Recently The Financial Consumer Agency of Canada issued a press release called “Debt reduction companies: Beware of “too good to be true” offers“.

Now, the Ontario Ministry of Consumer Services has issued their own Consumer Alert: Debt Settlement.

Both the Ontario and Canadian government warnings list similar signs to watch out for including false claims about being government approved, the ability to drastically reduce your debt and being able to protect your credit rating.

We have been sending the alert for several years. The message is the same, be aware of who you are dealing with and what your debt options are.

When you file for bankruptcy, the companies you owe money to are no longer able to collect the debts. In essence, the debts are in limbo. Your actions after filing for bankruptcy are what matter most.

During bankruptcy, every single person who files has to do the same duties.

These are:

1. Submitting monthly income and expense forms,
2. Submitting the required payment,
3. Attend two counselling sessions,
4. Submitting tax information,
5. Attending any necessary meetings,
6. Cooperating with your Trustee,
7. Advising your Trustee of your current phone number, address and email address.

Once you complete your duties, you are eligible for your discharge. Getting a discharge means that your debts are no longer collectible (subject to some exceptions).

Then what happens if you don’t do your duties? In short you won’t get discharged.

Before that happens you should contact your Trustee. Most times we are able to work out a plan to help you get your discharge. For instance, we can work out a payment plan, or give you another set of income and expense forms to complete. It’s important not to ignore your trustee.

Your file is sent to court (which will cost you money), and if a plan is not made, we are given permission to close your file. What does that mean? It means even though you are still bankrupt, your creditors can now go after you for the amount you owed them.

Another good reason to get discharged is the effect on your credit report. The bankruptcy note on your credit report remains there for a certain number of years after your discharged. If you are not discharged, the note isn’t removed.

Filing for bankruptcy is a serious matter and not to be entered into likely. If you don’t do what you are supposed to do, you could find yourself worse off than before.

Is home ownership worth it? Most people would say yes. Why make someone else rich off your rent payments, when you can own you own home. But I am not so sure its as simple as that.

The first thing I wonder is how can the average person I see save up for a down payment? If you are having a hard time paying your debt, you likely don’t have the money to save for a down payment. True, that once you file for bankruptcy you will no long have debt payments, but if you were only paying $200 a month on your credit cards, how long will it take you to save up enough money? The minimum down payment you will need is 5%. If you want to buy a house that is $160,000 you will need a down payment of at least $8,000. It will take over 3 years to save the money. But that assumes you can save the money. What happens if your car breaks down, or you have an unexpected expense?

The next thing to consider is the extra costs of home ownership. Right now you may be living in an all inclusive apartment. You have to consider what the cost of utilities will be. Don’t forget you will also have to pay property tax.

You also need to be able to save money for maintenance. How long will it be before you need to have the shingles replaced? Will you have the money to repair or replace the furnace if it breaks down? What happens it a pipe leaks> You also have to consider cosmetic changes such as painting the walls or replacing the carpet. You new home will likely have a lawn. That means that now you need a lawn mover and will have to pay for any landscaping that needs to be done. All of these things add to the cost of owing a home.

You may be thinking, “but my home is an investment. I can keep it for 15 years and then sell it and make lots of money.” Your house will probably be worth more in 15 years, but how much money will you have to pay in upkeep in the next 15 years?

The point I am trying to make is that home ownership is more that just owning a home. Do you homework on all of the costs associated with it before making the decision.

Every year the Office of the Superintendent of Bankruptcy publishes their income guidelines for the year. 2012 guidelines have just been announced. The good news is that the surplus income guidelines have increased a small amount over last year.

The new limits are:

But what does that mean?

It now means that you can earn a bit more money in a bankruptcy before you have to make additional payments based on your income. The main point about surplus income is “the more you earn, the more you pay”.

What does that really mean?

