This is a common question we are asked when we meet with individuals.

My name is Adam Rauf and I’m an articling student with Hoyes, Michalos & Associates Inc. and I work out of our Brampton Location.

A blemished credit rating is an unfortunate consequence when an individual decides they need to explore debt management options (whether it’s a credit counselling program, a consumer proposal or filing a personal bankruptcy)

When an individual files a personal bankruptcy, they are rated at an R9 – which is the lowest possible rating. If you’re already in collections, than those debts are already rated at an R9 (so bankruptcy won’t make it any worse).

While an individual is bankrupt, they will not qualify for any unsecured credit (bank loans, traditional credit cards, mortgages etc). Once an individual receives their discharge from bankruptcy (which could be 9 months for people who have never been bankrupt before), the bankruptcy stays on your credit report for 6 years from your discharge date.

If an individual works consistently (showing stable employment), continues car payments, mortgage payments etc. then rebuilding the credit rating is definitely possible before the 6 years are up.

There are other solutions to help resolve your debt issues that are less “damaging” on your credit report.
More than 50% of the clients I meet in Brampton choose to utilize a consumer proposal to manage their debts.

A consumer proposal will put your credit rating at an R7 (which is essentially the same) from any potential creditors.

If you think your debts are becoming too unmanageable and you need some relief from harassing and threatening phone calls, contact us right away 866-747-0660 to book a free consultation so we can discuss your options in person. Alternatively, feel free to e-mail us if you prefer

We hope to hear from you soon.

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For some people, making the decision to file for bankruptcy is easy.  For others, the decision is not so easy.  One of the things that make this decision so difficult is the negative impact on your credit rating and whether or not you will ever be able to borrow again. 

Unfortunately the bankruptcy will be reported on your credit report for several years after your bankruptcy which can make borrowing difficult.  The good news is that the bankruptcy information does eventually purge from your credit report.

Whether or not you will be able to borrow again will depend on several things such as your credit score, whether or not you are employed, how much you earn and what you are borrowing for?

Once your bankruptcy is finished and you have been discharged you need to start working on rebuilding your credit.  Since it takes time for your credit score to improve, the quicker you start rebuilding the better your position will be when it is time to apply for credit.

So, yes, you will be able to re-establish your credit and borrow again after filing for bankruptcy. Visit our Hoyes.com website for tips on how to repair your credit rating.

Of course, there are also other options that can help you deal with your debts and have less of an impact on your future credit and borrowing ability.  If you are having a difficult time keeping up with your payments to your creditors or feel that your monthly payments are not reducing your debts, then now is the time to call us.  We would be happy to meet with you to discuss your options and design a plan that will eliminate your debts.  Our toll free telephone number is 310-PLAN (310-7526, no area code required). Or send us an email. Let’s get started!

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This coming Saturday, September 24, Doug Hoyes and Ted Michalos will be on the air LIVE exposing “Debt Myths”. You can catch it on the internet by tuning it to 570 News at 1:00 p.m. The topics covered will include debt consolidation loans, payday loans, credit cards, consumer proposals and bankruptcy.

This will truly be an entertaining segment of “Ask the Expert”. The phone lines will be open and you can call in with your questions. If you’ve been wondering whether taxes are covered, or if everybody will find out about your situation, or whether you will lose your car or house, tune in on Saturday.

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"What will I lose if I go bankrupt in Toronto?" is one of the most common questions I am asked at my North York bankruptcy office. 

Janette and Benny

My name is Janette Martin and I work with Trustee Benny Mendlowitz at the Hoyes Michalos & Associates Inc. bankruptcy office in Toronto

There are many misconceptions about what happens to a person when they file for bankruptcy in Toronto. The top three misconceptions I see are:

• You are not allowed to work while bankrupt. That’s not true. In fact, most people who file bankruptcy in Toronto are working.
• Your family will become responsible for your debts. Also not true, unless they have co-signed for you
• Your creditors or the trustee will come to your house to take away their belongings and sell them to pay their debts. Again, not true, as we will discuss below.

When you file for bankruptcy, as your trustee, one of our jobs is to determine what you own, and what it’s worth. If your assets are "exempt", we don’t take them.

The Execution Act of Ontario exempts your basic belongings. These Ontario bankruptcy exemptions mean that if you go bankrupt in Toronto, the following assets are exempt from seizure by your trustee:

• $5,650 worth of personal possessions (clothing, jewelry, sports equipment, etc.);
• $11,300 worth of home furnishings (like furniture, televisions, computers, etc.);
• A motor vehicle (cars, trucks, etc.) worth up to $5,650, provided there are no liens against it. You can read more in our article on What will happen to my car if I go bankrupt in Toronto?
• $11,300 worth of tools of the trade (equipment that you use to earn a living).

In addition, in most cases you won’t lose your RRSP (except what you have contributed in the last year).

This is a very simple summary of what you may lose if you file bankruptcy. I strongly recommend that you take our free on-line bankruptcy review of your situation, or call us at 310-PLAN , or e-mail us today to arrange for a free initial consultation.

