My name is Adam Rauf and I’m the associate who manages the Guelph office for Hoyes, Michalos and Associates Inc. and I’m currently in the process of becoming a licensed Trustee In Bankruptcy.

The most common question I’m asked is: How much does it cost to go bankrupt?

Unfortunately, this is not a straightforward answer.

There are 4 costs associated with the bankruptcy process (they don’t apply to everyone); the administration fees, tax refunds for the year you file, Assets and finally a complicated thing call “Surplus Income”.

For the majority of people that I see that declare Personal Bankruptcy (versus a consumer proposal), only the administration fees and tax refunds apply (assuming they receive tax refunds).

1. Fees – Most trustee’s will charge anywhere from $160 to $250 per month for every month while you are bankrupt. The cost of administering the bankruptcy depends on how complex your file is. For a large majority of our clients, we charge a standard $200/month for 9 months. Most Trustee firms charge large upfront fees – something we have never done.

2.  Tax Refunds – This is not always a predictable loss, but losing a tax refund can be a strong deterrent to declaring bankruptcy. If you normally get large tax refunds you may want to consider filing a consumer proposal instead of a bankruptcy.

3.  Assets – some assets that are not exempt while you are bankrupt include RESP’s, Stocks/mutual funds, a second vehicle, equity in a house etc. If you have a non-exempt assets that you would like to keep (i.e. a $2000 RESP set up for your kids), then you always have the option of “buying back the asset ”. Essentially you have to pay the Trustee the cash equivalent and you are more than welcome to retain your assets. Here’s a list of exempt assets

4. Surplus Income – While you are in the legal state of bankruptcy you are required to show your income every month to your Trustee. Half of the money you make above the courts guideline has to be paid into the bankruptcy each month. Currently, the limit a single individual is allowed to live on without incurring “Surplus Income” is $1,884/month net (after taxes, medical expenses, child/spousal support payments etc).

If you make $2,084/month net, then you are above the Government guideline by $200, so 50% of that has to be paid which would be $100/month.

Surplus Income is very dynamic and goes up and down with someone’s income. So if you like working a lot of over time or perhaps a second part-time job, you should closely examine a consumer proposal which is essentially a fixed payment plan and does not waiver with your income.

It should be noted that most Trustee firms retain HST tax credits in addition to the above noted expenses, but here at Hoyes, Michalos & Associates Inc. we do not keep your HST cheques.

To find out if a bankruptcy or a consumer proposal is right for you, give me a call in Guelph at 310-PLAN, or e-mail me, and we can discuss your options and arrange a free initial consultation.

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My name is Adam Rauf and I’m the associate who manages the Guelph office for Hoyes, Michalos and Associates Inc. and I’m currently in the process of becoming a licensed Trustee In Bankruptcy.

Without a doubt, a Consumer Proposal is always the most favoured alternative to filing a bankruptcy. Unfortunately, it may not always be financially possible depending on your income.

With the current rules, when you file an assignment in bankruptcy, you’re assigning control of your assets to a trustee for the benefit of your creditors.  These assets also include your tax refunds for the year you file.

If you currently owe money to the government, it’s likely you would not be receiving any tax refunds, but for those of you that are expecting a tax refund it can sometimes be an important consideration to think about in regards to the timing of filing a personal bankruptcy.

Without trying to be to too technical, if you file a personal bankruptcy close to the end of the year, you’ll most likely have to pay for the Ontario Health Premium Tax. Essentially when someone declares bankruptcy we have to split up the year into two tax returns (Jan 1 – date of bankruptcy) and then the second return (date of bankruptcy – Dec 31). It’s on the latter return where the tax system is not very robust and you’ll have to end up paying anywhere from ($300 to $750) depending on your income.

What this means is that December could be a critical month to file a bankruptcy if it’s something you are contemplating rather than waiting until the new year. This is true of single parents with children that can be eligible for large refunds.

The best option to avoid this ugly mess is to consider filing a Consumer Proposal.

If bankruptcy is on your mind and you think you may be eligible to receive a tax refund, call me directly at 310-PLAN or e-mail me to discuss your options. It never hurts to have a face to face conversation and most people find the free consultation to be very helpful.

