Bankruptcy Toronto

In Toronto I meet with many single parent families to discuss their financial situation. Many single parents in financial trouble seem to have one common issue –they are the sole source of income for their families. For most single parents, the first issue after separating from their significant other is adjusting to life with only one pay cheque to cover their household expenses. Downsizing and the lack of reliable support payments from the other parent are also common reasons for financial trouble as a single parent.

I met with a single parent recently who realized that their finances were out of control, and that they were unable to repay the debts that had accumulated over time since their divorce. Feeling a lot of financial pressure, with approximately $65,000 in credit card and payday loan debts, two children ready to start college and no financial support from the absent parent – all of the educational costs would fall to them. No savings were left; all retirement plans and savings had been drained to pay for legal costs during a custody battle 6 years ago. A solution was needed and quickly because one of the credit card companies had commenced legal action and wanted to garnishee wages. On limited income the single parent was not going to be able to meet household expenses if garnisheed.

I reviewed the family budget and the expenses were typical for a family of three living in Toronto. The family was not living beyond their means, but the credit card interest was simply too much to manage with $3,400 take home pay per month and $2,900 in household expenses. At the end of our meeting, we were able to come up with a consumer proposal to offer the creditors with payment terms the family felt that they could manage of $375 per month for 5 years.

The creditors since accepted the deal and the family now has some breathing room to meet their basic living costs – the stress of worrying about how to pay for college is gone – thanks to the financial counselling sessions required during the consumer proposal. During these sessions the parent was able to develop a new household budget that will allow for installment payments for tuition, and the kids plan to take part-time jobs when they start college to help pay for books and supplies.

If you are a single parent living in Toronto and think that you need some help dealing with your debts please call us at 310-PLAN (310-7526), or e-mail us, to discuss your options. Being a single parent does not mean that you have to deal with your debts alone!

The Office of the Superintendent of Bankruptcy (“OSB”) regularly publishes statistics regarding the rate of bankruptcy and proposal filings both by province and for the country. The OSB has just released these statistics for June 2010 and as expected the rate of bankruptcies has dropped this year. For the three months ended in June, 2010 the number of consumer bankruptcy filings in Toronto dropped by almost 30% from the same period last year.

Has the doom and gloom of 2008 and 2009 passed? Is the worst behind us?

From my bankruptcy office here in Toronto at Yonge and Bloor, certainly the bankruptcy numbers have decreased this year. This was particularly evident from May to end of June. I attributed some of the slow down to the G20 Summit that was here in Toronto in June.

However, the implementation of the HST seems to be having an effect on peoples’ spending. There was a report late last week that it is believed the HST has impacted spending in Ontario and increased inflation.

It also appears that the US economy is not recovering as expected. House sales are down further than expected and unemployment remains high. The summary is the consumer’s confidence is low and this will impact spending. Thus the US may experience another recession or double dip as the experts refer to it. Given the US is our largest trading partner, it is hard to believe our economy will not be effected.

So we may not be out of the woods yet with respect to any recovery. It may be sometime before things are back on track and the result is there will be many ups and downs along the way. In Canada, we may not be affected as severely but we cannot be complacent. For the balance of 2010, I expect bankruptcies may decline but it maybe another thing for next year.

I would then say it is time to keep on top of our budgets and plan our spending wisely. It may be that you need to review your options for dealing with your debts and come up with a plan of action for the next 6 months to a year. One trend we are noting is many are not filing for bankruptcy but doing a consumer proposal whereby they are making a contract with their creditors to repay a portion of the debt.

We would be glad to meet with you to discuss all options including a consumer proposal an in our Toronto office of Hoyes Michalos & Associates, so please feel free to contact me via email or call us at 310-PLAN (310-7526, no area code required) to make an appointment for a free consultation.

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.

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.

What a privilege it was to watch our Canadian athletes excel at this year’s winter games in Vancouver – especially hockey. Now that the Olympics are over and I’ve had some time to reflect on the successes that we have experienced as a country; I can see the connection between determined athleticism and personal finance – in either case, if you have achievable goals and the skills to make them happen – anything is possible. We can help you with the skills if you have the goals!

What have our athletes taught us about financial hardship? I think the best example can be found in our bronze winner Joannie Rochette – a figure skater who suffered a devastating personal loss days before winning a bronze medal. Joanie came to the games to win and the passing of her mother did not stop her from securing a place on the podium. While financial hardship is not even in the same league as losing a family member – for most people it is still a pretty crushing blow to how they feel about themselves. Bankruptcy may not be the only or best option for you – you may want to consider a consumer proposal – an option where you repay a portion of your debt over time and work towards the goal of paying back some of the money you borrowed.