One final thought: if you want to avoid bankruptcy and guarantee that you won’t lose your assets, a perfect solution might be a consumer proposal. Contact us today to find out more.

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Often when people are meeting me at my personal bankruptcy and consumer proposal office here in Toronto, they ask me my opinion about that state of the economy and more importantly when is it going to get better?

This is a difficult question to answer and to be fair there are economists that study this all day long and don’t have answers. However, earlier this month I was watching 60 Minutes when the Chair of the US Federal Reserve, Ben Bernanke, was being interviewed about the state of the US economy and its recovery. My review would be the Mr. Bernanke is cautiously optimistic about the economy (although I guess that’s what you would expect from the guy who is in charge of fixing the economy).

I would equate what happened in 2008 and 2009 as the world economy having a massive heart attack. The "patient" was in taken to the hospital and in Cardiac Intensive Care and then Intensive Care until the patient could be stabilized. Once stabilized the patient was in the hospital for a period of time until they could be released to go home and recover. The patient in this case is our economy, and is now at home recovering and doing rehab in order to get completely back on its feet.

Like many heart attack patients there is a diet that needs to be changed and they need to start to exercising. There needs to be a life style change. Rehab is typically a longer process and also there are adjustments that need to be made to the program including in many cases medications. So on occasion there side effects or other issues that need to be dealt with but provide for a set back.

I believe we are in the middle of Rehab regarding our economy. Some things work and some don’t. We have certain measures to test if our recovery is succeeding like housing starts and the unemployment rate. We are not sure when we will be able to go back to our regular routine including going back to work. And we may have to find a new way to do business and we may not be able to go back to our old ways of doing things. Some days it feels like one step forward and two steps backward but need to keep moving forward. There are various doctor visits to check up on our progress. This is where our Canadian Bank and The Federal Reserve come into play.

As an individual being in this economy is not easy, as it is hard to know what to do next and how to proceed. Finances are difficult to understand and deal with at the best of times, but in unfamiliar waters it can be a nightmare. At Hoyes Michalos we would like to help you get through this process and understand how your options work based upon your situation, because each situation is unique.

If you, like hundreds of thousands of other residents of Toronto have been a victim of the recession, and as a result you have more debt than you can handle, give us a call at 310-PLAN , or e-mail us, to set up a no charge initial consultation. We’ll review your options for dealing with debt, and help get you on the road to financial recovery.

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Over the last five weeks I have written about how to overcome the most common fears about filing bankruptcy in Toronto. I think the biggest and most common fear for many people is the idea that they will have to wait an entire seven years for the bankruptcy “damage” to clear.

Let me clarify so that you understand how the credit reporting system really works. During your bankruptcy, while it is “active” – we call this “undischarged” – the bankruptcy is reported on your credit report as an R9 rating – this is the end of the rating scale. After the bankruptcy is over and you are “discharged”, your credit report is updated to reflect the change and the bankruptcy notation moves to the legal section of your report. At this point the credit report indicates when you started your bankruptcy and your discharge date and will typically remain there for about six more years for a total of seven years on your credit report.

However, it does not mean that you will not be able to obtain new credit; it does mean that potential lenders will know you did file and complete a bankruptcy. It will be up to the lender to determine your suitability for new credit. They will base this decision on many factors, including job stability, income, and household size, to name a few. The notation is not as much of a roadblock for most people as you might think it would be. We do hear from people who filed bankruptcy with us in the past and they have turned their lives around after bankruptcy and purchased new homes, and started new businesses.

I hope that the past five weeks have helped you to overcome some of your reservations and fears about contacting us at Hoyes Michalos to review your financial situation and come up with a plan that will work for you. Our goal is to make the process as easy and comfortable for you as we can. We are here to help you come up with a plan today, so don’t hesitate to call us at (416) 730-8060 or 310-PLAN (7526), or send us an e-mail to feed your knowledge by calling us with your bankruptcy questions today and your fears will starve to death while you digest the truth about filing for bankruptcy in Toronto.

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An old French proverb says that if you fear suffering you will suffer from fear itself – sometimes fear of a thing is much worse than the reality of it. This is definitely the case with my next common fear about filing bankruptcy in Toronto – the fear of criminal consequences. Many times I have had a person in my office asking me if they will go to jail for not repaying their debts, or if they will lose their passport or citizenship and not be permitted to exit or re-enter the country. Unfortunately, many people put off calling our office because they are afraid that being proactive about their debts will result in losing their status to live as a free Canadian citizen.

The reality is this: debtor’s prison may have a place in the history books but in our society there is no such thing. Not paying your debts or filing for bankruptcy will not put you into to jail. But more importantly, most creditors do not want you in jail because they would prefer that you are working so that they can recover some of the money you owe to them. Likewise, not paying your debts or filing for bankruptcy will not stop you from traveling to visit friends or family abroad – there is no notation on your passport or citizenship that you have filed for bankruptcy. So you should be able to travel outside of Canada and within Canada without any issues.