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A few months ago I met with a woman who filed a Consumer Proposal in our Guelph office at Hoyes, Michalos & Associates Inc. She was going through a difficult period in her life and had to take some time off work for personal health issues. As a result her credit card bills went by the wayside.  She tried her best to keep up with the minimum payments, but when she had to decide between paying her debts or feeding her children, she rightfully made the choice to put her family first. No one should ever sacrifice the well being of their family to try and stop the phone from ringing – which was her primary reason for contacting us

With the collapse of the housing market and the tighter restrictions on financing, many financial institutions are taking quicker steps to rid themselves of overdue accounts by selling them to collection agencies. This woman dealt with a collection agent who called pretending to be a distant relative with a fictitious story that someone in her family was quite ill. The most shocking story I’ve heard is the manager of a quick cash store waiting for someone at their apartment building to try and collect a $300 pay day loan – another reason never to use pay day loan companies.

These organizations receive a commission for any money they collect and they will use extreme and often illegal methods to force a payment from you (regardless of the amount). You can read more on about collection agents on our website.

How do you deal with these pestering, annoying and stressful collection agents?

Option 1 – Talk to the Agency Directly

Try negotiating with them and see if they are willing to work out an affordable payment plan. Unfortunately this is no longer a highly successful method as most companies will give you an ultimatum such as, “we’ll settle for 50% of your debt, but it has to be paid in 10 days.” Even if you owe $1000, trying to come up with $500 at the last minute is not a realistic option.

Option 2 – Ministry of Consumer Affairs

If the calls, harassment and methods for trying to contact you are violating the collection agencies act, then contact the Ministry of Consumer Services and file a complaint. The ministry is responsible for making sure the collection agencies are practicing within the scope of the law.

Option 3 – Discuss your options with a Trustee in Bankruptcy

If the ministry cannot give you the immediate relief you require,then contact a Trustee in Bankruptcy. Your Trustee in Bankruptcy is licensed to administer a Consumer Proposal which is a simple monthly payment plan. A consumer proposal is an offering to pay back a portion of what you owe (typically 30-40% without any further interest and penalties accumulating) over a period of time (maximum of 5 years). It’s a contract that once accepted, gives you protection from your harassing creditors. The phone calls stop and you receive your fresh start.

If a consumer proposal is not the best solution for you, then the alternative may be to consider personal bankruptcy.

Your first step is to pick up the phone and call us toll free at 310-PLAN and arrange for your free initial consultation. Alternatively you can e-mail me any questions or concerns you might have.

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My name is Adam Rauf and I’m the associate who works in the Guelph office for Hoyes, Michalos and Associates Inc. and I’m currently in the process of becoming a licensed Trustee In Bankruptcy.

A few months ago I met with an individual who was debating whether or not he should declare bankruptcy or file a consumer proposal to deal with his debts. His total debts were $50, 000 on credit cards and bank loans.

His income at the time of his decision was low enough that if he  went bankrupt, his bankruptcy would be 9 months long (meaning he would be in the legal state of bankruptcy for 9 months). For some people if their income is too high, the bankruptcy costs more and becomes 21 months in duration.  He fixated on the fact that his bankruptcy would only be 9 months,  even though in bankruptcy he had to make sure he didn’t make too much money because he had to report his income every month and he would also lose his tax refunds – which often times can be quite significant.

In the end he felt bankruptcy was the best solution for him. Both consumer proposals and bankruptcies are legal solutions to debt problems, but a bankruptcy has the potential to become more legally complicated. Part way through his bankruptcy one his creditors (people he owed money to) decided to oppose his discharge – which is in every creditor’s right to do so. So a court hearing was held and this individual had to go in front of a Registrar (think Judge) to explain what happened. The party opposing the discharge explained why they are doing so and gave suggestions to the Court on what should happen before the discharge should be granted. The bankrupt opted to hire a lawyer to represent him, because the Trustee’s role is simply to provide the facts about the bankruptcy. This was quite the negative experience to say the least! The bankrupt ended up receiving his discharge but had to deal with this added, (easily avoidable), stress.

