STUDENT LOANS

The new rules state that if the student loans are seven years old by the time someone files a consumer proposal or personal bankruptcy, then they are now dischargeable. That is, they will be eliminated after the consumer proposal or personal bankruptcy is completed. The age of the student loan begins when the student ceases to be a full or part-time student (referred to as the “end of study” date) and ends on the date that a consumer proposal or personal bankruptcy is filed. This is a change from the old rules which defined the dischargeable age of a student loan as 10 years.

To confirm the end of study date, here are the numbers:

Canada Student Loans: 1-888-815-4514

Ontario Student Loans: 1-807-343-7260

Further, if someone has completed a consumer proposal or a personal bankruptcy and the student loans are greater than 5 years old, a court application can be made to now have them discharged. After some court motions are made under this new law, there will likely be precedents set on the requirements to have the loans discharges. For this section of the law, we recommend that a lawyer be consulted.

REGISTERED RETIREMENT SAVINGS PLAN (RRSP)

In the past, some RRSP investments were cashed by the trustee in a personal bankruptcy. Pursuant to the new laws, all types of RRSPs are protected from the creditors in a bankruptcy, the only exception, is being those contributions made within the last 12 months prior to filing for personal bankruptcy.

If you would like to discuss these new rules or your situation, please call us at 519-747-0660 or e-mail us.

We reflected on her situation and the changes that she has made. Some details on Mary’s situation were:

• Mary is 32 years old
• Single mother of one child
• Rents an apartment in Kitchener
• Works full-time in a retail store and nets about $2,000 per month
• Receives $250 in child support (which was sporadic, but now is steady as it is being received through the Family Responsibility Office)
• She owed $34,000 in credit cards and a bank line of credit

When she first came to see me, the collectors were calling and the pressure was starting to get to her. We reviewed the options as she wanted to focus on dealing with the debts and obtain financial control again. Personal bankruptcy was the solution she selected.

The bankruptcy process required that she comply with some duties, which included:

1. Completing monthly income and expense statements
2. Attended two credit counseling sessions (one on one)
3. Providing income tax information
4. Paying a minimum contribution of $160 per month
5. If her income increased, then the amount she would have pay could increase as well (referred to surplus income)

If you are experiencing stress due to your debt load and want to discuss ways of dealing with it, e-mail me or call me at 310-PLAN and we can arrange a free consultation.

E-mail received:

“This is not a question but a thank you. The service and advice I received was way more than I expected, Any question was answered, and in a very timely manner. You handled every detail with utmost professionalism. From the moment we started to work together right up to now, my mind was at ease and I am so happy to have reached the end of one road and the start of another. I have recommended you to others I have encountered in my position and want to once again thank you for helping me get my life (and finances) back in shape.”

At Hoyes, Michalos & Associates Inc. we take pride in helping individuals obtain a fresh financial start. We understand that financial strain can have a significant impact on personal and family life. A consumer proposal or personal bankruptcy are some of the options that individuals have available to ease their stress and obtain a fresh start.

Our approach is to answer questions and provide facts so that individuals can make an informed decision for themselves. When they file a consumer proposal or personal bankruptcy with us, we attempt to provide assistance when they need it.

If you’re experiencing financial hardship and want to discuss your options in detail, e-mail us or call us at 310-PLAN. There is no cost in calling us or having a meeting to review the options and we are located at 607 King Street, Kitchener – between uptown Waterloo and downtown Kitchener.

1. Self-employment,
2. Working more than one job,
3. Receiving pension income,
4. Reassessments of prior years returns, and
5. Cashing out RSP’s

The options in dealing with tax debts are:

1. Pay them – in a lump sum or over a CRA payment plan;
2. Apply to relief under the CRA fairness provisions;
3. File a consumer proposal,
4. File for personal bankruptcy in Kitchener, or
5. Let Canada Revenue Agency (CRA) garnishee pay cheques, freeze bank accounts, place liens on assets, etc.

It is true that the Canada Revenue Agency has more collection powers than any other creditor.  Some of the difficulties individuals face when they have a tax debt is

a) they have various other debts and do not have the funds available to pay the tax debt and

b) CRA tends not to be too aggressive with the collection calls compared to other creditors.

One of the common misconceptions with respect to tax debts, is that they never go away.   This is not true.  A tax debt is a dischargeable debt in a bankruptcy or consumer proposal pursuant to the Federal law called the Bankruptcy and Insolvency Act.  Therefore, if someone does file for bankruptcy and has a tax debt, then that will be included and discharged as part of the bankruptcy.

Further into the radio show we discussed consumer proposals. In a consumer proposal, a CRA liability is a debt that does go away. 

The main difference is that the creditors vote on a consumer proposal and therefore if taxes are the majority creditor a consumer proposal acceptance will depend on whether Canada Revenue Agency wants to accept it.

