Bankruptcy Kitchener Blog by Scott Schaefer

If your new year’s resolution was to deal with your debts then you are not alone. With Canadians carrying a record amount of consumer debts, it is time to deal with them before the interest rates rise. Are your credit card balances increasing and you seem to be stuck in overdraft? You need to make a plan to deal with your debts. The options available to deal with your debts are:

1. Sell assets to pay the debts: If your debts are less than the value of the assets you own, then one option is to sell or cash in your assets and simply pay off the debts. For example, if you have $50,000 in an RSP and $20,000 in credit card debt, then a solution for you would be to cash in the RSP’s to cover the debt. The key is to get rid of the credit cards once they are paid off. If needed, only keep one with a smaller, more manageable limit. If you choose to sell assets make sure you consider the tax implications.

2. Remortgage your house: If you own your own home and the value of the home is greater than the mortgage amount, you might be able to redo the mortgage and have enough to pay the mortgage as well as your other debts. Be aware, this will increase the length of time left on the mortgage. I suggest you work with your mortgage company or a mortgage broker to ensure you are getting the right mortgage for your situation.

3. Consolidate the debts into one loan: If your situation is one in which you can afford to pay all of your debts back, but just have too many creditors to pay each month, then a consolidation loan may work for you. A consolidation loan is where you get a loan from a bank to pay off all of your debts, leaving you with just one loan payment to make.

4. Credit Counselling: In this case, you work with a qualified credit counselor to make a budget aimed at paying down your debts over time. Following a budget takes discipline and you need to be 100% committed. It you do not follow the budget closely the debts will not get paid down. Credit counselling works great if you have enough income per month to deal with your monthly commitments, but have not been able to keep track of or stay on top of it in the past.

5. Debt Management Plan: A debt management plan is a voluntary agreement between you and your creditors to allow you to pay back all the debts but under set payment terms. It is like a consolidation loan; however it is not a loan. The interest is eliminated or reduced to a lower amount. This option works when someone’s debts are manageable, but they cannot get ahead with the interest charges.

6. Consumer Proposal: A consumer proposal is an offer to your creditors through a trustee in bankruptcy that allows you to make one affordable monthly payment to all of your unsecured creditors. Through the consumer proposal, you pay a portion of your debts back to allow you to rebuild your financial situation. A consumer proposal allows you to protect your assets and stop wage garnishments. A consumer proposal is done under federal law and is monitored by the government for your protection. The trustee is paid through the consumer proposal and not a direct cost to you.

7. Personal Bankruptcy: As a last option, a personal bankruptcy can be filed with a trustee to eliminate your debts so that you can have a fresh start. Personal bankruptcy is not what people plan for, but when debts become too much and you cannot afford the other options listed above; a bankruptcy is designed to give you this fresh start.

To take care of your debts, you need to have a plan. I talk and meet with thousands of people from Kitchener Waterloo to review their financial situation and help them develop a plan to deal with their debts. As a licensed trustee in bankruptcy and qualified credit counsellor, I serve the Kitchener Waterloo and surrounding area. My office is conveniently located on King Street between Kitchener and Waterloo. I can be reached at 310-PLAN or via e-mail. If you spent the holiday season worrying about your situation, then the start of a new year is a good time to take action.

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If you are receiving collection calls, you likely can place each of them into three categories: the good, the bad, and the really ugly. Regardless of which type they are, they all add stress to your situation. In most cases, collection calls are being received because you do not have the funds to pay your debts right now. It is not that you do not want to pay them, but rather your circumstances have changed and you cannot afford to make a payment. Collection agents are paid and monitored based on their collection totals and therefore can get very aggressive and will say anything to pressure you in hopes of a payment. For examples of collection call stories, see this link.

If you have collection calls, you need to make a plan to deal with them. I generally consider the following factors:
First: How much are they collecting for? Could you just pay it and be done?
Second: Do you have other debts that need to be dealt with as well? The collection call is just one issue; however, the complete debt situation needs to be considered.
Third: What is the cause of the collection calls? Has there been a change in your circumstances?

Collections will not just simply go away; you need to deal with them. A consumer proposal or a personal bankruptcy both give you a legal option to deal with you debts so you can get on with your life financial. Collection calls are not allowed to continue once a consumer proposal or a personal bankruptcy is in place. To review your situation and make a plan to deal with your debts, call me at 310-PLAN or send me an e-mail and we can arrange a free meeting in my Kitchener Waterloo office.

