Archives for March, 2007

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Ted Michalos and I appeared on AM 640 Toronto Radio this morning to talk about how to deal with debt problems. During the hour long show we took a number of phone calls from people with debt issues.

The first caller was Rob, who said that he owed $65,000 to Revenue Canada. He was out of work while he recovered from heart surgery, and he got hit with a lot of penalties and interest when he was unable to pay. He’s paying CRA $1,000 per month now, but $600 of that is going to interest, so it will take a long time before his tax debt is paid. We told him that we can help him make a plan to deal with tax debts, either through a consumer proposal or a bankruptcy.

John, Mike, and Marcie called in to talk about credit cards, which we all agree are a very expensive way to borrow. I strongly believe that credit cards are okay as a substitute for cash (when you have the money in the bank, but don’t want to carry cash to the store), but credit cards should never be used as a substitute for borrowing.

The host of the show asked us what listeners should do if they have more debt than they can handle, and Ted and I both gave the same advice: Debt problems generally don’t go away on their own: if you have too much debt, you need a plan. We talked about debt consolidation loans, credit counselling, consumer proposals and bankruptcy.

Not all solutions will work for everyone, but there is a solution that will work for you, so we closed the show by suggesting that if you have debt problems, call our Toronto team at 310-PLAN (310-7526, no area code required) or E-mail us to arrange a free initial consultation. There is help available, so give us a call, and let’s get started.

Most people I see in the Mississauga area are concerned about their house and what will happen to it if they file for bankruptcy. Many of them don’t want to file for bankruptcy or even discuss it because they are afraid they will automatically lose their house.

When you file for bankruptcy and you own a house, the question that will be asked is, how much of your house do you own, or how much equity or money do you have in the house?

In order to file for a bankruptcy or a consumer proposal, you need to figure out how much equity or money is in your house. This is based on what the market value of your house is, or how much you could sell it for, minus the amount of money that you owe on the mortgage.

If you don’t have any equity in your house, it won’t be an issue in your bankruptcy. If you do have equity in your house, you might have a lot more options when it comes to paying off your debts.

So, typically, when you come to see me in my office, I’ll ask you to bring in a mortgage statement for every mortgage on the house, and the market value of the home. Once we have figured out how much equity, or money is in your house, then we can start discussing your options, including debt consolidation loans, consumer proposals, and bankruptcy.

Don’t be afraid to make a plan for your debt because of your house. Think of your house as an asset that may be able to help you deal with your debts.

For more information about how your house could affect your financial situation, call me at 310-PLAN to set up a free consultation. You can also email me any questions you might have. The sooner we get started on the right plan for you, the faster you can start living a healthy financial future.

I met with a young man the other day who was feeling overwhelmed by his money situation. He wanted to know at what point he should start thinking about a plan for his debts and what the warning signs for bankruptcy are.

He was having trouble paying his bills – he was behind on a bill payment for his car and was worried about catching up. He didn’t have the money to make two payments the next month and he was afraid that he would lose his car. His situation was so tight, he was considering going to a cash advance place in order to get a pay day loan so he could pay his rent on time.

He was managing to make payments on some of his credit cards, but only the minimums. He felt like even though he made those payments, his card balances never went down. He was thinking about moving his debt to one credit card, for lower interest, to see if that would help.

For the other cards that he wasn’t able to make payments on, he had collection agencies calling him at home. He stopped answering their phone calls because he didn’t have any money, but that just made matters worse. The agencies were calling him at work now, and were threatening a wage garnishment.

He felt like all he was doing was juggling his paycheque every month, and was worried about the time when it wouldn’t be enough anymore.

I told him that he was experiencing all of the warning signs of a bankruptcy – he is behind on a lot of his bills and is having trouble paying the rest, he is considering a cash advance on his pay cheque to make rent, and collection agents are calling him, threatening him with serious action.

People often wonder what the warning signs of bankruptcy are. This young man was right in the middle of his warning signs. Fortunately for him, he got help and made a plan that would work for his situation before he ran out of options to deal with his debt.

A lot of people try to ignore the situation, hoping it will just go away. By the time they go for help, they don’t have any options besides bankruptcy left.

If this young man’s situation sounds like yours, then give me a call at 310-PLAN for a free consultation. You can also email me any questions you might have about bankruptcy warning signs. Let’s work together to come up with a plan that will work in your situation.

 

What was most interesting about today’s article was the new type of fee some of the credit card companies are charging. If you pay your balance in full every month, you don’t pay any interest. However, if you don’t make your payment, the bank starts charging you interest.

In the example given in today’s newspaper article, a man was away on a business trip so he didn’t make his payment on time. When he got back home he paid his balance in full. His payment was made six days after the due date. Obviously because he was late he has to pay interest. Here’s the kicker:

His bank will continue to charge him interest on his new purchases for the next two months, even though his account is up to date. This means that if next month he charges $1,000 on his credit card and pays the balance in full at the end of the month, he will still be charged interest on the $1,000. He will not get his interest free grace period back until two months have gone by with perfect payments.