There are proposed new rules around bankruptcy that will impact tax debts.  Doug Hoyes and Ted Michalos (founders of Hoyes, Michalos & Associates) were in Ottawa last month and presented the Senators with their opinions on these new bankruptcy laws. 

If you are finding yourself with a tax debt that you are not able to handle and want to discuss your options, e-mail or call me in Kitchener at (519) 747-0660 or 310-PLAN (7526).  As a Chartered Accountant and a Trustee, I will understand your situation and will be able to explain to you how to make a plan to deal with your tax debts.

The class was an hour and twenty minutes, during which we discussed:

• Today’s working families
• Financial constraints
• Budget/Cash-flow
• How to manage credit
• What can go wrong
• How financial troubles impact marriages
• How to resolve tough situations

We explored how family employment has changed over the years resulting in an increase in the number of relationships that have both spouses working. One of the reasons for this is the financial constraints we have in today’s society which has added great stress to couples and families.

When you factor in the increase in credit use, the average family is now carrying more balances on credit cards and loans then they make in a year’s income. Thus, costs of living have increased over the years and we are spending more and saving less.

During my talk, I had the class work on a family budget for a year’s period. I wanted them to assume they were a family of 4, bringing home $60,000 per year. It is interesting to see the amount of difficulty that the students had with this project. I have always believed that our education system has not properly prepared today’s youth with the fundamentals in personal financial management. There are many techniques and methods to budgeting and not all them work for each person/family.

We then discussed that one of the major leading causes of insolvency in Canada is marriage breakdown. When a couple dissolves a relationship, the costs of living increases significantly as there is now the requirement for two residences as well as support payments. The impact of financial strain on a relationship, like all other stresses should be dealt with as they arise. There are solutions to these financial strains.

If you are experiencing financial stresses or strains and they are impacting your relationship, call us at 310-PLAN or e-mail us to discuss the options you have.

We answered questions that people had concerning personal bankruptcy. Here is a summary of what we discussed:

What is personal Bankruptcy? Personal bankruptcy is a solution that allows individuals to have their debts discharged and will generally last a minimum of nine months. In order to obtain a discharge at the end of nine months, several duties must be fulfilled. These duties include completing monthly income and expense statements, attending two debt management counselling sessions, and making monthly payments.

With respect to vehicles and house, if there is a loan against either and selling the asset would result in a loss, then it will generally not be affected, but you would have to keep paying the secured loan. Regarding these assets, it is best to call us and discuss the situation so we can provide more information.

We speak with thousands of people from the Kitchener-Waterloo area and we understand that personal bankruptcy can be a logical solution for real people who have fallen under tough times. Personal bankruptcy could be the result of marriage break-up, illness, loss of jobs or reduction of hours.

Our entire Kitchener team looks forward to meeting with you to work out a plan to deal with your debts, so call us at 310-PLAN (310-7526, no area code required) or 519-747-0660 or e-mail us to arrange a free initial consultation. There is help available, so give us a call, and let’s get started.

I called a utility company with a simply request to cancel a service. Simple, in theory, but it took me 27 minutes (I’m not kidding) to perform this task. First I connected to an automated attendant which gave me four options, none of which was appropriate to canceling a service. OK – I chose the one I thought might be closest only to find myself back at the beginning again. Alright, let’s try something different. This time I was lucky enough to be connected to a live person. Of course, it was the wrong person (and I might add this person was very difficult to understand). He in turn transferred me to another person, who was also the wrong person. This person then transferred me to the billing department (there was nothing wrong with my account). This person fortunately was a lot easier to talk to, understood my frustration, but couldn’t help me. He transferred me again and finally (after being on hold in between each of these transfers) I was able to state my request and get the help I needed. I had the time to waste on this process this morning (which really isn’t the point), but under normal circumstances the 27 minutes I spent in performing this simple task would have been completely unacceptable.

At Hoyes, Michalos & Associates this will never, never happen. We pride ourselves on operating with the latest high tech systems, but we also believe in people. If you are calling us at 310-PLAN for information about our services or for information about your file you will always be able to speak directly to one of our courteous and well trained associates. During regular business hours your call will be answered by one of our receptionist who will direct your call to a professional who will assist you. We are constantly adding new associates to insure that each and every call is answered promptly.

Or you can go to our website at www.hoyes.com which is full of interesting information about our services and will allow you to send a Question or obtain an evaluation of your situation. Questions and evaluations are answered as promptly as possible. A few weeks ago I responded to a Question that had been emailed only 10 minutes prior to my call. The comments was “Wow, I just sent that email a few minutes ago”.

It is very comforting to know that at Hoyes, Michalos & Associates you will always be treated like a person by a person.

We all misunderstand things at times.  However, if something as important as the terms for  borrowing money are not perfectly clear it is certainly a good idea to have whoever was in charge of the lending explain.

