The Rebecca Martyn Bankruptcy Windsor Blog

Wage garnishments happen for one reason: the bill wasn’t paid so the creditor obtained court permission (with some exceptions) to take a portion of the debtors wages. This portion can be as high as 50%. The percentage that can be garnisheed is set according to the Ontario Wages Act.

There are only three ways to stop a wage garnishment:

1. the debtor has to work out a payment plan directly with the creditor;
2. file a consumer proposal; or
3. file bankruptcy.

A consumer proposal or bankruptcy stops all wage garnishments other than those dealing with alimony or support.

Upon filing the consumer proposal or bankruptcy, we will send a document known as a “stay of proceedings” to both the creditor, your employer, and in most cases the court, advising them that you have filed either a consumer proposal or bankruptcy and that the wage garnishment is to stop immediately.

If you have a wage garnishment and want to stop it, please call me in Windsor at 519-250-8060 or e-mail me today.

Bankruptcy is a legal process where the debtor (the person who owes the money) surrenders his or her assets. In exchange for this, their debt is discharged (released), subject to certain conditions. There are certain debts which are not released and these debts include, but are not limited to: student loans less than 10 years old, fines, alimony and support.

There are certain limits to which assets are surrendered in a bankruptcy in Windsor. The first, and sometimes most important consideration, is whether or not there is a lien on the assets. For example, if you have a house that is fully mortgaged, the bankruptcy will not seize the house. There are special considerations if you have a vehicle with a lien on it and we will be happy to speak with, or email you, about your vehicle. There are other exemptions allowing the bankrupt to keep the assets. These exemptions apply to furniture, clothing, and a vehicle (if there isn’t a lien).

During the course of the bankruptcy, there are duties to be performed such as submitting monthly income and expense statements, making payments, and attending 2 financial management sessions. These duties are discussed in greater detail in other blog entries.

If you want to learn more about bankruptcy and if it is the best option for you, call me in Windsor at 519-250-8060 or e-mail me to arrange a free initial consultation.

I received an email yesterday from someone who wanted to file a consumer proposal, but he wasn’t sure how much he should offer. I have extensive experience with consumer proposals (I filed one quarter of all consumer proposals filed in Windsor in 2007) and I use that experience to help you determine a plan that is best for you and has the best chance of success. There are several steps to determine what amount is best to offer.

The first thing we look at is your monthly budget. We review your income and household expenses such as rent, food, transportation and any other expenses you might have. If you only have $300 to offer each month, it is not logical to offer more unless you know there will be a reduction in expenses or increase in income.

The next thing we review is the assets you have. If you have assets that can be cashed in valuing more than you are offering to your creditors, it is not likely that your creditors will accept your consumer proposal.

We also have to review the cost of a bankruptcy. Although a consumer proposal is not a bankruptcy, we need to make sure you are offering more than creditors would receive in a bankruptcy. This includes a review of what the surplus income payment would be in a bankruptcy.

A review is done of all of your debts in order to review what the voting history has been of the creditors you have. Based on our experience, we know what creditors prefer as a payment plan. We also know of some local Windsor creditors who refuse to accept any consumer proposal and we will advise you if you owe to these creditors. For instance, creditor A may not accept anything less than 25% of their debt repaid and creditor B might not accept anything less than 30%.

To review your situation and discuss filing a consumer proposal, please call me in Windsor at 519-250-8060 or e-mail me to arrange a free initial consultation to review your options.

Credit Counselling Services of Southwestern Ontario is offering a number of monthly seminars dealing with a variety of topics such as budgeting, credit cards and home ownership.

