Welcome to Bankruptcy Chatham Ontario

Quite often when someone calls me in Chatham, the first question is “can I keep my house”. Unfortunately, there isn’t a yes or no answer.

The first question I ask is can you afford to keep the house? If you are 2 months in arrears, your mortgage payment is $1,100 but your income has now dropped and you are making $1,500 each month, the answer is no. It has nothing to do with whether or not you file for bankrutpcy, you don’t make enough money to pay for the house. If you don’t pay your mortgage, the bank (or other mortgagor) will take the house back.

If you can afford to keep the house, then my next question is does the house have any equity? That means if you sold the house, would you have any money left over after you paid the mortgage, penalty, real estate, legal and other fees. If the answer is yes, then bankruptcy might not be an option. A better plan might be a consumer proposal. If there is no equity and you can afford it, you can probably keep your house. But even then it is up to your lender.

Why is the answer still not definite? It depends on your lender. Many lenders are getting out of the mortgage business. Bankruptcy or not, when your mortgage is up for renewal, you won’t be able to renew it with them anyway. There are other lenders who won’t renew for customers who live in certain cities and Chatham is one of them. Before you file, we always recommend that you first call your mortgagor and find out if they are going to renew your mortgage.

As you can see, the decision on keeping your house or not is not just a bankruptcy issues. It is also a budget and lender issue. I can help you navigate through these questions. You can call me at 310-PLAN or 519-351-2323.

Having a business always adds complication to a bankruptcy. When you go bankrupt, you agree to give your assets to the bankruptcy. The answer is depends on whether the business is a sole proprietorship, partnership or incorporated.

First let’s discuss if the business is a sole proprietor or partnership. You and the business are the same legal entity for bankruptcy purposes. That means, with some limitations, any equipment or tools owned through the business belong to the bankruptcy. That could mean that if your business has more assets than it’s allowed, you would have to surrender the excess assets. You are probably joint on the debt with the business, so if you go bankrupt it would limit the business’s ability to continue to operate since it would have no more credit. If it is a partnership, the debt would now be the responsibility of the partner.

Now let’s discuss what happens if your business is incorporated. Your ownership of the business is your asset and as I mentioned before, when you file bankruptcy, you surrender your assets. That means you surrender you ownership in the business. However, you can file a consumer proposalwhich doesn’t affect the ownership in your business.

Lets now look at another scenario. Joe’s business is Joe’s Drywall. He works as a subcontractor for whichever contractors have work. Joe is the business. He is one who does the work, bills the contractor and receives the money. He has some tools, but they fall within what he is allowed to keep. Does this mean if Joe files for bankruptcy he can no longer work? No it doesn’t. Joe can continue to earn his living.

As sometimes happens, there isn’t a yes or no answer to the question. If you have a business and you are thinking about filing personal bankruptcy in Chatham, call us at 519-351-2323 or 310-PLAN to book a no charge consultation to review what effect bankruptcy would have.

I have written before about my concerns with debt managements consultants. While the principle is fine (meeting with someone to review your options), as with all agreements, you need to review what you are doing thoroughly before you sign and make sure you understand the financial implications of what you are doing.

Last week I met with Tom and Betty (not their real names). They went to a debt management consultant 2 years ago. At that time they had $30,000 in credit card debt, a mortgage of $150,000 and a house worth $170,000. The consultant referred them to a mortgage broker who in turn re-wrote their mortgage with a new amount of $160,000, paid off their old mortgage and $10,000 towards their credit card debt. (Please note these amounts are not exact, they are for illustrative purposes only). In addition both the debt consultant and mortgage broker charged fees for their services.

They came to see me because they still have the same $20,000 in credit card debt that they had 2 years ago. They have only been able to make minimum payments and have continued to make new charges on the credit cards. They are wondering what their options are now. I reviewed both the consumer proposal and bankruptcy options and they have decided that bankruptcy is now their best option.

Rewriting a mortgage or getting a secured line of credit can be an effective way to consolidate your debt. However, if you don’t have enough equity in your home to pay off all of your debt, you really need to crunch the numbers first. You also need to make sure you don’t continue to use credit. In Tom and Betty’s case, they ended up with a higher mortgage payment and still didn’t have the cash flow to manage their debt. They may have been better off filing a consumer proposal 2 years ago.