I met with an elderly man in our Kitchener office.  This fellow is collecting a pension but still works part time as a security guard to make ends meet.  This job requires working at night and standing for 4 hours at a time.  He wanted to quit this job as he felt it was taking a toll on his already declining health but needed the income to keep up payments on debts.

Jane Merling

Here is a big part of his problem.  A few years ago he obtained a line of credit from his bank in the amount of $10,000.  A line of credit is similar to a loan but is not usually borrowed for a specific item.   A bank or lender will allow a certain amount of money to an individual to use to make purchases, home improvements, pay off other debt and so on.  The lender will provide cheques and the borrower uses these cheques as required .   The interest is considerably lower than credit cards so it makes sense to use this type of credit as an alternative.  It is very common for someone to use a line of credit for many different things and most people would only take as many dollars at any given time as they need and then pay down the balance before using it again.

Our fellow understood this process a bit differently.  When the line of credit in the amount of $10,000 was granted to him, he immediately issued a cheque for the whole amount and put it in his chequing account.  This meant that he was paying interest on $10,000 that was sitting in a bank account that paid no interest.    Over a period of time he started to think of this money as “his’ and used it to purchase a car, help his son with bills and “other things”.  In fact he told me the money just seemed to slip away .   He was also still using credit cards and he was making payments on the cards out of this account .  

When he came to see us he had a total of $22,000 in debt.  His pension income and income from the security guard job were not enough to keep up all the payments and cover his living expenses.  The additional stress of worrying about these debts did not help his health problems.

We reviewed his situation with him and he decided to get a Fresh Start by filing personal bankruptcy.  A few weeks later he called and said that he had also given up the security guard job and was starting to feel much better.

If you feel that you need  Fresh Start call us in Kitchener at 310-PLAN (310-7526, no area code required) or 519-747-0660 or e-mail us to arrange a free initial consultation.

OK not everyone is a fan of classical music or (like myself) didn’t even know who Joshua Bell was before reading this article.  However, just the fact that an obviously talented musician was playing the violin in a train station at 7:30 in the morning should have been enough to get the attention of more than 7 out of 1090 people.   A poll was done on the train about this event and while the comments varied most of them were along the lines of “no time”, “big meeting this morning”, “gotta get to work”, “I’m already late”,  “what violinist?”.

You may be wondering what any of this has to do with a blog about financial difficulties or money problems.  It was obvious from this experiment that less than 1% of the people involved felt relaxed enough that they could take a few moments out of their routine to enjoy something unusual.  It made me think of many of the people I meet with on a daily basis.   Financial difficulties and money problems are undoubtedly one of the big stressors of today and many people are stretched to the limit trying to keep up.   On numerous occasions I’ve had people tell me that their ability to make payments on their debts relies on working overtime, or having two jobs or that both spouses must be gainfully employed at all times.  They are often consumed with worry and concern about how they are going to hold everything together “if something happens”.  Unfortunately, all too often something does happen that can tip the balance and send them into a world of collection agents, legal battles and garnishees.

If you are feeling that you can’t possible relax for fear of losing the grip on your finances give us a call us at 310-PLAN (that’s 310-7526, no area code required, anywhere in Ontario), or complete our one minute on-line evaluation and one of our professionals will contact you to set up a no-charge initial consultation to help you make a better plan to deal with your debts.        

Which city in Ontario had the biggest increase in the number of consumer proposals filed in the first six months of 2007?

So, is this good news or bad news?

Some will say it’s bad news, because an increasing number of people in Kitchener are experiencing debt problems, and need a way to deal with their debts.

I prefer to think that this is good news. Many people still believe that the only solution to debt problems is personal bankruptcy; I’m glad that the word is getting out that there are other alternatives.

(I’ve done my part to get the word out; Ted Michalos and I appeared on Ask the Experts on 570 News in Kitchener back on March 3, and we discussed how consumer proposals can be used to deal with credit card debt. We also talked about consumer proposals when we returned again on April 2).

I think the increase in consumer proposals in Kitchener is also good news because most residents of Kitchener who file proposals have a job and are earning an income, because without an income it’s hard to make a proposal. An increase in proposals shows that debt levels are increasing in Kitchener, but it also shows that people in our area have jobs, which is good news.

It’s also good news that many Kitchener residents want to repay their debts, and when given the chance they are happy to make a deal with their creditors.

In a consumer proposal we negotiate a settlement with your creditors; in most cases you pay less than the full amount owing. Your debts are taken care of, and you only have one monthly payement.

Would you like to find a way to stop collection calls? Wouldn’t it be great to only have to worry about making one payment each month? Then a consumer proposal may be right for you. To find out if a consumer proposal is right for you, call our Kitchener office at 310-PLAN (310-7526, no area code required) or e-mail us to arrange a free initial consultation. There is help available, so give us a call, and let’s get started.