Bankruptcy Kitchener Blog

There is a very simple budgeting system that has been around for a long time, but today, with the use of credit, this system is used less every day. This is a system of understanding our “needs” and our “wants”. After taxes, we are all constrained by how much money we have available to us to spend. We live in an expensive society. For example, our housing costs are a significant percentage of our income. The issue then is, how do we allocate the rest of our income?

In theory, it is easy to understand the needs verses wants principle, but is much harder to practice.

The first step is to know which items are needs and how much they cost. Once we have totaled the need items, we can calculate how much we have available (or left over) for the want items.

Over spending on wants is where we tend to accumulate too much debt. Most times, if we are using a credit card for want items, we likely do not have the full amount of cash available to pay back the credit card for this item. Therefore, debts accumulate. The problem is compounded by high interest rates on those credit cards.

We consume more “stuff” then prior generations. Instead of fixing, we buy new. Every few years we need to replace the old computers and electronics as they may no longer be in style, etc. There are huge marketing campaigns out there to ensure we keep spending.

The availability of credit in today’s world has made it easy to make spontaneous purchases on “want” items. Before you purchase a “want” item, save up for it and then wait a couple of days or weeks to ensure that is truly how you want to spend your money. You may find that you change your mind during that waiting period.

Once you are on the need and want system, you need to determine the appropriate plan for dealing with your debts. These include bank consolidation loans, liquidating assets, doing a debt management plan, filing a consumer proposal or a personal bankruptcy. If you are in Kitchener Waterloo and want to understand your options to deal with your debts give us a call at 519-747-0660 or send me an e-mail.

In order to succeed in any plan, you need to know how to spend your hard earned funds in the future. Use the system that existed well before credit was in play, the needs and wants system. Save up for the want items and do not use credit.

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As New Year’s is upon us again, it is time to look into 2010 and make our resolutions. If one of those resolutions is to get your finances in order, then let’s discuss some of the steps you need to take. A couple of major hurdles we have to overcome are; one – our spending habits do not change overnight and two – we are generally limited to the amount of money we bring in.

The first step is to take inventory. To take inventory we have to figure out where you are. You need to make lists of your:
a) debts, and
b) major assets (house, vehicles, investments)

Second, make a realistic personal budget. Making a personal budget can be overwhelming, but is very important. Simplify the budget to calculating what income you receive and where you spend money. Review old bank statements to see where money was spent. For assistance on making a budget, here is additional information.

Third, set goals. Think about what is important to you and your family, and consider where you want to be in the future. It is sometimes easy to be wrapped up in our day-to-day lives and not think about the future. News Years is a good time to reassess and think about the future, by setting your goals.

In order to deal with you debts, you need to understand the inventory of your debt load and assets, the personal budget, and what your goals are. Then you can evaluate the pros and cons of each option in your situation.

Options to deal with debts include:
a) Use your assets – house equity and investments,
b) Consolidation loan with a bank,
c) Credit Counselling/Debt Management Plan through a not-for-profit agency,
d) Consumer Proposal, and
e) Personal Bankruptcy

For a debt option calculator see this link.

If you are in the Kitchener-Waterloo area and want to sit down for a free consultation to discuss your situation and options in greater detail, call me at 310-PLAN or send an e-mail.

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Based on the statistics that the government released last Friday, personal bankruptcies in Kitchener-Waterloo increased 60% for the 3rd quarter (July – September) in 2009 over 2008. This is a significant increase when you consider the Canadian average was an increase of 47%. Even for consumer proposal filings in the 3rd quarter, Kitchener-Waterloo increased 43% versus the Canadian average of 39%.

These are staggering increases. Working in the Kitchener office, I have met with many people that were facing the decision of how to deal with their debts. There is a variety of reasons that someone has to file, here are a few key factors; the economy downturn has caught up with the Waterloo Region, the debt levels of the average person has increased, as well as a result of the new bankruptcy rules that came into effect on September 18, 2009. These are average people who fell under tough financial times and needed to obtain a fresh financial start.

To discuss actual numbers, in the 12 month period ending September 2009, total consumer bankruptcies and proposals in Canada totaled 148,378. This is a 36% increase over the same 12 month period ending September 2008.

If you are experiencing financial difficult in 2009, you are not alone. Call us at 519-747-0660 and we will discuss your situation in detail to help make PLAN for the future.

