As a Chatham, Ontario trustee, I hear this question quite often “what are my options to deal with my debt?”.  I get a phone call or email and someone is stressed.  They have debt they can’t manage but they are not sure what they can do. 

In general everyone has 5 things they can do.

1.  Do nothing. Yes, this is an option.  If you have employment earnings or assets it is not a very good option.  But if you are creditor proof, this is something to consider.

2. Try to solve the debt problem on your own. You may be able to save up money and offer them a lump sum settlement. Or, you may be able to get a debt consolidation loan from your bank. For many people, this is not a viable option. If you are already behind on your bills, you may find you bank is not able to help you.

3. You can hire an outside agency such as a credit counselling agency. They will work out a plan between you and your creditors to either settle the debt and/or reduce the interest rate. This plan is best for people who can make the minimum payments on their debt each month, they just need get ahead of the compounding interest.

4. File bankruptcy. This is good option for people who are low income and have minimal or no assets. You have to make payments based on your income, and you are allowed to keep certain assets. Contrary to rumours you do not “lose everything” if you file for bankruptcy.

5. File a consumer proposal. This ever increasing option is being used by those who have the ability to make payments on their debt, they just can’t make the full payment. It typically requires you to make monthly payments for up to five years. It is court approved and only requires the majority dollar amount of your creditors to agree to it.

To review your situation and formulate a plan that is right for you. Give me a call at 519-351-2323 or 310-PLAN.

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I just spoke with someone who came to see me 2 months ago. She has not yet file bankruptcy or a consumer proposal. As I always tell people who are in financial difficulty, do not bank where you owe. To her surprise (but not mine), the bank took money from her bank account to pay her arrears on her bank loan. I thought it worthwhile to re-post the article on why you need a new bank account.

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If someone has decided to file a bankruptcy or consumer proposal I insist that they bank with a financial institution they don’t owe money to and I explain why. I even give them a bright yellow sheet explaining how to do that and why it is important. However, every so often someone comes back to see and I find out they didn’t take my advice and move to a new bank.

Let me make this clear, if you bank at a bank where you owe money, there is a really good chance that they will freeze your bank account when they get the bankruptcy or consumer proposal papers. Your bank account is frozen and now your car payment and rent cheque will bounce.

Yes, I know you have been dealing with your bank a long time and they know you, but you have to consider what will happen if you don’t get a new bank account. They can take money out of your bank account if you are behind on your bill payments. Opps, that money was for your rent … sorry but the bank took the money to pay the visa bill, and yes they are allowed to do this. Now how do you pay your rent?

“But switching bank accounts is a lot of work”. I know it is, but you would rather have the bank freeze all of your money for days or weeks, or would you rather take an hour faxing your new bank account information to your employer, utility, insurance, car lender, etc.

“But my bank really likes me”. Then why did they turn you down for a loan?

“But all I have with them is a car loan and I am keeping my car”. Unfortunately, that doesn’t matter. Once your paperwork is entered into the bank’s computer, the freeze is automatic. They don’t have someone checking your file to see if they should be doing it.

“But I bank where my mortgage is.” You can bank where ever you want, you don’t have to bank where your mortgage is. You just have to tell your mortgagee to take the money from your new bank account.

“What if I don’t owe any money to the bank?” You may not need to get a new bank account. However, if you have written any post-dated cheques or have given pre-authorized payments on a debt that will be part of your proposal you will have to put stop payments on all of those payments. Putting stop payments on cheques can be expensive, you may find it cheaper to just get a new bank account. Talk to your bank about this.

To make it clear, don’t bank where you owe.

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My first question is what caused you to contact us or search out this web site? Are you having difficulties making your payments? Do you find you are using one credit card to pay off another? Are creditors calling you are work? Do you have a garnishment order in place? If any of these answers are yes, it’s best to speak with a professional about your situation.

That doesn’t mean you have to file for bankruptcy. There are many other options to deal with your debt including a debt management plan or a consumer proposal. If you are already in collections on your debt, it is unlikely your bank would give you a consolidation loan, but for some, that may be an option.

When you come to my Chatham office for your no charge meeting, we will review your entire situation. The things we will discuss you about you include:

- What caused your financial difficulty? Has your income gone down, were you off work or out of work, or did you have a relationship breakdown?

- We then review your debts. Please tell me about all of your debts including mortgages, car loan, credit cards or debts you know won’t go away with a consumer proposal or bankruptcy

- We also review your assets. This doesn’t mean you lose your assets, I just need to know what you have.

- Finally we review your budget. It is good to know how much you bring home (net income) and what your household expenses as, such as rent, mortgage, utilities, car payment, gasoline and groceries.