Make sure you know all of your options first. Call me or email me for a no charge consultation.

As a Chatham trustee I hear countless stories about the manner in which collection agencies treat people when they call. I thought now would be a good time to review the rules that collection agencies must follow. The following information was obtained directly from the Government of Ontario’s website.

A collection agency may not:

• Contact you until six days have passed from sending you written notice of the following:
  The name of the creditor
  The balance owing
  The name of the agency and its authority to demand payment
• Continue to contact you if you did not receive the notice unless a second copy of the written notice is sent to an address provided by you, and then contact may only be made six days after sending notice.
• Contact you if you send a registered letter to the agency saying that you dispute the debt and suggest the matter be taken to court.
• Contact you if you and/or your lawyer notify the agency by registered mail to communicate only with your lawyer, and you provide the lawyer’s name, address and telephone number.
• Contact you on Sunday, except between the hours of 1 p.m. and 5 p.m., and on a holiday.
• Contact you other than by ordinary mail more than three times in a seven-day period without your consent, once the agency has actually spoken with you.
• Use threatening, profane, intimidating or coercive language, or use undue, excessive or unreasonable pressure.
• Continue to contact you if you have told them that you are not the person they are looking for unless they take reasonable precautions to ensure you are that person.
• Give false or misleading information to any person.
• Recommend to a creditor that a legal action be commenced against you without first sending you notice.
• Contact your employer except on one occasion to obtain your employment information, unless your employer has guaranteed the debt, the call is in respect of a court order or wage assignment or if you have provided written authorization to contact your employer.
• Contact your spouse, a member of your family or household, or a relative, neighbour or acquaintance except to obtain your address and telephone number unless the person contacted has guaranteed the debt or you have given permission for the person to be contacted.

If a collection agency has engaged in any of these prohibited practices in dealing with you, file a complaint with the Consumer Protection Branch.

You are probably being contacted because you have debt that you cannot manage. Call me or email me and we can review your options to deal with your debt.

As a Chatham Trustee I am frequently asked which is better a consumer proposal or bankruptcy? Generally speaking a consumer proposal is better and here are 5 reasons why:

1. The payment is fixed. A bankruptcy requires you to make payments based on your income. The more money you make, the more your pay. With a consumer proposal you pay a set amount regardless of any wages increases or bonuses.

2. You maintain control over you assets. You lose income tax refunds, GST, equity in your home, and other assets in a bankruptcy. In a consumer proposal you don’t lose your assets and can use them however you want.

3. It is better on your credit rating. A consumer proposal stays on your record for 3 years after it is paid off. That is a really great incentive to pay it off faster. A bankruptcy stays on your record for 6 years after your discharge. The longer you are in bankruptcy, the longer it is on your record.

4. You can sit back and relax with a consumer proposal. Once your creditors have accepted your proposal, in addition to attending your 2 counselling sessions, all you have to do is make your payments until the proposal is paid. Many people in bankruptcy worry about how much they have to pay and how long their bankruptcy will last if they get an increase in income.

5. A consumer proposal is not bankruptcy. Most people just don’t like the idea of bankruptcy and a consumer proposal is a great alternative for many people.

I am not saying a consumer proposal is for everyone, but if you are interested in filing a consumer proposal or just want to review your situation, you can call me at 310-PLAN, 519-351-2323 or email me.

I received an email a couple of day ago from someone who was being garnisheed and wanted to know what he could do. In his email he told me that a credit card company took him to court and now his wages have been garnisheed 20%. He wanted to know what he could do about this. There are only 3 ways to stop a garnishment
- pay the debt in full,
- file bankruptcy, or
- file a consumer proposal.

Once he files a bankruptcy or consumer proposal we will send a “stay of proceedings”to his employer. This lets his employer know that the bankruptcy or consumer proposal has been filed and the garnishment is no longer in force. However, any money already sent to the creditor will not be returned.

If you are being garnisheed and want to know if bankruptcy or a consumer proposal is the right option for you, call me at 310-PLAN , 519-351-2323 or email me.