If you have been putting off dealing with your debt problems because you fear legal consequences like the ones I have illustrated above, please call us to discuss it and we will let you know if you have any real cause for concern or if it is another common myth holding you back that we can chase away for you. Call us today at (416) 730-8060 or 310-PLAN (7526), or send us an e-mail to develop a plan to deal with your debts.

Next week I will finish this series by discussing the most common fear of all: Bankruptcy means that my credit rating will be destroyed for seven years.

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Robert Louis Stevenson said that (except for the part about bankruptcy in Toronto) – and as I am about to discuss joint debt and married couples I thought it was relevant to the topic at hand! Today is my third article in an ongoing series about the five most common bankruptcy fears.

Many married couples share – and don’t share. How much you share financially with your spouse varies from couple to couple. Sometimes this includes debt and sometimes it is more of an assumption of debt – meaning that there is a big difference between everything is “ours” and the legal obligation of being “joint and severally liable” for a debt.

I cannot even begin to count the number of times couples visit me and asked me “If I have debts and I am married, will my spouse will be responsible for the debts if I go bankrupt in Toronto?” The answer is no, the only time someone else is responsible for your debts is if they are joint on the debt with you or have co-signed the debt for you. This is what we commonly refer to as joint and several liability. In this case, if you do not repay the debt than the other person who signed with you will be required to do so. Being married does not automatically make you joint or financially responsible for the other person’s debts. There must be a legal financial responsibility outlined in the cardholder or loan agreement. More information can be found in our article on how bankruptcy will affect your spouse.

If you are unsure if a debt is joint or not, you can ask the lender or look for the original agreement that you signed. If this fear has been holding you back, don’t let it! Call us today at (416) 730-8060 or 310-PLAN (7526), or send us an e-mail and get started on your path to financial recovery. Don’t share your fear with your spouse, share your confidence – by dealing with your debt problems you and your family will be well on your way to a fresh start.

Next Week’s Fear: Will I go to jail if I don’t repay my debts?

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I would like to take credit for that quote, but it was Marie Curie, a very wise woman who said it first. Last week I started to discuss the five most common fears that people have about bankruptcy in Toronto – the fears that stop people from investigating their options with regard to debt.

Last week I discussed the common fear that filing for bankruptcy means you will lose all of your personal belongings and household furnishings – which of course is not true.

This week the topic is obtaining new credit. Many people visit my office and tell me that they have heard that if they claim bankruptcy they will NEVER have credit again. This is typically not true unless you do not want to apply for any new credit. But you will have a life after your bankruptcy ends and most people do eventually apply for new credit after bankruptcy.

Here are the facts: as part of the bankruptcy process, you are required to attend two credit counseling sessions. One of these sessions is about rebuilding your credit once you have finished your bankruptcy. Typically the minimum time to be in a bankruptcy is nine months. Once you are done, or discharged, from your bankruptcy, you can start to rebuild your credit and the counsellor will give you some tips for starting over. Rest assured, there is life after bankruptcy and that life will likely include new credit, be it a secured credit card, a car loan, or a mortgage on your first home – you will be able to start over.

So if you’ve been putting off that call because your fear of a credit-less future has been getting in the way – you don’t have to wait any longer. If you are ready to put a plan into place to deal with your debts please feel free to contact us today at (416) 730-8060 or 310-PLAN (7526), or send us an e-mail.

Next Week’s Fear: What happens to my spouse if I file for bankruptcy?

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While growing up my parents always reminded me that knowledge is powerful and not to fear what I don’t understand. I am fortunate to have had parents to teach me this lesson early in life but many people who I meet have a lot of misguided fears about personal bankruptcy in Toronto.

I meet with many people in Toronto to discuss their financial options and at the end of each meeting, the majority of people say things like “I should have come to see you sooner, this was not as scary as I thought it would be.” Your trip to my office should not be scary – I want to help you to determine what the best solution is for you and your debts. Should you try a consumer proposal where you repay a portion of your debts over a maximum period of five years? Or is bankruptcy a better solution for your budget?

Over the next few weeks I will write about the five most common bankruptcy fears that people ask me about at their first meeting – the fears that stop people from contacting us sooner – my hope is to help you overcome those fears and get started with your financial plan today.

One of the things that people fear is that when they go bankrupt someone will come to their home and take all of their stuff – allow me to dispel this myth for you. Ontario law states that some of your assets are exempt from seizure. This is the law. For example, your household items such as your television, dining set and bed are exempt up to a value of $11,300 and your personal items, such as clothing and shoes are exempt up to a limit of $5,650. You may also keep one vehicle if it is worth less than $5,650 (this exemption is not for cars that are financed or leased – those vehicles you may keep if you continue to honor your contract). The exemption limits are based on liquidation or "garage sale" values; most people do not exceed the limits unless they have valuable antiques or collectibles.

If fear is holding you back from calling us for advice, don’t let it! If there is something that you have questions about please call us at (416) 730-8060 or 310-PLAN (7526), or send us an e-mail.

Check back next week when I will discuss the common fear that bankruptcy means you will never have a credit card again.

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