Here is an example. Let’s say you are single, with no dependents. Your government set surplus income limit is $1,980. Your take home pay is $2,300 each month. You are over the income limit by $320 ($2,300 – $1980). Surplus income in a bankruptcy doesn’t mean you have to turn over all of the money you have left over at the end of the month. Surplus income in a bankruptcy just refers to the amount you are over the government limit. You keep half of that amount and you pay half to the bankruptcy, which is $160. This calculation is done each month for at least the first 6 months of your bankruptcy.

Does it sound confusing? It can be. But this calculator can help you figure out what your surplus income is.

An easier approach for many people is to file a consumer proposal instead of bankruptcy. That way their payment is set each month and they don’t have to worry about the math.

Need help? Give me a call at 519-250-8060 or 310-PLAN.

When I meet with people in Windsor or Leamington to review their options, I am often asked “What does Bankruptcy cost?”

There are several components to the cost of Bankruptcy and I will attempt to summarize them here.

1. First there is the administrative charge. This usually starts around $180 per month and can last up to 36 months depending on your income and if you filed bankruptcy before.

2. Next is surplus income. In simple terms, the more you earn, the more you pay. You make this payment for either 21 or 36 months (or longer if you have filed bankruptcy twice or more before).

3. You have to make payments on any assets that are not exempt if you want to keep them. For example, if you have a car that is worth more than the exempt limit of $5,650, you have to pay the trustee the difference to keep the car. If the car is worth $6,000, you have to pay the Trustee $350.

4. Although not a payment, you also lose tax refunds for the year you filed and the year before if not already received the refund. You may also lose your quarterly HST credit cheques.

As you can see the cost of filing for bankruptcy is not always straight forward to figure out. Give us a call at 519-250-8060 or 310-PLAN and we can try and help you determine how much a bankruptcy might cost you.

Financial Fitness Centre is holding it’s 1st annual winter beach party.

Hoyes, Michalos & Associates is happy to be a sponsor of this event that supports Financial Fitness Centre’s literacy programs for seniors, youth and low income earners.

Tickets are $35 and can be ordered by calling 519-258-2030. But hurry, they are selling out fast!

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.

The Office of the Superintendent of Bankruptcy has just reported that for the 12 months ending September 30, 2011 personal bankruptcies are down 23.2% and consumer proposals have increased by 3% in the Windsor area. In Ontario bankruptcies are down 23.5% and consumer proposal are up 8.4%.

The decreasing bankruptcy rate in Windsor is good news as our local economy slowly improves.

An increase in consumer proposals means that Windsorites are able to make payments on their debt, they just need some help.

What can you do for 2012? Make a plan to reduce your debt. Visit us at hoyes.com. We have some budgeting and money management tips available for you to use.

Everyday someone tells me they don’t know how to manage their money and they don’t know how to start managing their money.

The simplest way to think of managing your money is that the “ins” have to equal the “outs”. That is to say that your income, from all sources such as employment, EI, support etc., must equal your spending and the amount you have allocated to savings (you are saving, right?). How you keep track of that is going to depend on your personality. There is no one size fits all.

Certain expenses are fairly easy to keep track up because they always the same. This would include things like rent, mortgage and car payment. Where it gets tricky is managing the expenses that change all of the time such as gasoline or groceries.

For some people, they like to keep a certain amount of cash with them and then write down everything they spend. For other people they place the money in a jar or in a freezer. They put all of their receipts in the jar or freezer and when the cash is gone, they have no more money to spend.

In order to do that, you first need to know how much you have to spend. Look at last month’s bank statement as a guide, but as you can see keeping track of your money to not an easy task.

Doug Hoyes has a secret to budgeting …. don’t. Instead he talks about managing your money through calendar money management. Time your expenses to match your income. Again, this might not be for everyone, but it’s a starting plan.

My suggestion is that you know yourself best. Spend a few minutes researching various ways to keep track of your money. Ask a friend how he or she tracks her money. And most of all, stick with your 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.