You can read the article for a list of credit card issuers that are following this new method. You can also go to the Financial Consumer Agency of Canada’s website for a comparison of the different credit cards, and how they charge interest.

The point is that you should be very careful with your credit cards, and make sure you pay your balance in full each month.

If you have more credit card debt than you can handle, 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 so that we can help you make a plan to deal with your credit card and other debts.

Bankruptcy is a legal process that is designed to help someone in an unfortunate financial situation rehabilitate themselves, get a fresh start and get back to contributing to society. Therefore, when you file for personal bankruptcy or make an assignment into bankruptcy, the court requires you to complete certain duties and responsibilities during the 9 months that you are bankrupt, in order for to get relief from your debt.

One of the duties is to attend two counselling sessions. The two counselling sessions need to be done within a certain amount of time after you file for bankruptcy, and are even required when you do a consumer proposal. When I meet with clients they are often intimidated by the idea of having to do the counselling sessions and want to know if they are mandatory. While they are mandatory, there is no reason to be nervous – most people tell me how useful the sessions were once they have completed them.

Just so you can have a brief idea of what each session is about, I have outlined them as follows:

Each session is about an hour long and can be done in a group setting or individually. At Hoyes, Michalos & Associates Inc., we want you to get the most out of the sessions, so our sessions are done on an individual basis. Couples who file together attend the sessions together as this makes the most sense.

The first session will deal with budgeting, which a lot of people find helpful. Depending on how you are paid and the expenses you have, there are various ways to make the budgeting process work. The idea is to help you with your particular budgeting issues so that you do not get into new or more debt.

This session coincides with another duty required when you file for bankruptcy – monthly income and expense statements submitted to your trustee for the time that you are bankrupt. By learning how to budget, your monthly statements are easier to complete, and in the future you’ll be able to take control of and keep control over your spending.

The second session deals with the factors that contributed to your debts and the resulting bankruptcy. Things like job loss are discussed and you are taught how to plan for such an event. Although most of us don’t want to think about losing our job, it does happen in today’s economy and you need to think about how it will impact your finances and plan to the extent that you can to prepare for it. People I meet with usually know how they got into debt and this session will give you some tools on how to deal with the life events such as a job loss or illness in the family that sparked your financial situation. The one on one with the counsellor for this session ensures that your specific situation is discussed, so that you not only relate to the material, but also that you can safeguard your future from any more financial trouble.

Don’t be intimidated by the required counselling sessions. Embrace them as an opportunity to get a fresh start and you may actually find what you learn useful.

If you find that you are struggling with your debts and are having difficulty budgeting, please contact us at 310-PLAN and speak to one of our professional staff. We would be happy to meet with you to discuss your options and come up with a plan that will work for you.

I was helping a gentleman last week file for bankruptcy, and I was explaining what he would be responsible for while he was bankrupt. He asked me just how long he would be considered bankrupt.

I get this question a lot – people want to know when their debts will go away and when their fresh start officially begins.
Usually a person is bankrupt for 9 months from the time that they’ve filed for bankruptcy, but the amount of time that you are bankrupt depends on certain factors. These include whether or not you have been bankrupt before, and whether or not you completed the duties imposed on you by your bankruptcy.

When you declare bankruptcy you are required to do certain things. You have to submit a monthly report of your income and what you spend it on, attend counselling sessions to talk about money management, and you may have to pay money every month to your creditors, depending on the number of people in your family and your family income.

If this bankruptcy is not your first, or you fail to complete any of the conditions of your bankruptcy, you will not automatically be discharged, or released from bankruptcy after 9 months. If this is your situation, the trustee will make an application to court to set up a discharge hearing date, where you will appear before a judge who will decide when you will no longer be bankrupt.

Once you have been discharged by either your trustee or a judge, your fresh start can finally begin; the debts included in your bankruptcy are wiped out.

Bankruptcy may or may not be the solution for you, but if you find yourself in financial trouble, contact me at 310-PLAN for a free consultation. You can also email me any questions you might have about bankruptcy or other financial options. Let’s make a plan so you can get started on your healthy financial future. 

At our firm, Hoyes, Michalos & Associates Inc., we believe in meeting with a trustee or professional staff person to discuss your options with respect to your debts. Many people will call us at 310-PLAN to discuss their particular situation and usually this results in a free consultation with one of our trustees. When we make the appointment we often ask people to bring with them a list of the people they owe money to so we can review the type and amount of debt.

At one of my meetings in my Brampton office, a young person provided me with a list of the people he owed money to and it totaled approximately $28,000. Most of the debt was credit card debt which totaled about $21,000. We started to talk about the credit card debt, discussing how much the debt was on each card, what he had spent it on and why. He told me that he and his girlfriend used one of the credit cards to purchase household things.