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In rare cases, a creditor will oppose the discharge of a personal bankruptcy, so lets discuss what this means from a technical stand point. This can be confusing and it is important to note again that this does not happen very often in Kitchener Waterloo area. If you have any questions, please contact me.

An individual files for personal bankruptcy to receive a discharge from his or her debts. Bankruptcy laws are set up to allow a discharge to happen automatically after the bankruptcy is complete. A discharge from bankruptcy occurs when all bankruptcy duties are completed and as a result the debts are released. In some cases a creditor wants the courts to review the bankruptcy; this is referred to as a creditor opposition. The opposition is to the automatic discharge. The individual will still remain eligible for a discharge, however the terms will be decided by a registrar at a court hearing.

If a creditor wants to oppose a bankrupt’s discharge, they must serve notice to the trustee, the bankrupt, the court, and the government. The notice the creditor serves must list out reasons for their opposition. At this point, the creditor would have to appear at the court hearing to prove their facts such as fraud, gambling, speculation, etc. The bankrupt individual is entitled to respond to the items raised. From this point the court will decide on the type of discharge to be granted and whether conditions will be put in place outlining additional duties before the discharge is received. For example, the court may order that an extra amount is to be paid to the trustee for the benefit of the creditors as a condition to be met for the individual to receive an absolute discharge.

With respect to accepted consumer proposals, creditor oppositions do not apply.

To read more on creditor oppositions please see at this link.

In most cases, creditor oppositions do not happen as the bankruptcy laws are set up to provide a fresh start to the honest but unfortunate debtor. If you would like to discuss your financial situation and options, simply contact me today via e-mail me or call me at 310-PLAN.

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The Office of the Superintendent of Bankruptcy released their report on the 2010 second quarter statistics on personal bankruptcy and consumer proposal filings in Kitchener Waterloo. The results show a decrease in the number of filings for the first 6 months of 2010 compared to the same period in 2009. This is something we all expected, as 2009 saw a record increase in personal bankruptcy and consumer proposal filings due to the economic recession, especially in Kitchener Waterloo. Comparing the 2010 second quarter number to the same period in 2008, we see the number of filings in Kitchener Waterloo are up over 14% for the same period.

Based on the situations I see in my Kitchener office, residents in Kitchener Waterloo are still feeling the effects of 2009 and the burden of carrying too much debt. Most people have found employment but at reduced incomes and debts may have risen in 2009 due to the financial strain the recession had.

Looking more at the statistics, consumer proposal filings grew over 32% in the first 6 months over that in 2009, and further grew 65% higher than that in the same period in 2008. This is mostly due to the new bankruptcy rules that came into effect on September 18, 2009. These changes have increased the length of time and costs for some bankruptcy filings. For more information on this, please see this blog link.

The fact is that if someone is struggling with their debts and they need relief, the government has provided the option of a consumer proposal as an alternative to the last resort option of personal bankruptcy. For the people that file with me, about 60% have filed a personal bankruptcy with 40% filing a consumer proposal. To sit down and review your situation and options in a free no obligation meeting, please send me an e-mail or call me at 310-PLAN.

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As debts levels rise in Canada, people at retirement age are facing the challenge of retiring with debts. Retirement is seen as a rite of passage – we work hard our whole lives and are to be rewarded with an extended vacation in our senior years. Problems arise if one retires with debts and their monthly pension income has decreased, making it difficult to keep up with debt payments and living expenses.

In my Kitchener office, we see several seniors who are struggling financially and are looking for relief from the collections and overwhelming stress of carrying these debts. Seniors are very proud people and are upset about their situation, but they also realize that the stress of the situation is affecting them too much.

Sometimes we see the adult children coming into meetings with their parents who are having financial difficultly. This is a good sign for me as I see the children acting as a support network for the retired parent. It is hard for anyone to admit they are struggling financially, but when they do, those around them can help to seek financial advice with someone who will talk with them about the situation and alleviate some of the stress.