For more information, or to register contact Credit Counselling Services of Southwestern Ontario at 519-258-2030 or via email at info@ccswindsor.com

Financial Management Skills — March 11 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

Credit Cards and You - April  8, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

Dealing with Debt/My Options - May 13, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

Finances and Divorce - June 10, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

Kids and Money - July 8, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

Why Save for Retirement - August 12, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

Home Ownership - September 9, 2008

12:00 - 1:00pm  $20.00 with lunch: 6-8 p.m. $20.00

Christmas and Money - October 12, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

The Cost of Banking - November 11, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

Seven Financial Blind Spots - December 9, 2008

12:00 - 1:00pm  $20.00 with lunch; 6-8 p.m. $20.00

A Consumer Proposal is a legal proceeding by which you offer to pay your debt, or a portion of your debt, with the assistance of a licensed trustee. Anyone, including someone who is bankrupt, can file a consumer proposal providing their debts are less than $75,000 (not including the mortgage on your home). A consumer proposal can be filed with your spouse and the debt limit increases to $150,000

A consumer proposal deals with unsecured debt only. This debt will include items such as credit cards, personal loans, income tax and overdraft. It does not include secured debt such as mortgage, car loans or finance loans. The exception to this is if you give up the security. The balance owing is now an unsecured debt and is included in the consumer proposal. For instance, you have a car loan in the amount of $30,000. You surrender your car upon filing the proposal and the lender sells it for $20,000. The balance of the loan in the amount of $10,000 is included in the consumer proposal.

The consumer proposal is offered to all of the unsecured creditors and they have 45 days from the filing to vote on the consumer proposal. If the majority of unsecured creditors accept the consumer proposal it is binding on all of the unsecured creditors, even if the creditor voted no. When the consumer proposal is filed, interest is frozen on the debt. Creditors are prevented from taking legal action against you for debt and they can’t garnishee your wages (other than support and alimony). The consumer proposal can be structured with a variety of payment terms such as:

• a monthly payment per month for a number of months
• a monthly payment plus proceeds of sale from an asset
• staggered monthly payments geared to income – such as a higher monthly payment during Sept – June and a lower payment in the months of July and August.

Once a consumer proposal has been filed and accepted the debtor has the ability to pay off the consumer proposal faster. If a negative event occurs and the debtor can no longer afford the proposal, he or she can file an amendment to the proposal explaining the situation and the new proposed payment plan. The creditors then recast their votes.

To review your situation and discuss filing a consumer proposal, please call me in Windsor at 519-250-8060 or email me to arrange a free initial consultation.

When faced with numerous loan payments and credit cards bills each month, the first step for many people is to find out if they can obtain a debt consolidation loan. The debtor (the person who owes the money) will go to his or her bank and apply for the loan. If the debtor qualifies, the bank will then give a loan and pay off the other credit card and loans. Once you receive the loan from your bank, if the bank doesn’t cut up your credit cards, you need to make sure you do it yourself. If you currently don’t have a source of income, it is unlikely you will be able to obtain a loan.

The main advantage of a debt consolidation loan is that it takes all of your debt and combines it into one monthly payment. Your new loan payment should be less than the minimum payments you were paying on your credit cards and loans. If it is not a lower monthly payment, this might not be the best option for you.

Another factor to consider will be the interest rate you will be charged. Most credit cards have interest rates between 10% and as high as 28% per year. The interest rate charged on the loan should be lower than you are paying now.

You will also need to consider any other terms the bank has. Do they want to put a lien on your car, or do they need a cosignor? If they do, you need to consider the risk to your car and the cosignor if you are unable to pay the loan in the future.

If you are able to make a monthly payment, but you don’t qualify for a debt consolidation loan, a consumer proposal might be a better option for you. You can call me in Windsor at 519-250-8060 or e-mail me to discuss this option in more detail.

I received an email from someone yesterday asking if he could file a consumer proposal with us.  He had filed a consumer proposal in 2005 year with another administrator and over the next 12 months, he missed 3 months of payments because of a reduction in income.   As he knew, once you miss 3 monthly payments under the terms of the proposal, it is deemed annulled, meaning it has now ended.  

He now has a steady source of income and wanted to file another consumer proposal.  I had to let him know that it isn’t easy as that.  In order to file another consumer proposal he first needs to obtain court approval.  This can be done with the assistance of a lawyer who specializes in insolvency.  I told him to contact us once he has the court order and we will be happy to help him file another consumer proposal.