Is there an alternative to Bankruptcy?

Sure there is, it’s called a Consumer Proposal. Simply put, a proposal is an offering to your creditors to pay back a portion of what you owe (typically 30%, with no interest accumulating) over a period of time (5 years is the maximum).

A consumer proposal would have been set for $15, 000 spread over 5 years which equates to $250/month. Considering he was paying $800/month on his debts (barely touching principal), $250 is a great deal!

Creditors have 45 days to vote on the proposal, and every dollar they are owed is a vote in their favour. If 51% of the dollars say yes, the proposal is a legally binding contract for all the parties involved. Once a proposal is accepted, creditor oppositions are not an option and the proposal becomes a simple payment plan to resolve your debts issues (without the nuisance of having to prove your income every month and you get to keep your tax refunds).

This individual knew that if the proposal was accepted by his creditors, he could have made accelerated payments, and the sooner you pay off the proposal, the quicker it’s off your record.

If you think a consumer proposal might be the solution for you, visit us on-line and find out more. Alternatively, feel free to call us directly at 310-PLAN and arrange a free consultation with a professional in your area. There’s no harm in sitting down with one of our trustee’s who can explain all the different options available to you.

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My name is Adam Rauf and I manage the Guelph office for Hoyes, Michalos & Associates Inc.

As an associate (and articling student in the process of becoming a Trustee in Bankruptcy) I meet with clients on a regular basis that are struggling with their debts.

I met with a woman this past week who is going through a very difficult time. She was forced to drop out of her master’s program leaving her thesis undefended due to her medical conditions. Unfortunately she was forced to live off her credit cards and student loans and as a result her debts piled up and she cannot pay her bills as they come due.

She’s hoping to qualify for EI disability so she continue her rehab therapy and resolve her medical issues, which thankfully is showing positive results.

After sitting down with her I discussed all the options available to her, personal bankruptcy, a consumer proposal and even doing nothing.

Doing nothing is a real option for many people. If you are an individual whose sole source of income is Unemployment Insurance, Social Assistance, Ontario Works, Pension Income (government or work pension), your creditors (the people you owe money to) have no legal rights to garnisheeing your wages. The best advice we give is to make sure you bank with an institution you do not owe money to as they could start freezing accounts for any debts they are owed (i.e. credit cards, line of credits etc).

However this still does not stop the stress of phone calls and the collection agencies from harassing you and anyone they might have contact information for.

Thankfully there is always an option for a Consumer Proposal. A consumer Proposal is a legal option to deal with your debts and is quickly becoming Canada’s Number one alternative to bankruptcy.

Simply put, a consumer proposal is an offer that you make to your creditors to pay back a portion of what you owe over a set period of time (no longer than 5 years).  we were able to put together a consumer proposal that included what she would have to buy back for the consumer proposal. The consumer proposal avoids the headaches, stress and legal consequences that someone would experience when filing a second bankruptcy.

If you think a consumer proposal might be the solution for you, visit us on-line and find out more. Alternatively, feel free to call us directly at 310-PLAN and arrange a free consultation with a professional in your area. There’s no harm in sitting down with one of our trustee’s who can explain all the different options available to you.

If even a consumer proposal is more than you can afford, the final option is personal bankruptcy. Bankruptcy discharges your unsecured debts, but there is a cost to bankruptcy, and it will negatively impact your ability to borrow in the future.

If you think a consumer proposal might be the solution for you, visit us on-line and find out more. Alternatively, feel free to call us directly at 310-PLAN and arrange a free consultation with a professional in your area. There’s no harm in sitting down with one of our trustee’s who can explain all the different options available to you.

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My name is Adam Rauf and I manage the Guelph office for Hoyes, Michalos & Associates Inc.

As an associate (and articling student in the process of becoming a Trustee in Bankruptcy) I meet with clients on a regular basis that are struggling with their debts.

I met with a woman this past week who is going through a very difficult financial time. She had worked very hard to try and help her children with their post-secondary education by setting aside close to $30, 000 in RESP’s for her kids. Desperately wanting to preserve the funds for her children, we sat down and looked at her options.  The first question she asked me was:

“How will a bankruptcy affect my RESP’s?”