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This Saturday, November 14th, Howard Hayes and I will be spending the hour between 12:00 and 1:00pm answering your questions live on air on the Ask the Expert Show on 570 News. If you have questions and want to hear them answered, please send us an e-mail at this e-mail address created for this show. We will attempt to answer all of your questions.

We receive many e-mails from people in the Waterloo Region. These e-mails are asking questions about garnishments, personal bankruptcy, consumer proposals, assets, creditors, or any debt related question to name a few. Personal finance problems are stressful and overwhelming, so hopefully our live radio show will help you understand your options and how specifics in your situation will be handled.

As a Trustee in Bankruptcy, I am responsible for our Kitchener Office. I can be reached at 519-747-0660 or at this e-mail if you would like to talk specifically about your situation.

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When someone files for personal bankruptcy, the amount they have to pay depends on the number of people in the family unit and how much income the family makes. This is called “surplus income”. The concept of surplus income can be relatively confusing, so let me try to explain it generally.

The government sets a threshold amount. This amount represents the level of income an individual can make before having to pay extra into their bankruptcy. That is, if you have more income, then some amount should be paid to the creditors.

The surplus threshold is based on net income or take-home pay. Each year, the government adjusts the amounts. The thresholds for 2009 are:

Family Size – Monthly Threshold
1 – $1,870
2 – $2,328
3 – $2,862
4 – $3,474
5 – $3,941
6 – $4,444
7 or more – $4,948

Any amount an individual makes above these thresholds represents surplus income and as a result an individual must pay 50% of that number into a personal bankruptcy. For example, if a single person brings home $2270 per month, they would have $400 of surplus income of which they would have to pay $200 extra into their bankruptcy. The amount of surplus income decides the length of the bankruptcy. If the surplus income is on average is $200 or more, the bankruptcy will go for 21 months (9 months if less than $200). To see the directive from the government, follow this link.

For individuals that would expect to have a higher amount of surplus during their bankruptcy, a consumer proposal is an alternative plan to deal with debts through one manageable monthly payment.

If you are from Kitchener Waterloo area and are considering your options in dealing with your debts, I suggest that you call our Kitchener office at 310-PLAN or 519-747-0660 or e-mail me. We will review your options in detail and explain the concept of surplus income further. We can make a plan for your situation so that you can get a fresh financial start.

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Doug Hoyes and I aired on the hour long Ask the Experts show on 570 News in Kitchener. We discussed the options Personal Bankruptcy and Consumer Proposal for listeners in Kitchener area. We focused our discussion on the impact of the new rules that came into law on September 18th, 2009. Part of our role as Trustees is to inform individuals of their options when they are experiencing financial difficulty. The radio show allows us to share the information with people throughout Kitchener, Waterloo, and Cambridge.

Who are we? We are a licensed Trustee in Bankruptcy firm that focus on solutions for individuals. The firm, Hoyes, Michalos and Associates Inc. started in 1999 in Waterloo Town Square. Since then, we have moved to our Kitchener location at 607 King Street, on the second floor of the strip mall near Zeke’s Restaurant. We have helped thousands of people from the Kitchener-Waterloo region since then. We are the largest firm in Kitchener-Waterloo that only provides solutions for individuals.

My back ground consists of:
1997 – BA Economics and Accounting from Wilfrid Laurier University
1999 – Chartered Accountant (CA)
2002 – Insolvency Credit Counsellor Certification
2007 – Chartered Insolvency and Restructuring Professional (CIRP)
2007 – Licensed Trustee in Bankruptcy

If you are interested in a free consultation to review your situation and discuss your options to make a plan, call me at 519-747-0660 or e-mail me. My approach to our meetings is non-judgmental and my objective is to provide you with the information you need to understand the pros and cons to your options so that you can choose the right one for you.

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Hoyes, Michalos & Associates Inc. has been helping the residents of Kitchener-Waterloo since we opened our doors on January 1, 1999. As a firm, our focus is on individuals and their families. We assist with helping develop a PLAN to deal with individuals or families debts. We are non-judgmental as we understand that there are many different factors for financial difficulty.

When someone calls us, we try to gain an understanding of the situation so we can advise on all options. It is important that people understand how all options work so that they can make the best decision for themselves after evaluating the pros and cons of each.

This coming Saturday, Doug Hoyes and myself will spend the noon hour on the 570 News radio show called Ask the Experts. We are going to discuss the new bankruptcy rules, the economy, and answer caller’s questions. We go on this show to help Kitchener-Waterloo residents understand personal bankruptcy and consumer proposals in more detail.  Please tune in to 570 News at noon on Saturday for our one hour live broadcast, or go to the 570 News web site to listen live.

