I met with someone the other day, let’s call him Bob (that’s not really his name), and he told me that he met with another Trustee and was told he can’t file for bankruptcy.

First off, I hope that Bob is just paraphrasing and that is not what he was told. The Superintendent of Bankruptcy outlines the things a trustee is supposed to talk to you about when you meet with him or her. We as Trustee’s cannot tell you what you should or should not do, that is your decision. If you feel you are being urged to do something you don’t want to do, then end the meeting and call someone else.

When you meet with me in my Windsor office I review your entire situation, including debts, assets, income and expenses. I explain the benefits and costs of each option available including bankruptcy and consumer proposal. In Bob’s case, a bankruptcy is an option, just not a very practical one.

Bob is going through a divorce and expects to bring home $3,500 a month after paying support. I explained the options available to him and that based on his surplus income, his bankruptcy would cost him around $787 per month for 21 months (I explained that would increase or decrease each month based on what he actually brought home that month). Bob told me he would have a hard time paying that each month since he has rent, a car payment and other living expenses. A better for him might be a consumer proposal. He could offer $375 per month for 48 months and based on his debts, it is likely his creditors will agree to it. Bob filed his consumer proposal last week.

The conditions to file bankruptcy are rather straightforward. You must:
- owe at least $1,000
- be unable or have stopped paying the debts
- have debts greater than assets

As a result, most of the people I meet with qualify for bankruptcy, but is only the right option for some of them.

Bob did the right thing. He wasn’t happy with the advice he received and called me at 310-PLAN.

If you have been ready my blog and following my money saving advice the answer is yes, because this is what you have been doing all year long.

You know that last year you spent $200 buying presents. You are paid every 2 weeks and you have been putting $10 in a savings account every time you are paid. You now have enough money saved to buy presents. If I just described you then you can stop reading this post now.

For the rest of you, what are your plans? What do you do if you haven’t been able to save up money? If your first thought is to make purchases on your credit cards, STOP. You have to consider how much you will really be spending over time. The $200 in presents may end up costing you a total of $350 when you add on interest.

Instead look for other ways to save money this holiday season.

If you are buying for children consider a toy swap with a friend or neighbour. Chances are you both have used toys that are no longer played with.

You can also check out websites such as Kijiji. I found a great gently used train set a few months ago for a small amount of money. None of the children that play with it care that it was once belonged to someone else.

I often scratch my head when I hear someone say “my friend is so hard to buy for, she has everything”. Then why exactly are you buying her something she doesn’t want or need? Instead think of another way to exchange gifts. Maybe she doesn’t bake and you do. Why not make her a batch of your world famous chocolate chip cookies? I remember always having a hard time buying for a relative of mine. Every present she received was always to be saved for a “special occasion”. Instead one year we put together a basket of her favourite canned goods. It was the first time I say her use a present she was given. When she moved out of her home, we ended up donating many “special occasion” items to the local charity.

If you have a large family, consider doing a gift exchange and setting price limits for everyone to follow.

What about gift cards? We have all read about gift cards that get put away and forgotten about or worse, the company closes down. Did you know that many grocery stores have gift cards? Everyone goes grocery shopping. What can be better than saving a few dollars off your grocery bill by using a gift card someone gave you? Since this is something that is done every week or two, there is less chance it will become worthless.

The list of ways to save money can go on and on. If you have a tip to share, please post it.

But the most important tip of all is to have a safe and happy holiday.

The length of time in bankruptcy depends on your income and if you have filed for bankruptcy before.

To best explain this, let me tell you about 4 people who recently filed for bankruptcy. They are all single and have $30,000 in credit card debt.

Debbie works part time and earns $1,800 per month. Since she is below the surplus income guidelines, she will be in bankruptcy for 9 months.

John also earns $1,800 per month. However, he previously filed bankruptcy in 1997. Because he has filed for bankruptcy before, he will be in bankruptcy for 24 months.

Henry brings home $2,500. He is a first time bankrupt. Since he has surplus income, his bankruptcy will last 21 months.

Cindy brings home $2,200. She filed bankruptcy in 2001 and as a result her bankruptcy will last 36 months.

Is it as simple as that?

No.

If you don’t do your duties, your discharged is opposed by your Trustee. That means you have to go to court to get your discharge.