If you need a plan to deal with your financial problems, call us at 310-PLAN or email your question.

A short time ago I met with Walter and Ruth in Windsor (not their real names).  They are both in their late 60’s.  Walter had worked for many years in a skilled trade and Ruth was a home maker.  Walter retired 3 years ago and his sources of income are his company pension and CPP.  He is bringing home around two thirds of what he was bringing home when he was working.  He had considered returning to work, but is concerned about what affect this might have on his health.  They are now starting to get behind on their credit card bill, collection agencies are calling and they called Hoyes Michalos to find out what their options are.

It is easy to understand their financial difficulty.  Their income has been reduced; however their living expenses are still the same as what they were when Walter was working.  For the past 3 years they have tried really hard to stay current on their credit card bills, but now the stress of the situation is too overwhelming.

They came in to see me and together we reviewed their budget and their debts.  When they came in to see me their credit cards totaled $30,000.  We discussed the advantages and disadvantages of a consumer proposal and bankruptcy.  They decided to file a consumer proposal in the amount of $15,000.  It has recently been accepted by their creditors making Ruth and Walter very happy.  Their stress has already decreased and they can now look forward to a happy retirement. 

If your income has been reduced and you need a plan with deal with your debts, call us at 310-PLAN or email your question.

As a result of the bankruptcies of some high profile companies in Windsor and Essex County, there has been a lot of discussion in local newspapers about outstanding employee wages in a bankruptcy. As a Windsor trustee, I have read letters to the editor and personal blogs about this matter.

A typical situation is this: Employee A has been working for company X for several years. He is paid every 2 weeks. 2 days before pay day he goes to work as usual and there is a note on the door that company X has filed for bankruptcy and the company is closed. A representative from the trustee firm handling the bankruptcy notifies him that his wages owing will not be paid in 2 days and gives him some paperwork to complete. Employee A wants to know why. He worked an honest 2 weeks work and he expects to be paid for the work he did. Employee A is told is that the trustee is going to sell the assets and distribute the money. He is also told that Company X owes the bank money and they have a lien on all of the equipment. Company X also owes the government money for source deductions (the income tax, CPP and EI deducted from the employees).

Under the current legislation that governs bankruptcy, known as the Bankruptcy and Insolvency Act, the scheme of distribution of money (up to employee wages) is as follows when the assets of Company X are sold.

Canada Revenue Agency for the employee portion of source deductions;
The bank which holds a lien on the equipment;
Fees and expenses of the trustee and legal costs;
The levy payable to the Superintendent of Bankruptcy each time a dividend is pay to unsecured creditors;
Wages to the extent of $2,000 per employee earned in the previous 6 months.

To simplify the matter, employee A will only be entitled to up to $2,000 providing there is enough money to pay CRA for source deductions, the bank, the trustee and the lawyer. Unfortunately, a lot of the time there isn’t any money left over after the bank is paid.

There is new legislation currently in Parliament to move up the priority of employee wages, but this has not yet passed.

Losing your job under conditions like this is stressful when you have your own bills to pay. Call us at 310-PLAN to discuss your situation.

Bankruptcies are a matter of public record, however the information is not generally published anywhere.  The exceptions are that certain types of bankruptcies with substantial assets are published in a local newspaper.  In Windsor, most Trustees (we are not among them) send a copy of the bankruptcy papers to “Windsor Credit Bureau” to have published in monthly brochure that is available to any company who subscribes to it. 

If you think you know which trustee they filed with, simply call the trustee to confirm.  You can also call the local office of the Superintendent of Bankruptcy.  Their phone number can be found at in the blue pages of the phone book of online at http://strategis.ic.gc.ca/epic/site/bsf-osb.nsf/en/br01003e.html.  You can also search online at https://strategis.ic.gc.ca/sc_mrksv/bankruptcy/bankruptcySearch/engdoc/.