If you have a question that you would like answers to and do not want to call into the show, send me an e-mail or call me at 519-747-0660 and I will try to answer it on the air.

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After 57 years in the Kitchener-Waterloo community, the local not-for-profit organization, Catholic Family Counselling Services is experiencing a name change – going forward, they will be known as Mosaic Counselling and Family Services. The organization is a member agency of the United Way.

The Mosaic Counselling and Family Services is located at 400 Queen Street South, Kitchener. They offer a wide range of services to residents in Kitchener-Waterloo. When someone is in need, counsellors are there to meet with the person and help in a supportive role.

One key area of focus for the organization is offering credit counselling. They meet with individuals and families to review their situation, work on budgets, and help guide them in the right direction. One aspect of the business is a Debt Management Plan, which is a 100% repayment option through the Ontario Association of Credit Counselling Services. Another service offered is credit counselling in a personal bankruptcy. For individuals filing personal bankruptcy in Kitchener, the system requires 2 one on one credit counselling sessions to assist in obtaining a fresh start. We refer several people Mosaic Counselling and Family Services for these sessions.

If you are in financial stress, call Mosiac Counselling Services at 519-743-6333 or call us at 519-747-0660. We are both located in the Kitchener-Waterloo region to help people in tough financial situations.

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This past weekend was Homecoming at Wilfrid Laurier University (WLU). I attended the School of Business & Economics (SBE) from 1993 – 1997, were I double majored in Economics and Accounting. As an alumni of Wilfrid Laurier University in Waterloo, I enjoy going back to take in some of the events.

Friday was the Dean’s Alumni Golf Classic. It was wet, windy, and cold, but we made the best of it and were able to get in a partial round of golf. The tournament was in support of awards for deserving students within SBE. The Kitchener office of Hoyes, Michalos & Associates Inc. sponsored a hole for this event to show our involvement to support local students.

On Sunday, I took part in the 2nd Annual Laurier Loop (a running race). The race is part of the Waterloo Running Series and was a 2.5 KM circuit through beautiful Waterloo Park which started and finished on the track in the Laurier University Stadium. In this event, Ian Martin and myself joined two others in a 4 person relay team to run a 10km relay race, we each ran a 2.5 loop as fast as we could – our final combined time was 43 minutes, 26 seconds. This race was raising funds for Laurier’s Movement Disorders Research & Rehabilitation Centre (MDRC). Once again, thanks to Hoyes, Michalos & Associates Inc. in Kitchener for sponsoring 3 staff members in this event.

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As of September 18, 2009, the new amendments to the Bankruptcy and Insolvency Act are now in effect. Under these new laws, many individuals will be facing 21 months of personal bankruptcy instead of 9 months. What this means is that personal bankruptcy has become longer and more expensive for many people.

A consumer proposal is an alternative to personal bankruptcy. With the current amendments, it is now more attractive than ever before for many people in financial difficulty. The debt limit for a consumer proposal is now $250,000 (up from $75,000). This limit is based on total debts excluding the mortgage on the debtor’s home.

A consumer proposal is an option pursuant to the Bankruptcy and Insolvency Act that allows a consumer debtor to make an offer to the unsecured creditors as a group. For example, if a person owes $80,000 in credit cards, lines of credits as well as some income taxes and is at a point where they can no longer pay in full, they could meet with a trustee (referred to as an “administrator” in a consumer proposal) and work out an affordable monthly amount to offer to the creditors. In this case, the debtor could offer a consumer proposal that the creditors with terms of $500 for 60 months = $30,000. Each unsecured creditor would receive a pro rata share of the amount offered. The maximum length of a consumer proposal is 60 months (5 years). This is just an example, and each case has to be considered separated based on person’s situation.

A consumer proposal is automatically accepted by the creditors after 45 days unless the creditor(s) ask for something different. In that case, the consumer debtor can accept the creditors counter offer. Each creditor receives one vote for each dollar they are owed. The majority vote decides.

In general, a consumer proposal is a fair and reasonable offer between the debtor and the creditors. The creditors receive more than in a personal bankruptcy and the debtor is able to protect his/her assets and make one manageable monthly payment. As for the costs to file a consumer proposal, they come out of the amount offered to the creditors and are not paid in addition to the proposal terms. The government has legislated the amount of fees involved and cannot be changed by the trustee.

To discuss the option of a consumer proposal, call me at 519-747-0660 or send me an e-mail.

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