Personal bankruptcy is a last resort for anyone, including pension earners. But if someone cannot handle their debts and collections calls, then a personal bankruptcy will be available to give the debtor relief. Personal bankruptcy still has costs and is handled over a period of time not less than 9 months, so it is not simply walking away from debts. When someone files for personal bankruptcy, a note is put on their credit rating which affects their future ability to obtain new credit. I believe that seniors should be debt free and therefore not applying for new credit as they are on a fixed pension income.

Last week, Doug Hoyes, was interviewed by the Financial Post on the question “Do Senior Citizens Need to File for Bankruptcy?”. There any many cases in which a senior does not have to file for bankruptcy and several cases where bankruptcy may be the relief they need. The fact of the matter is, if a senior is struggling with their debts, they can talk to someone about the options available. If you are from the Kitchener Waterloo surrounding area and want to talk with me about a senior’s options to manage financial debt load, please call me at 310-PLAN or send me an e-mail.

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It is always important to remember the things that matter in life. Children and family tend to be number one on our list of importance. Some consider vehicles, homes, investments, trips, etc. as well, but ultimately these items are of lower importance. Sometimes it is easy to get caught up in the everyday grind of going to work and paying our bills, that we can lose focus on what matter most. Stress levels can rise and it seems we are just putting in time.

When I meet with people in my Kitchener office, I look at their financial situation and discuss the options to best deal with their debts. I always take into consideration the future and the values that matter most for each specific person before we come up with the best plan of action. With every plan of course, there are pros and cons. In order for the pros to outweigh the cons, personal values/objectives need to be met.

The people I meet with never planned to be sitting with a trustee in bankruptcy contemplating filing a consumer proposal or personal bankruptcy. The fact is however, that things happen and debts can become unmanageable sometimes to the point of consuming our lives. This is the time to re-focus and consider what matters most. Both a consumer proposal and a personal bankruptcy negatively impact your credit rating; however both options also allow an individual to look towards the future and start rebuilding their situation on a personal and financial level.

If you would like to sit down and have an honest, non-judgmental meeting to review your situation, then give me a call at 310-PLAN or send me an e-mail. My office is conveniently located between Kitchener and Waterloo at 607 King Street West.

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A wage garnishment by a creditor is stopped on the date that someone files a consumer proposal or personal bankruptcy. From my office in Kitchener, I e-file the consumer proposal or personal bankruptcy documents to the government right after they are signed. From that moment in time, there is a “Stay of Proceedings” that stops garnishment. This stay of proceedings is then faxed to the payroll department to advise them that the garnishment must stop.

Let’s talk about the process and timing to get to the point when the garnishment is stopped. The first thing we need to do is to arrange a free meeting in my Kitchener office to sit down and discuss the situation and options in detail. This meeting can take 30 minutes to 1 hour. From there, if a consumer proposal or personal bankruptcy is decided on, we need to complete an application with basic information. The application information is inputted into our computers and official government documents are printed – ones to be sent to the government and creditors. If there is a garnishment in place, we can complete the paperwork in a timely manner. The final step to make the procedure official is to come back into the office to sign all the paperwork.

Garnishments happen for many different reasons but the fact of the matter is that if someone is having part of their pay taken for an existing debt, it can really affect their ability to pay everyday living expenses. If you have a garnishment or are facing a garnishment and want to discuss your options with me in my Kitchener office, please call me at 310-PLAN or send me an e-mail.

Please note, that neither a personal bankruptcy nor a consumer proposal can stop or change family law support garnishments.

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As a licensed Trustee in Bankruptcy, I am a one of just over 1,000 Trustees in all of Canada. A Trustee in Bankruptcy has a unique role. We are like a referee in the bankruptcy process. We sit down with people who are experiencing financial hardship and assess their situation as well as review the options to deal with their debts. Then, if someone needs the protection and relief from their creditors, we administer the bankruptcy process. We are not lawyers, but rather licensed by the government. We are all required by law to uphold a minimum standard and we report to and are monitored by the government.

So how are the Trustees at our firm different?

At Hoyes Michalos and Associates Inc. we think that people make the difference. In our Kitchener Waterloo bankruptcy office, my associate Ian Martin or myself meet with every individual. Ian and I are both Chartered Accountants. We personally work with everyone who sees us in the Kitchener Waterloo to make the process is fully explained and understood.

