Archives for November, 2008

Many of the people who come into my office are experiencing financial problems due to recent, dramatic life events. Marital separation is a major common thread that we see in bankruptcies in Toronto. It is not too hard to see how a couple splitting up can lead to personal bankruptcy.

When you are married, you have two incomes combined to support the household. Together, you pay for your mortgage, your utilities, food, your children’s care and making any debt payments you may have. When you get a divorce, suddenly these incomes are no longer combined to take care of one household, but they are separated and need to pay for running two households.

There will be two homes to pay for each with their own bills and depending on custody arrangements both homes may need to have all of the things the kids need and somebody may be making child or spousal support payments. This, combined with the fact that getting a divorce incurs significant costs on its own with legal fees, means that the lifestyle that was once manageable no longer is because the two separate incomes cannot cover the costs.

When a marriage breaks up, the entire family needs to be prepared to make adjustments in their lifestyle in order to keep financially stable. What happens is that when the separated couple cannot afford things, they begin to use credit cards to get by for the short-term. Eventually the credit will run out and they will have raised a huge debt load that they cannot pay off. This is when a divorcee might come to meet with a bankruptcy trustee and begin making a plan for them to get back on track financially without their former partner.

If you are divorced and the impact on your income has put you into financial trouble and you would like to discuss your options for bankruptcy and its alternatives, call call us today in Toronto at 310-PLAN (no area code required) or e-mail us to arrange a meeting with one of our professionals, and let’s get started.

We covered a lot of material: what are credit cards, what’s good and bad about them, tricks and traps you should look out for (such as low introductory rates, late payment fees, high interest rates, etc.), the number of credit cards out there, the balances carried by the average credit card holder, and how many credit cards you should have in your wallet or purse. 

It was clear from the callers coming in to the show that while credit cards are a problem today, people are faced with many, many other problems.  One of our callers told me that while he is current on his mortgage payment, he is starting to see his credit card balances slide; he is only able to make minimum monthly payments and can’t seem to take a bite out of his total balance owing. 

Now this is the type of situation I like.  Don’t get me wrong; I don’t envy the callers situation, but he has taken the first step to deal with his problem.  He is looking for a solution before the situation takes control of him.  Before the collection letters and calls come, before the legal papers from the lawyers arrive, before he finds out there is a garnishment against his wages, he is starting to deal with his problem.  And this is where I can help.  By reviewing his finances (income, assets and liabilities) we can come up with a PLAN to deal with the problem.  Based on his budget, his job, and his family situation, I can recommend the right option for dealing with his problem. 

When someone comes to meet me they usually say, “I live in Toronto and I don’t want to go bankrupt”.  Well, guess what? I don’t want you to go bankrupt either if it can be avoided.  Bankruptcy is the last option I recommend. There are several choices before we get to that point, including a consumer proposal.  This option gets your creditors off your back, allows you to repay a portion of your debts based on what you can afford AND avoid you filing for bankruptcy. 

If you think you are headed for problems with your finances (or are already there), call us at 310-PLAN (310-7526), no area code required, or email us to schedule a free initial consultation.  Financial problems won’t go away or get better by themselves; it’s up to you now, so let’s get started. 

Getting a debt consolidation loan means that you go to a bank and borrow the amount of money you need to pay-off your other debts. With all those debts covered, now you just need to worry about paying back the bank loan. This sounds really easy and a lot of people think that debt consolidation loans are the answer to all of their financial problems. What these people need to know is that debt consolidation is not a magical cure, it is just another tool to use to help you deal with your debts.

A debt consolidation loan does just what it sounds like it does. It takes all of your debts and puts them into one big ball instead of a bunch of little ones. Here’s the problem: a debt consolidation loan does not actually save you money. You still owe the same amount and you often pay only slightly lower, or the same interest rate.

For example, if you have 6 credit cards with balances of $3,000 each, and you get a loan for $18,000, you still owe the same amount of money, except now you can focus your energy on paying off just one debt instead of having to figure out multiple monthly payments. For many people, the convenience and simplicity of only one monthly payment is exactly what they need to get their life back on track.

Before you get a debt consolidation loan, you really need to make sure that you can afford the monthly payments. If you can and think that having multiple debts to pay-off is confusing you and making it harder for you to get rid of them, then a debt consolidation loan may be for you. You will need to go to your bank or finance company to research your options and see if you can even qualify for a debt consolidation loan.

If you can’t, don’t worry, there are many other options to get you out of debt. If you would like to hear about some of them you can call us today in Toronto at 310-PLAN (no area code required) or e-mail us to speak with one of our professionals.

The increase in casinos, race tracks, government run lotteries and other forms of legalized gambling has also caused an increase in the number of people that file for personal bankruptcy. For the average person a night at the slots is just a form of entertainment, but for an increasing number of Canadians it’s an addiction that eventually leads to financial ruin.

Unlike a job loss or marriage break-up, the Courts are taking the view that gamblers are responsible in part for their own situation. I’ll leave it to the mental health experts to argue against that position, what I’d like to do is inform those persons with gambling issues how they may be treated by the bankruptcy Court.

My first bit of advice – if you have the means try and file a consumer proposal instead of filing a bankruptcy in Toronto. The fact that you voluntarily offer to repay a portion of your debt may keep you out of Court altogether. For those unfamiliar with consumer proposals, they are a legal procedure whereby you offer to repay a portion of your debts – generally at least 25% or more of what you owe. You are probably wondering why anyone would agree to accept only 25% of what you owe them? Well, the most common alternative to a consumer proposal is to file bankruptcy. If you file for bankruptcy your creditors will receive even less than that so a consumer proposal makes sense.

If you can’t afford to repay a portion of your debt and you have to file for bankruptcy then you need to understand that, if a significant portion of your debt is due to gambling, it is likely that you will be required to appear in Bankruptcy Court at the end of the process. Once there you will have to prove to the Court’s satisfaction that you’ve got your gambling problem under control. The Court will want to see proof that you have excluded yourself from Ontario’s casinos and race tracks, and that you are attending counseling for your gambling addiction. As part of the process the Court will likely order that you maintain the exclusion and counselling for another 3 to 5 years. If you used credit cards to pay for your gambling then the Court will probably ban you from obtaining a new credit card, again for 3 to 5 years.

Finally, if a significant portion of your debt was a result of your gambling the Court will likely order you to repay a portion of the debt. Usually it is at least 10%, but can be higher, or as much as the Court feels is reasonable.

If you have issues with gambling please seek out a qualified gambling counsellor. If together we determine that either a consumer proposal or bankruptcy is required to set things right, please give us a call at 310-PLAN (that’s 310-7526, no area code required) or e-mail us and we’ll help you work through the process.