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!

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.

At the meeting, we reviewed her financial situation and it was clear that even though most of the household credit cards were originally in her name, there were extra cards issued to her spouse and he had used the cards. She brought in her credit card statements and his name appeared after her name on almost every bill and where his name did not appear on the statement I suggested they call the lenders to verify if he were also a cardholder and responsible for the debts.

Since I knew that we were discussing debt for both husband and wife, we reviewed all of the options for them as individuals, and as a couple. In total they had about $56,000 in debt and $38,000 of that was debt they were both responsible for together. As a young married couple with a future to plan for, they really wanted to get the debts behind them before starting a family. They also wanted to be sure that whichever option they chose, it would not prevent them from owning a house some day.

They liked the idea of a consumer proposal – together – and I let them know that I have met other couples in similar financial situations who were able to purchase a house towards the end of their consumer proposal, but that purchasing a home while in a proposal would likely require a bigger down payment. It made the most sense to them do this together so that they would have one easy monthly payment. As a family with two incomes, they could afford to make a proposal, or deal with all of their creditors, and the monthly proposal payment worked out to be $400.00 – an amount that was significantly less then what they were paying to juggle all of the debts on their own.

We signed the proposal paperwork together and all of the creditors were given a chance to vote on the deal, and the creditors asked that the monthly payment be increased to $425.00 to which the couple agreed. The consumer proposal was a success and the phone calls stopped, they are well on their way to financial stability, home ownership and starting a family together.

To find out more about filing a consumer proposal in Toronto please contact us at 310-PLAN (310-7526), or e-mail us, to learn more about your options. Don’t lose hope, and don’t let debt stand in the way of planning for your dreams!

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.

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 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.

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?

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?

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.

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.