Bankruptcy Kitchener Blog

I received a call from a woman yesterday from the Kitchener-Waterloo area.  She was calling in about her situation and wanted to work out a plan for the future that would  help her deal with her debt load.

The caller was divorced and her children were grown and was therefore, living on her own.  Due to a medical issue, she had been off work for a period of time, which resulted in use of credit cards to maintain living expenses.  After returning to work, she consolidated her debts but advised me that she could not keep up on these living expenses and the loan payment, so her credit cards were used again to fund the short-fall each month.  Now with interest and monthly minimum payments, she cannot sustain payments to her creditors.  A summary of her situation is as follows:
 
Debts:
- $18,000 in credit cards,
- $16,000 in a bank loan for a prior consolidation of her debts, and
- $900 in bank account over draft.

Assets:
- a 1996 Chevrolet Cavalier, value at $2,000,
- Locked-in retirement account (LIRA) of $28,000 from a previous employer, and
- Normal household & personal items.

Income and Expenses:
- take home pay of $1,900/month,
- $150 of medical expenses per month, and
- rent, food, utilities, vehicle gas & insurance, etc taking the better part of $1,500/month

After briefly discussing her situation over the phone, we have booked a free consultation for her to come to our office in Kitchener at 204-607 King Street (by Zeke’s restaurant) and discuss her options.  At this meeting, we will review her financial situation, immediate concerns in more detail and discuss various items such as garnishment, co-signers, credit rating, legal action, payments required, windfalls, tax returns, etc.  Some of these may or may not pertain to her personally. 

We will also discuss the various ways to deal with her debts, including the formal options of a debt management plan, a consumer proposal, and a personal bankruptcy.
The impact of each option is reviewed through an analysis of the pros and cons to each, based on her situation.  At that point, we would need to look at the future, as a decision will be made based on the idea of obtaining a fresh start.  Therefore, by combining the solution to the debts with an overview of her future, we will arrive at a plan suitable for her.

If you are experiencing some form of financial hardship and want arrange a free consultation to review your situation and develop a plan for your future, email me or call me at 310-PLAN.

No Comments »

I was meeting with a couple today in Kitchener and they decided that they are going to file for personal bankruptcy to deal with their overwhelming debts.  They are in their mid-thirties and have two young children. The personal bankruptcy will clear their debts, but only after they complete certain duties or conditions, including two credit counselling sessions, which will assist with their situation today and in the future.
 
The credit counselling sessions are required in all personal bankruptcy and consumer proposal filings. The sessions are conducted by a qualified credit counsellor and are generally done on a one on one basis, or in the case of a couple, attended together. 

The credit counselling sessions must be completed within a certain period of time – the first session in between 10 and 60 days after filing, and the second session within 30 days after the first session, but before the 210-day mark, or 7 months after the filing.

The sessions are designed to help people understand how they got into their financial trouble and teach them how to make a plan for the future.  In the first session, money management, spending and shopping habits, warning signs of financial difficulties, and obtaining and using credit are all discussed.  The second session is more personalized, looking at the  causes of the person’s financial situation and reviewing information from the first session.  If necessary, the counsellor will also provide more information or resources for future help.

The couple I met with today will find the credit counselling sessions valuable because they will help them understand their situation better and provide insight on how to handle future situations.  The couple has two children and their next goal is to own a house.  By filing for bankruptcy, they get a financial fresh start and the credit counselling sessions can help them work on budgeting and a plan to save for a house.

If you are experiencing financial difficulty and need some additional guidance, call me at  310-PLAN for a free consultation, or e-mail me any questions you might have. Let me help you get your financial fresh start.

No Comments »

Today Ted Michalos and I appeared on Ask the Experts on 570 News in Kitchener. We spent the hour discussing credit cards, and how to deal with credit card debt. I added that they can help you earn rewards and air miles, and you get a nice summary of your spending at the end of each month.

Ted started the show by explaining that credit cards are a convenient way to make purchases so you don’t have to carry a lot of cash.

Douglas Hoyes on 570 News

Unfortunately, there is a very big negative with credit cards: the high interest rate. That’s why we made the following point two or three times on today’s show:Credit cards should be a substitute for cash, not a substitute for borrowing.

In other words, if you have the cash to make a purchase, using credit cards is fine; just be sure to pay off your balance at the end of the month. If you don’t have the cash, try to get a loan at the bank, or a line of credit, to keep the interest you are paying as low as possible.

Beware of the “low introductory rate” offers that get you to transfer your balances on other cards, only to increase your interest rate six months later.

Ted then talked about one of his “pet peeves”: people who have two many credit cards.We both believe that having one or two credit cards is fine, but if you have more than two credit cards, you run the risk of spending too much, and even worse, carrying a balance and paying a very high interest rate.