We then review all of your options including the one that may be best for you.

If you are struggling with your debt payments, then give me a call at 519-351-2323 or 310-PLAN and lets get started on your fresh start.

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Every week in my Chatham office I receive a phone form somebody who states he or she “has to file for bankruptcy”.

My first question is “who much do you owe?” It might seem like a straight forward question, but what do to you do when the answer is “I don’t know”?

We then discuss why they don’t know what his or her debts are? Have you just not added them up? Do you have unopened creditor bills at home?

If you are calling in a panic to file for bankruptcy, why? Are creditors calling you, have you received collection letter or has your employer received notice of garnishment? All of these are pieces to the puzzle that will fit together to find out how much you owe.

Maybe you went to apply for a loan and you were denied and were told your credit rating is poor. The first thing you should do it to get a copy of your credit report. You can get that from either Equifax or Transunion. You don’t need a credit card to do this, you can request a free copy via mail. No, we cannot get your credit report due to privacy reasons, you are the only one who can do it.

Once you get a copy of your credit report, read it to find out what the problem is. If all you have on it is a small bill from years ago, it is probably easier just to pay if off then to file for bankruptcy.

If you still need to file for bankruptcy, then contact us at 519-351-2323 or 310-PLAN to arrange a no charge consultation.

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When I get an email from someone in Chatham, it often is just a simple question: How do I file for bankruptcy? The answer though is a bit too in-depth for an email so I thought I would summarize the steps here.

1. You need to call our office at 519-351-2323 or 310-PLAN to set up a no charge meeting. It is better to do this via phone so we don’t go back and forth for days on email trying to get a time that works for your schedule. When you call we just need general information such as approximately how much you owe, your income and what assets you have.

2. At this meeting we will review all of your options to deal with your debt including debt consolidation, credit counselling, consumer proposal and bankruptcy.

3. Together, we gather all of the necessary paperwork to complete the fresh start application form. This includes information such as your creditors, income, expenses and details on what you own such as a house or car.

4. We complete the bankruptcy paperwork and you return to our office to sign the documents.

5. Once the paperwork is signed we electronically send it to the Office of the Superintendent of Bankruptcy and you are officially bankrupt. You are on your way to your fresh start.

6. During the bankruptcy process, you complete a series of duties which includes making payments, attending two credit counselling sessions, providing tax information and submitting monthly income and expense reports.

7. If you perform all of your duties, and if no creditor objects, you are automatically discharged at the end of your bankruptcy period (which is 9 or 21 months in a first bankruptcy, or 24 or 36 months in a second bankruptcy, depending on your income).

Of course, the bankruptcy process can’t fully explained in a one page article, so I suggest you contact me to set up a meeting. I would be happy to meet with you to discuss your situation.

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by Angela Marquis, client service specialist

At Hoyes Michalos & Associates Inc. we offer two solutions in dealing with your debt. One is bankruptcy. Bankruptcy means you assign everything (surrender) you own in exchange for the elimination of your debts. Everyone’s situation may be different and it doesn’t mean you will lose your assets.

Second is a consumer proposal. A consumer proposal is a repayment plan to your creditors and in most cases you will repay only a portion of the total amount of debt you owe. The amount you may pay depends on what your income is, who your creditors are and what assets you have.

Here are the top deciding factors to help you decide which option is best for you:

You might choose bankruptcy if:

• You have low Income
• You have no assets to lose
• You have never been bankrupt before
• You have a wage garnishment

You might choose a consumer proposal if:

• You are not low income
• You have assets you want to protect
• You want and have the ability to pay a portion of your debt back
• You don’t want to go bankrupt
• You debts are lower than $250,000 (not including your mortgage)
• You have a wage garnishment

If you would like to review which option is best for you, then call Hoyes Michalos & Associates at 519-351-2323 as we are here to help. We will set up an appointment to meet with you in Chatham and go over the options with you.

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On Saturday, September 24, 2011, Doug Hoyes and Ted Michalos will be live 570 News (Kitchener) speaking about myths you have heard about debt and how to deal with it including debt consultants, pay day loans, consumer proposals and bankruptcy.

They will share their stories and personal experiences from some of the thousands of people they have helped.

Join Doug and Ted at 1:00 pm on Saturday, September 24, 2011 for this informative hour.

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Last night, while searching the internet, I came across of YouTube video that piqued my curiosity titled “how we became debt free”.

The story is actually an interview by a well known US news organization. It tells us of a marriage couple with three children and how 5 years ago they had $125,000 in debt (not including their mortgage) and that today through, amongst other things, money management they now have zero debt.

