bankrupt.
 

He left my office feeling better about his situation. He took some reading material and other information with him and went home to do some thinking. A week later, he was back to see me in order to proceed with the proposal option. And in the end, the proposal was approved by his creditors upon the terms he had offered and he didn’t need to go bankrupt.
 

If this sounds like a situation you find yourself in then please give us a call at 310-PLAN and let’s see what we can do to make a plan for dealing with your debts.

I have mixed feelings on this approach to catching “deadbeat” parents.

On the one hand, it is usually the children who suffer when a marriage ends, and if the court has ordered that child support should be paid, then it should be paid. On the other hand, the Family Responsibility Office probably has the worst reputation of any government agency when it comes to inefficiency and mismanagement. (Do a Google search and you will find articles like this one, reprinted from the National Post).

I’m not exaggerating when I say that at least once every week I have someone in my office who tells me their sad story about their dealings with FRO.

Half the time I hear the story from the support payer, usually the father, who tells me that he knows he owes support, but he just started a new job, and can’t reach anyone at FRO to ask them to start getting the payments from his new employer. After numerous attempts at reaching a human being at FRO with no results, the man finds, without warning, that his driver’s license has been suspended for nonpayment of child support.

I hear similar stories from the recipient, usually the mother. Often the story is “I know my ex is paying support because he showed me his paystub and his employer is taking it off his paycheque every week, and his employer sends a cheque to FRO every week, but sometimes I go six or seven weeks without seeing a cheque from FRO. It’s impossible for me to budget not knowing when my next child support payment will arrive.” (This is an exact quote from a woman I met with last week).

So why am I discussing all of this on a blog about bankruptcy in Toronto? Simple. We did a study back in 2005 (you can read about it in an excellent article that appeared in the National Post) that determined that 29% of people who go bankrupt are either separated or divorced, and an even greater number of people with financial problems have gone through a marriage or relationship break-up at some point in their lives. The sad reality is that divorce can lead to financial problems that result in people filing bankruptcy in Toronto.

I understand that relationships end, and I understand that child support is a way to help ease the financial hardships on the children of divorced parents, and I understand that sometimes support is not paid as has been ordered by the court.

I would like to see the Ontario government doing something about it. Unfortunately I don’t think a pretty website is the answer. I think real change is necessary. I would like to see the government do a detailed review of the operating procedures at the Family Responsibility Office, and make changes to make the process better for payers and payees. If the problem is that FRO is under-funded, let’s start funding it. If the problem is that FRO is mismanaged, let’s fix it.

I can’t prove it, but I strongly suspect that if FRO made it easy for parents to pay their child support (such as getting a live body when you call to change your employer information) fewer people would fall behind in their support obligations, and fewer people would need to go bankrupt when they try to catch up. (Support payments don’t go away when you go bankrupt, but if you max out your credit cards to get caught up on your support payments they can still be a contributing factor in bankruptcy). If the recipients got their child support payments on a more timely basis, they would not need to max out their credit cards to buy groceries, and again, fewer bankruptcies would be the result.

I will get off my soapbox now, since there is probably nothing more I can do about the problems at FRO. I can, however, help you make a plan to deal with your debt problems, so if you have more debt than you can handle, whether you are divorced or not, give me or any member of the Bankruptcy Toronto team a call 310-PLAN (310-7526, no area code required) or E-mail us to arrange a free initial consultation.

Even with that decline there were still 10,475 people in Toronto that filed bankruptcy in Toronto in 2006, so if you have ever wondered if you are the only person experiencing financial problems, I can assure you, you’re not. In addition to those filing bankruptcy, there were also 4,587 people who filed a consumer proposal in Toronto in 2006, which is actually an increase of 10% over the number of people who filed a consumer proposal in 2005.

Interestingly enough, when you break down the numbers for the different areas in the Greater Toronto Area we see that the bankruptcy rate changed by very different amounts, depending on where you live. Here’s the specifics:

• The City of Toronto fell by 10.9%
• North York fell by 1.9%
• Mississauga fell by 3%, but
• Etobicoke was up by 0.1%
• Brampton was up by 3.8%
• Scarborough was up by 5.7%

For the most part the decline in the personal bankruptcy rate in Toronto was the result of a strong employment picture, as the unemployment rate declined for the third straight year in Toronto to 6.6% (it was 7.7% in 2003).

The Toronto press picked up on these trends, and a number of articles appeared in the local press; they even quoted me! For example, read More Debt, Less Bankruptcy in the Toronto Sun and Strong economy causes bankruptcies to fall in the Toronto Globe & Mail.

Over the years I’ve talked to hundreds (probably thousands) of people in Toronto, and in my experience financial problems are often caused by three significant factors: job loss, marriage break-up, or medical problems. That’s why the statistics only tell part of the story:

It’s not numbers that go bankrupt, it’s people.

If you have financial problems, and if you want to see if it’s possible to avoid becoming a statistic, give me or any member of the Bankruptcy Toronto team a call 310-PLAN (310-7526, no area code required) or E-mail us to arrange a free initial consultation.