Ted Michalos on 570 News

When you consider that there are over 50 million credit cards in use in Canada today, that’s a lot of credit cards! Even worse, 32% of Canadian carry a balance on their credit cards, so that’s a lot of interest being paid each month.

What’s the solution?

If you have more credit card debt than you can handle, take action now.

Start by working out a monthly budget to determine how much you can afford to pay on your debts each month. By cutting some expenses you may be able to pay your credit cards off yourself. If you need some help, the credit counsellors at Catholic Family Counselling Centre in Kitchener can help you work out a budget, and even negotiate with your credit cards on your behalf.

On today’s show we discussed consumer proposals, a great alternative to bankruptcy where professionals such as Ted and I work out a plan where you repay a portion of what you owe, based on your income.

Of course if your credit card debt is overwhelming, a personal bankruptcy may be necessary to stop the collection calls and help you get your life back.

As we said on the show, if you have too much credit card debt, give our office a call in Kitchener at 519-747-0660 or 310-PLAN (310-7526, no area code required) or E-mail us to arrange a free initial consultation.

5 Comments »

When I meet with someone who is self-employed, their biggest concern is usually tax debt. Income tax debt can become too large to manage for some self-employed individuals.  Let me give you an example of a recent consultation I had with a gentleman from the Kitchener-Waterloo area, and the steps we took to find him the best solution for his situation.

Income:  Bob (not his real name for privacy reasons) was a self-employed construction worker who worked in the roofing business.  Bob worked when the weather permitted and was only paid when he worked.  During peak times, he was able to make what he thought was good money. 

Expenses/Debts:  Bob was previously married and as a result of the divorce, is paying $300 per month in support for one child.  Bob rents his home and has an old pick-up truck worth about $2,000.  He has not filed his taxes for 4 years, but after consulting with an accountant, it is estimated he will owe $34,000 in income taxes.  Bob also has $18,000 in credit card debt, on cards which he uses in place of income when he is not working due to the winter slow times.  With all of his debts combined, he is now at a point at which he cannot pay them in normal monthly payments. He called Hoyes, Michalos & Associates in Kitchener at 310-PLAN to seek some advice and get some help with his financial situation. 

Plan:  I sat down with Bob and reviewed his situation with him.  He was upset about his debts and not sure what he should do to go forward.  We discussed the options available to him and he decided that filing personal bankruptcy was the best solution for him to get a fresh financial start.  However, before he filed personal bankruptcy, he needed to file all of his outstanding tax returns.  In doing so, Bob realized just how unstable his income was and that he needed to obtain steady annual income.

Result:  After filing his returns, Bob returned to our office a month later to file for the bankruptcy. He is now working a steady job and earns $2,000 a month after taxes. He is well on his way to his fresh financial start.

If you are self-employed and are behind in your taxes, or if you have questions about bankruptcy, call me at 310-PLAN for a free consultation. You can also email me any questions you may have about income taxes or bankruptcy. Your financial future may seem bleak now, but with the right plan you could be living your fresh start sooner than you think.

No Comments »

Today I met with Shelia (not her real name for privacy reasons). She wanted to file for personal bankruptcy.  She was a 24 year-old single mother and had $29,000 in unsecured debts.  She found herself in financial hardship for several reasons and as a result, filed a personal bankruptcy to obtain a financial fresh start.  Her situation was as follows:
 

She had a factory job where she was working for $18 per hour.  She was managing well with her financial situation until she was in an accident which resulted in her losing her job and having a three month period of unemployment.  During this time, she was to receive child support, but payments didn`t always arrive on time and couldn’t be relied on.  As a single mother, she needed to ensure she could feed and provide housing for her 5 year-old son and herself.  The only income she could count on was the Child Tax Benefit. As there was barely enough funds for the basic needs, her car was returned to the bank to avoid unnecessary costs.  She just recently found new employment, but the pay is significantly lower than before, at $9.50 per hour. 
 

The debts that stacked up during this period of unemployment were in credit cards, and phone, dental, and cable bills, to name a few.   Several of the debts were in collections and there were numerous collection calls being received each day.  The stress from her financial situation was affecting her life and she was worried about her  future. That is when she called Hoyes, Michalos & Associates Inc. to help her develop a plan for her debts and future goals.  After meeting with us and making a plan, she has a positive outlook on her future and her ability to rebuild her credit again after bankruptcy.
 

If you are experiencing a similar situation and want to start to develop a plan for your future, call me at 310-PLAN for a free consultation. You can also email me any questions you may have.  If you want a healthy financial future, contact me so we can make it a reality.

No Comments »

I’ve met with a number of seniors in Kitchener recently that find they are struggling with high debt loads. Debts may have carried over from a time they were working, but reduced income may make it almost impossible to keep up. In some cases, insufficient income tax is deducted from a pension which adds to the financial stress when a tax bill arrives.