I asked him for more details on this particular credit card. He told me that he had the card for years and it was one of his first credit cards. When he and his girlfriend moved in together and the credit card company offered him an extra card, it made sense for her to have a card for the household things they paid for together. He showed me a statement and it only had his name on the bill.

I started to explain about extra credit cards or supplementary credit cards and he was adamant that he was the only person on the card and therefore the only one responsible for the debt, not his girlfriend.

Our discussion continued and I told him that these extra or supplementary cards have agreements, and depending on the agreement his girlfriend may be responsible for the debt just like him. Every agreement is different and I told him that he would have to check to see what this particular agreement said, in order to determine if his girlfriend was also responsible for the debt. Some agreements you need to use the card to be responsible for the debt, and others you just need to activate the supplementary card to be responsible for the debt. It varies from agreement to agreement.

A single mother was in my office last week, discussing her financial options. She was considering bankruptcy, but was worried about the money she would make during that period. She asked me if she would be allowed to keep any of her income or to save money for emergencies. With three young children at home, you can understand her concern.

A lot of people that I meet with ask the same questions. They wonder what will happen to the money they make and are particularly worried about money saved for emergencies. After being in financial trouble, the last thing they want to do is have a situation where they need to rely on credit or loans again.

First of all, bankruptcy is not designed to take away all of your money. It was created by the federal government to help honest, unfortunate people who need help with their debts, not to punish people more when they are already in distress. While you are bankrupt, all of your money will not be taken away and any money that you are able to save will not be touched.

Secondly, after experiencing financial trouble, it is good to see that this woman is planning for the future – she wants to save money for emergencies so she doesn’t have to use any more credit cards or take out any more loans.

When you are bankrupt you have to pay a monthly amount to your trustee based on family income and how many people are in your family.  Your trustee will then distribute this money to your creditors.  Your bankruptcy trustee will be able to discuss this amount with you and the responsibilities that you will have during this time. If after you have paid this monthly amount and your living expenses, and you still have money left over that you want to save, then that is fine. Being bankrupt does not stop you from earning a living and saving money.

If you have any questions about what will happen to your money when you file for bankruptcy or any other financial options, call me at 310-PLAN for a free consultation. You can also email me any questions you might have about this situation or any other financial concern. Remember: you deserve a fresh start. Let’s make a plan so you can start enjoying your healthy financial future.

I met with a husband and wife in my Mississauga office the other evening and like many couples who see me they thought that because they are married they are responsible for each others’ debts. Typically, a household finds it hard to keep debt separate because if there is an issue with one debt, the consequences such as creditors calling usually affect everyone in the home.

While I am glad to see couples working together on a budget and seeing each of their respective debts as one debt to be dealt with by the household, legally there is no financial obligation to pay someone else’s debts. Joint debt does not automatically occur because you are married to someone. Joint debt occurs when there is a financial obligation between two people to pay a debt. Therefore you can have a joint debt with a friend, brother, sister, parent, etc.

The couple that I met with had a total of $55,000 in debt in credit cards, lines of credit and a car loan. He had credit card debt that totaled $27,000 and she had her own debts totaling about $13,000. The remaining debt was for a car loan at $15,000. They were both on the car loan debt, as she had signed the loan agreement, even though he thought of the car as his because he took it to work every day.

In addition, he had 3 credit cards totaling about $19,000, which she also had extra cards for. Extra cards or supplementary cards are offered by many credit card companies to the person who has the credit card or is the primary cardholder. The supplementary card agreement for all the cards indicated that she was also responsible for this credit card debt, making these joint debts. Of the total debt of $55,000, they had debt together or joint debt totaling approximately $34,000.  The joint debt was significant, and represented a majority of the total debt, so it made sense for them to see me together to figure out a plan for dealing with it. By doing something together they were dealing with the problem and getting the benefit of stopping creditor calls.

When we sat down together we sorted out the debts –  his, hers, and ours.  They also brought with them a monthly budget, which detailed their take home pay after taxes and what expenses they have, such as rent, food, etc. As they were just starting out together, they did not have a house, but did want to own one someday and were concerned about filing for bankruptcy or doing a consumer proposal because of the effect it might have on their future home ownership. I reassured them that even after deciding on a course of action, they will start to rebuild their credit and eventually (just like baby steps) they would see their way to owning a home of their own. Many of our clients in the same situation do just that.

After we discussed the options for dealing with the debt, they decided that a joint consumer proposal was the way to go. Their debts in total were under $75,000 (not including any mortgage on a home) which is one criterion for doing the proposal, and they would stay in control of any assets. In this way, they could pay back a portion of the debt over a period of time that was less than five years, allowing them to budget each month for the required monthly proposal payment. It was a good plan given their income and debt.

If you are in a new relationship and are having trouble dealing with both of your debts, or if you are confused about which debts are joint or not, please give us a call at 310-PLAN for a free consultation. We can meet to discuss your options and a plan of action can be made for dealing with the debts.