I was sitting in the Kitchener Bankruptcy Court last week where I noted some major differences between trustee firms. There were 65 individuals being seen by the court for their discharge hearing that day. Not all personal bankruptcies have to appear before the court, only certain cases go to court to get their discharge. I was there to report to the court as the trustee on 5 individual bankruptcies. There was only one other trustee firm represented at the court, even though there were individuals at the court for at least 10 other trustee firms.

How does court work? The judge deals first with clients whose trustee is present. Therefore, the individuals there from Hoyes Michalos were dealt with first and out of the court within minutes. After that it got interesting. I decided to stay in court until all cases were heard. I sat in the court room watching what happened for the individuals whose trustee chose not to appear at court. Each case was heard one by one, with just the individual sitting before the court and having to speak alone – without the support of their trustee. There were some cases where there appears to be some miscommunication between the trustee and the individual and the trustee was not there to sort it out. This left the individual confused and not sure of what had just happened.

For most people, they have never been in a court house. Now if their bankruptcy has to go to court, they are left to go it alone. At Hoyes, Michalos and Associates Inc. we will appear at all discharge hearings because we see it as part of our role as trustees. Further, it is imperative that everyone understands want the process is so that there is no confusion. This is one major difference between us and the other trustee firms in the area.

For a free assessment of your situation, call me at 310-PLAN or send me an e-mail. The Kitchener Waterloo office is located in the middle of both cities at 607 King Street West in Kitchener – near the intersection of King and Victoria.

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In a personal bankruptcy, the amount someone has to pay to the bankruptcy trustee depends on how much take home pay the person and their family unit receives. When a person’s income is above the government limit, this is referred to as surplus income. 50% of the amount over this limit must be paid to the trustee. The overall concept is that the creditors are to be paid back a portion of the debt based on the net income received during the personal bankruptcy. This surplus income concept can be relatively complex as each family unit’s income varies on a case by case basis; especially considering the range of income levels in Kitchener Waterloo.

The government released the new 2010 limits or threshold yesterday, they are now:

Family Size – Limit
1 person -$1,884
2 people – $2,345
3 people – $2,883
4 people – $3,501
5 people – $3,971
6 people – $4,478
7 or more people – $4,986

The amount of surplus income received during the bankruptcy impacts if the bankruptcy will last 9 or 21 months (24 or 36 months if it’s a second time bankruptcy). The surplus is averaged and is reviewed prior to making this discharge decision.

If surplus income is expected to be a factor for someone in financial hardship, then a consumer proposal is an alternative to personal bankruptcy. A consumer proposal fixes a monthly amount that someone has to pay each month as compared to a personal bankruptcy were the amount changes each month based on income.

If you are from Kitchener-Waterloo area and want to better understand how a personal bankruptcy with surplus income or a consumer proposal would help deal with your debts, call me at 310-PLAN or send me an e-mail. We have free consultations in out Kitchener office to sit down and review your situation and gain an understanding of the pros and cons to the options in your situation.

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Statistics Canada released the bankruptcy and consumer proposal rates today and Kitchener Waterloo was hit harder than the Ontario and Canadian averages. 2009 was a year marked by the recession, the downturn in the automotive sector and financial crisis. These all contributed to individuals falling on tough financial times.

In 2009, 151,712 individuals filed a consumer proposal or bankruptcy in Canada. This was an increase of 31.0% over the 2008 number of 115,789. For Kitchener Waterloo, the increase in personal bankruptcies and consumer proposals was 39.2% which was higher than the Canadian increase of 31.0% and the Ontario increase of 32.7%. The numbers with respect to just personal bankruptcies in Kitchener are even more drastic – Kitchener bankruptcies saw a 45.9% increase as compared to Ontario of 28.5% and Canada 28.4%.

For my Kitchener office, we met with many people from Kitchener Waterloo and as such personally understand how hard this year was on them as they saw the impact of the recession on them and their families.

In the past, Kitchener Waterloo may have fared better due to our diverse economy with the high tech sector, universities and college, hospitals, insurance, and manufacturing sectors, but 2009 had a deeper impact that spread to all areas and sectors.

Kitchener Waterloo is rebounding, but individuals are still feeling the long lasting impacts that 2009 brought to their situation and with increased debt levels, individuals still will need the assistance to get a fresh start through a consumer proposal or bankruptcy.

If you would like a free review your situation to make a plan to deal with your debts, call our Kitchener office at 310-PLAN or send me an e-mail.

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