Many of the things they did are things we should all be doing:

1. They started shopping smarter at the grocery store. Instead of always buying brand name goods, they started buying “no-name” brands. I agree with that. I will admit I am loyal to certain brands of ketchup and peanut butter, but for most other products, I would rather save money than have the brand name in my freezer.

2. They started eating out less. Many people I meet with don’t realize how even a small thing such as buying lunch every day can add up. If you are buying a sandwich every day of $5, that is $25 a week. If you brought your lunch instead, that is $25 a week that could be put towards debt repayment.

3. The father took on a part time job. While I applaud his efforts to increase his income, this needs to be balanced with having time with family. He commented that he was frequently too tired to play with his children.

4. Instead of coming home after his part time job, he slept in his car to save gas. This is just weird, not to mention the poor effect on his hygiene.

5. They did not file bankruptcy, but instead went to credit counsellor for help to lower their debt. This is the point that I felt cheated by the interview. Instead of a feel good story of how a family was able to dig their way out of debt on their own, it was a story about how they used outside tools to help them. There is nothing wrong with getting help but the story made it sound like they did it all on their own. They didn’t, they had a qualified professional help them negotiate with their creditors and manage their money. Just like I help people every day.

They did nothing that hundreds of people in Chatham can’t do every year. Since this was a US story, a better option in Chatham would have to to file a consumer proposal. The effects are the same, people avoid bankruptcy and become debt free after making payments towards their debt.

The moral of the story is the same. If you need help with your finances, just ask.

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The Office of the Superintendent of Bankruptcy recently released the year to date statistics for bankruptcy and consumer proposals filings.

The good news for the Chatham area is the decrease in bankruptcy filings for the first 6 months of 2011 compared to 2010. 320 people filed for bankruptcy in the first 6 months of 2010 while 237 filed in the same period for 2011 for a decrease of 26%. There were 64 consumer proposals filed in the first 6 months of 2010 and 104 for a 63% increase.

How is that good news? A decrease in bankruptcy filings is good if it means the decrease is caused by people being able to manage their debt. If the number of consumer proposals filed has increased it does mean that people can manage some kind of payment.

Since the bankruptcy rules changed in 2009, bankruptcy has become longer and more expensive for many people. Rather than having an expensive bankruptcy for up to 36 months, you can have a reasonable payment under a consumer proposal for a longer period of time.

However, if you need help managing your debt it’s important that you speak with a licenced bankruptcy trustee. Don’t be fooled by the fancy ads of debt consultants. I am meeting with too many people who spent thousands of dollars in fees only to either be referred to a trustee to file a consumer proposal.

For the Chatham economy in general, a declining personal bankruptcy rate is good news. In order to make the consumer proposal someone needs to have a source of income, usually employment income or pension. An increase in consumer proposals shows that people are working, although still struggling with their debt. They can make some payment towards their debt, they just need help. However, Chatham’s economy has taken some bad hits in the past month with the news of plant closures. This could mean that we will start to see an increase in the number of bankruptcies filed.

If you are interested on reading how Chatham compares to other cities, you can visit Bankruptcy Canada and read more about consumer proposals in Canada.

Hoyes Michalos is one of the largest filers of consumer proposals, so if you are interested in learning more about this increasingly popular option to bankruptcy, call me at 519-351-2323 or email me to arrange a no charge consultation.

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I have written before about the dangers of payday loans. The money seems “easy” when cash is tight. But it is an expensive way of borrowing and you may find yourself in a hole you cannot dig yourself out of.

Last week I met with Joan (not her real name) at my Chatham office. Several months ago, her hours were cut back at work. At the middle of the month she found that she didn’t have enough money to pay her visa bill, but she knew she would get paid again in 2 weeks. She then went to payloan A to borrow $200. The problem is that after she added fees and administrative costs, 2 weeks later she would have to pay back substantially more than $200. Her paycheque arrived, her hours were still cut back and now she didn’t have enough to pay back payday loan A. She then went to payday loan B and borrowed enough to pay back payday loan A.

This continued until 4 months later she came to see me. By that time she had $3,000 with 5 different payday loan companies. She was worried about what to do. She is now off work and the stress of knowing she had these payday loans was overwhelming her.

Her total debt was small compared to the average, but when you are running out of money each month to pay the bills, does it really matter if your debt is $10,000 or $100,000?

Even though she didn’t have any wages that could be garnisheed Joan decided to file for bankruptcy. That way she can finally emerge from the payday loan trap and begin her debt free future.

If you find yourself trapped by payday loans, give me a call at 519-351-2323 and let me help you.

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