Your creditors can also object to you getting out of bankruptcy. This also means you have to go to court to get your discharge.

If your bankruptcy was caused by gambling, you will have to go to court to get discharged. You will also have to go to court if you have high tax debts.

You have to report your income to the trustee each month that you are in bankruptcy. You may have had low income to start, but if your income increases, you may find your length of time in bankruptcy increases.

As you can see, the length of time in bankruptcy can vary and can be confusing. It’s best to meet with me in my Windsor office to determine how long your bankruptcy may last.

Before I answer your questions, let me first discuss the similarities between a bankruptcy and consumer proposal.

1. They both give you a fresh start from your debts;

2. They are both administered by a licenced trustee;

3. They both give you court protection from your creditors.

Now let me discuss the differences.

1. In a bankruptcy the more you earn, the more you pay. The payment in a consumer proposal is fixed;

2. In a bankruptcy you lose certain assets such as tax refunds, certain RRSP’s, RESP’s and equity in house and car. You control your assets in a consumer proposal;

3. You have monthly reporting to your trustee in a bankruptcy. You don’t in a consumer proposal.

Every situation is different. For most people who are low income and don’t have assets, a bankruptcy is a better option.

If your income is high, or you have a lot of assets, a bankruptcy would be expensive each month. For most people, they prefer to have a smaller monthly payment in a consumer proposal.

Give me a call at 519-250-8060 or 310-PLAN and we can review which option may be better for you.

I received this email and I thought it was a good question and I would post my answer here.

The first thing you should look for is their licence. Most trustee’s will have this hanging on their wall.

You can also check the database with the Office of the Superintendent of Bankruptcy. All trustee’s are listed here.

Only licenced trustee’s can administer your bankruptcy or consumer proposal.

If the person you are meeting with is not on the list they are not a trustee. You may want to think about meeting with someone else before you pay any money or sign any forms.

Times are tough for you.

Maybe your hours were cut back at work, and you are having difficulty paying your credit cards. Things were fine when you were working full time.

Maybe your relationship recently broke down. Things were fine when there were two incomes in the household. Now that it is just your income, you find there isn’t enough money to go around.

Whatever the reason, the creditor calls are starting. The calls are stressful and you don’t know where to turn. The first thing to know is that you are not alone. There are options to help you with your debt problems. What you need is a fresh start.

What is a fresh start?

I refer to a fresh start as a way to be free from your debt. It can come in various forms. For some people a fresh start is a bank consolidation loan.

For others credit counselling may be the way to their fresh start.

It could also be a consumer proposal or bankruptcy.

Everyone will have their own path to their own fresh start. It’s important to talk with someone about which option is best to help you. Give me a call at 519-250-8060 or 310-PLAN and I would be happy to meet with you to discuss the road to your fresh start.

We have all heard the radio ads, seen the TV commercials or billboards. A company is claiming that they can reduce your debt up to 70% and that the government has announced a new program to help you eliminate your debt.

Who are these companies and what do they do? These companies are debt consultants and they claim that they can reduce your debt. I am reminded of a couple of TV commercials I saw last night. The commercial was for a weight loss product. It showed many before and after shots of someone who lost 50 pounds., the next person lost 100 pounds, the next one 200 pounds, then in teeny tiny letters on the bottom of the screen it states that these results are not typical. While watching a debt consultant’s ad it stated they can reduce you debt up to 70% and get you debt free in 2-3 years. Then at the bottom in teeny tiny letters it states that they cannot guarantee your debts will be lowered or you will be debt free within a certain period of time.

I don’t object to companies helping you manage your debt. I just have a problem with how some companies do it. You saw the ad and called the company that says they can help you reduce your debt. Maybe you just did paperwork with them on the phone, or maybe you went to someone’s home (and why are you not meeting at their office?). The cost of this meeting is $1,500.00. After spending a few hours with you they tell you your best option is to file a consumer proposal. They then give you the name of a Trustee they know and they offer to forward your information. Do you realize you could call us for free and the meeting is free, you don’t need a referral from someone else? You certainly don’t need to spend $1,500 to get my name.

Think about it this way. You are new to the area and you are looking for a hairdresser. You ask your neighbour where she gets her hair done. She tells you. Did she charge you money for this information? No.