If you are experiencing financial difficulty and are wondering about your options call us today to schedule free consultation.

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?

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?

Every person that files bankruptcy in Toronto with me asks the same question: What’s involved? What do I have to do to make sure my bankruptcy finishes as quickly as possible.

I realize how nerve wracking and stressful bankruptcy can be, so I try to simplify the process by giving every person who files bankruptcy a sheet that lists their duties and responsibilities. Here’s a quick summary:

1. In a bankruptcy, the individual must report their family income to their trustee for us to determine how much, if any, must be paid to their creditors as part of the bankruptcy process. These rules are referred to as “Surplus Income” rules. Simply put, the more you earn, the more you pay while you are bankrupt in Toronto. Each month you will send my office copies of your pay stubs, and based on your actual earnings we will calculate your required payment.
2. There are two mandatory financial counselling sessions to attend. They last about an hour and focus on budgeting and credit repair. Most people tell me these are great sessions, and help them learn how to budget so they don’t get into financial problems in the future. That’s why I call bankruptcy a "fresh start".
3. It is a requirement that the Trustee file the tax returns for the year of bankruptcy and the previous year, if it has not already been filed.
4. Each month the bankrupt person will also make a contribution to their estate to cover basic administration costs. The cost of your bankruptcy will depend on a number of factors, including what you earn, and the size of your family.

This is a quick summary of your duties as a bankrupt in Toronto. For a more detailed explanation, and to find out what would happen in your specific situation, please call our office in Toronto at 310-PLAN, or e-mail us for more information.

I recently spoke to a real estate agent, and she spoke told me about the staggering number of homes being sold under power of sale due to arrears on mortgage payments.  She went on to say that this heartbreaking event all too often leads to marital breakdown.  It is easy to see how this happens – young families, big debt and tremendous stress.

I agree with her comments as I speak to people on a daily basis who are dealing with issues like this. In the bigger picture the mortgage will often get behind as other unsecured debts also demand monthly payments.  

There may be a better way to save both the home and the marriage.  This is a very complex issue (more complicated than can be fully explored in a short article) but let’s review the basics.

Under the Bankruptcy and Insolvency Act a consumer proposal can be offered to your unsecured creditors.  This means that credit cards, lines of credit and unsecured loans can be bundled into one manageable monthly payment.  The interest stops on this type of debt and creditors lose the right to take collection action.  Simply put, this could significantly improve the family’s cash flow and make room for the mortgage payments.  There are a number of factors that have to be examined such as the amount of equity in the home, family net income, day care expenses and so on, so the decision to file a consumer proposal can only be made after an in-person consultation to allow us to review all of the facts.

Another interesting point that the real estate agent made was that rental properties are not easy to find and in some cases the rents are equal to or greater than mortgage payments.  In the case of a separation of the family this could also mean two rental properties, support payments and even more stress.

We can’t begin to resolve this type of problem in a short article, but we invite you to call us at 310-PLAN, complete an online evaluation or send us an email and one of our professionals would be more than happy to discuss the options with you.  We offer a free consultations so if you are wondering what to do next, let us help you develop a plan to deal with your debts. 

It doesn’t matter if you’ve been naughty or nice – if you are feeling a pinch in your wallet this time of year you are no different from most residents of Toronto! Holiday shopping in the province’s capital can be both a blessing and a curse! We have the benefit of options – so many stores and so many discount sales – but we also have the burden of increased marketing. When I look out my office window (from our bankruptcy Toronto office at Yonge & Bloor) I see a lighted sign from a major retailer that flashes all of the ongoing seasonal deals!  With so much advertising in Toronto we have decided that our gift to you this season would be a helpful list to aid you in your shopping so that you can put up your best defense – you!

1. Create a shopping list – be clear about who and what you are shopping for and how much you want to spend.  Don’t be tempted. 
2. Window shop first – always look around for deals on specific items – if your father asked for a new microwave oven make sure you don’t just buy the first one you see – there is always a better deal!  Also consider bargaining for the item.  In many cases if you ask for discount or what is available you will be surprised at what can be offered. 
3. Leave the cards at home – shopping with cash will make it easier to stay within budget!
4. Be savvy and creative – think about who you want to give gifts to and if you can make that person happy with something that costs less but has a big impact on them you are really understanding the true spirit of the season – it’s not about how much you spend it really is the thought that counts!

For those of us have entered into this season with existing debts and who plan to deal with them in the new year, proceed with caution – if you are spending on your credit cards today and considering bankruptcy in the new year the credit card companies can ask that you repay a portion of the money spent!

If you already have more debt than you can handle, we are here to assist you so please feel free to call and request your free consultation today!

Happy Holidays Everyone!