The possibility of health care requirements that may not be covered by benefit plans just increases the problem. Without resources such as equity in a home or personal investments, some seniors are finding that they simply don’t have enough income to go around. High interest rates, phone calls from creditors and embarrassment at not being able to adequately provide for themselves have left some seniors overwhelmed at a time in their lives when they should be enjoying retirement.

If you are a senior experiencing any of these problems contact us in Kitchener at 519-747-0660 or at 310-PLAN (no area code required) for a free consultation with one of our professionals. Offering a proposal to creditors is one example of how we could help you to develop a plan to get your financial life back on track.

No Comments »

For the second straight year, the number of personal bankruptcy and consumer proposal filings in Kitchener decreased in 2006. In 2006 1,177 individuals in Kitchener and surrounding area filed personal bankruptcy, and 316 people filed a consumer proposal. That’s 1,493 people who filed, as compared to 1,529 people in 2005, a decline of 2.4%.

It appears that this decline is caused primarily by a strong labour market in Kitchener. The unemployment rate declined to 5.2%, and employment continued to increase (although not as fast as in 2005).

While a declining bankruptcy rate is good news, let’s not forget that Canadians are carrying a record level of debt. Household debt increased 9.8% in the first 10 months of 2006, and in September 2006 the ratio of debt to personal disposable income reached a record 122%. This means that for every $4 the average Canadian earns in a year, they now have $5 in debt.

If you live in Kitchener and are carrying a lot of debt, you may not be able to financially survive even a temporary job loss or reduction in your income.

If you have too much debt, give my office a call in Kitchener at 519-747-0660 or 310-PLAN, and let’s get to work on making a plan to deal with your debts.

No Comments »

This Saturday Ted Michalos and I will be guests on Ask the Experts on 570 News, an hour long live call in show.  We will be talking about consumer proposals, an alternative to filing bankruptcy in Kitchener.

If you are near the radio between noon and 1:00 pm on Saturday call in with your questions.  If not, feel free to give our office a call during the week at 310-PLAN, or 519-747-0660 and we will help you decide whether or not a consumer proposal is the right option for you.

No Comments »

As one of the bankruptcy trustees that meets with people in our Kitchener bankruptcy office, I am often asked: “what should I bring to my first meeting with the trustee”? Some people are worried that we will ask them to bring every scrap of paper in their house, and they are worried that they will not be able to provide all of the information we need. My response is to tell them not to worry, we can perform an initial assessment of your situation with very little paperwork up-front, although the more information you can provide, the easier it will be for us to help you make a plan to deal with your debts.

There are three significant items I need to understand about your situation:

First, I want to understand who you owe money to (your creditors). You can make a list of all of your credit cards, bank loans, and other debts, or you can bring in your most recent statements.

Second, I need to know what you and your spouse earn each month (your take home pay), and what it costs you to live (rent, food, and all other living expenses). This helps us determine what type of plan will work best for you, including perhaps a consumer proposal.

Third, I will ask what assets you own, such as a house, car, or RRSP. If you file for personal bankruptcy in Kitchener you may lose some or all of your assets, so it’s important that we review them before you make any decisions.

If you don’t have all necessary information when we first meet, we will review your situation based on what you have, and we can gather the remaining information later. We will work on the paperwork; initially, reviewing your situation and working out a plan is most important, so please e-mail us a question or give us a call in Kitchener at 519-747-0660, or 310-PLAN, and let’s get started.

No Comments »

A consumer proposal is a deal that you make with your creditors as a way to avoid filing personal bankruptcy. A consumer proposal is a bankruptcy alternative.

In a typical consumer proposal filed in Kitchener you make a monthly payment, and that payment is distributed to each of your creditors (your credit cards, bank loans, and so on). This one monthly payment is perhaps the biggest advantage of a proposal, because now you know exactly what you are required to pay each month, and your creditors stop calling you, and they no longer can sue you or garnishee your wages.

The amount you pay each month in a proposal is based on your monthly income at the time you file the consumer proposal. Your family size and what assets you own are also factors in determining the amount you will pay each month (the more you own, the more you will be required to pay each month).

When is a consumer proposal a better option than a bankruptcy?

First, if you hope that your income will increase in the future, a consumer proposal is a great way to fix the amount you are required to pay, now, so that as your income increases your consumer proposal payment remains the same. In a bankruptcy, each month you report your income to the trustee, and as your income increases, your payment increases.

Second, in a bankruptcy you may lose your home, RRSP, or other assets, depending on their value. In a consumer proposal you can keep your assets, which makes proposals a great bankruptcy alternative.

Finally, many people I have met with in Kitchener over the years simply don’t want to go bankrupt. They know they owe the money, and simply want a solution to help them deal with their debts.

Each situation is different, so I recommend that you contact the trustee firm that has filed more consumer proposals in the last five years in Kitchener than any other firm: Hoyes Michalos & Associates. We can be reached in Kitchener at 519-747-0660, or e-mail your question, and let’s get started.

No Comments »