Do you know what the best way to reduce your debt is? It’s a consumer proposal. A consumer proposal is a legally binding, negotiated payment plan made between you and your creditors. It’s not a new government program. It has been around for 20 + years and can only been administered by someone licenced by the federal government, such as Hoyes Michalos. Debt consultants are not licenced and cannot file consumer proposals.

My point is to do your homework. As the saying goes, if it sounds too good to be true, it probably is.

Unlike an unsecured debt, a secured debt is a debt that is attached to something.

The biggest secured debt in most people’s lives is the mortgage which financed the purchase of their house. The loan is secured by a mortgage on the house itself.

The next biggest secured debt for most people is their car loan.

If you purchased furniture at the local furniture store and you make your monthly payments directly to that furniture store, it is probably a secured debt.

If you purchased furniture from a national chain and are making your payments on their credit card for the stuff, it is probably an unsecured debt.

If you fall behind on the agreed payments on your loan, the creditor has the right to seize the security for the debt (the house or car) and sell it to recover his money. If the creditor gets more from the sale than the debtor still owes, he must give the excess to the debtor. If the creditor gets less from the sale, the debtor will still owe the difference.

If you are not sure if your debt is secured or not, look at the original loan agreement. If the stuff you purchased is listed on the agreement, assume it is a secured debt.

Secured debts are not released in a bankruptcy. If you go bankrupt, your mortgage doesn’t go away. If you want to keep your house, you must continue to make your mortgage payments. If you want to keep your car, you need to make the car payments.

If someone has decided to file a bankruptcy or consumer proposal I insist that they bank with a financial institution they don’t owe money to and I explain why. I even give them a bright yellow sheet explaining how to do that and why it is important. However, every so often someone comes back to see and I find out they didn’t take my advice and move to a new bank.

Let me make this clear, if you bank at a bank where you owe money, there is a really good chance that they will freeze your bank account when they get the bankruptcy or consumer proposal papers. Your bank account is frozen and now your car payment and rent cheque will bounce.

Yes, I know you have been dealing with your bank a long time and they know you, but you have to consider what will happen if you don’t get a new bank account. They can take money out of your bank account if you are behind on your bill payments. Opps, that money was for your rent … sorry but the bank took the money to pay the visa bill, and yes they are allowed to do this. Now how do you pay your rent?

“But switching bank accounts is a lot of work”. I know it is, but you would rather have the bank freeze all of your money for days or weeks, or would you rather take an hour faxing your new bank account information to your employer, utility, insurance, car lender, etc.

“But my bank really likes me”. Then why did they turn you down for a loan?

“But all I have with them is a car loan and I am keeping my car”. Unfortunately, that doesn’t matter. Once your paperwork is entered into the bank’s computer, the freeze is automatic. They don’t have someone checking your file to see if they should be doing it.

“But I bank where my mortgage is.” You can bank where ever you want, you don’t have to bank where your mortgage is. You just have to tell your mortgagee to take the money from your new bank account.

“What if I don’t owe any money to the bank?” You may not need to get a new bank account. However, if you have written any post-dated cheques or have given pre-authorized payments on a debt that will be part of your proposal you will have to put stop payments on all of those payments. Putting stop payments on cheques can be expensive, you may find it cheaper to just get a new bank account. Talk to your bank about this.

To make it clear, don’t bank where you owe.

As a Windsor and Leamington bankruptcy Trustee, I am frequently asked what happens with joint debts when someone files for bankruptcy.

Simply stated, the debt would belong to the other person. For instance, lets say that John has a bank loan and his mother co-signed the loan. By being a co-signor mom is essentially agreeing to pay the debt if John doesn’t pay. If John files for bankruptcy, mom becomes responsible for the entire debt. The same is true if it was a joint debt between John and his wife. Many people assume that John is responsible for 50% of the debt and his wife is responsible for 50% of the debt. Not so. If John filed for bankruptcy, his wife is responsible for the entire debt.

The same is true if a mom had a supplementary card of John’s credit card. She would be responsible for the entire credit card debt when John filed for bankruptcy.

As you can read having co-signed, joint, or a supplementary card can add a twist to a bankruptcy that you weren’t expecting. If you have any questions about this, give me a call at 519-250-8060 or 310-PLAN or send me an e-mail.