For anyone unfamiliar with an RESP, it’s basically a special savings plan that is registered by the Government of Canada. You are able to invest the funds and the growth is tax-free. The funds are topped up through the Canada Education Savings Grant and Canada Learning Bond.

If I go bankrupt, why do I lose the RESP for my children?
An RESP is generally held not to be a true trust, and is cashable by the plan-holder. Because the plan holder (usually the parent) can cash out the RESP at any time, the RESP is considered to be an asset of the plan-holder. Therefore, if the plan-holder is bankrupt, the RESP is seized by the Trustee.

In a bankruptcy situation, we would have to collapse the funds, unless she was able to buy back the amount the RESP’s would be worth if they were cashed in today. If you have $30, 000 in RESP’s, the actual amount that would be received would be a lot lower due to service fees, penalties, portions being returned to the Government etc. The actually value of her RESP’s would be closer to $20, 000. So if she wanted to keep the RESP’s going, she would have to come up with the money necessary to match the cash value of the funds (which is quite difficult to do).

Thankfully there was another option – a Consumer Proposal. A consumer Proposal is a legal option to deal with your debts and is quickly becoming Canada’s Number one alternative to bankruptcy.

Simply put, a consumer proposal is an offer that you make to your creditors to pay back a portion of what you owe over a set period of time (no longer than 5 years).  we were able to put together a consumer proposal that included what she would have to buy back for the consumer proposal. The consumer proposal avoids the headaches, stress and legal consequences that someone would experience when filing a second bankruptcy.

If you think a consumer proposal might be the solution for you, visit us on-line and find out more. Alternatively, feel free to call us directly at 310-PLAN and arrange a free consultation with a professional in your area. There’s no harm in sitting down with one of our trustee’s who can explain all the different options available to you.

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My name is Adam Rauf and I’m the associate who works in the Guelph office for Hoyes, Michalos and Associates Inc. and I’m currently in the process of becoming a licensed Trustee In Bankruptcy. The past few months I have been meeting with many Guelph residents who have been struggling for years trying to pay back their debts.

A vast majority of the people we see say the same thing:

“I should have made the appointment to see you years ago”

Many people (with the most noble of intentions) will do everything in their power to try and pay back the companies they owe money to.  Unfortunately, this usually means exhausting all forms of exempt investments, savings, assets etc. in an attempt to pay back what they owe.

The reality is many basic common assets are exempt in a bankruptcy.
Hopefully this will clear up any misconceptions.

1. Vehicle – everyone is allowed to own one vehicle that is worth up to $5, 650. If your vehicle is below the exemption limit, you get to keep it without any consequences.

If your vehicle is worth more than the exemption limit then you pay the difference into your bankruptcy. For example, your vehicle is appraised at $6, 150, you can offer to buy back the “excess” equity of $500 ($6, 150 – $5, 650) and keep your car.

2. RSP’s are exempt, except for your last 12 months of contributions.

3. Taxes are included in a bankruptcy. Many self-employed people who fell behind in paying their taxes require our help for a fresh start.

4. If you own a house and there is no equity (meaning it would sell for less than the mortgage owing), you can keep your house – provided that you can maintain the monthly mortgage payments. If however, there is some equity in your home, you should consider a consumer proposal as your legal option to deal with your debts.

5. A Bankruptcy can also put a stop to a wage garnishment. If you’re being taken to court and threatening to have your wages garnisheed, a bankruptcy (or consumer proposal) offers legal protection to stop your wages from being taken.

Of course there is a downside to declaring bankruptcy such as losing any tax refunds for the year you file, a blemished credit score and not being able to use credit cards.

The legal alternative to declaring bankruptcy is called a Consumer Proposal.  A Consumer Proposal still offers the same protection, but your assets do not belong to the Trustee. A proposal is a simple monthly payment plan that helps you deal with your debts. Essentially you make an offer to repay a portion of what you owe without interest (typically 30% – but this depends on family income and size).

So if you owe $50 000 on your credit cards and you’ve been paying $800-$900 every month with no end in sight, you can offer to pay back $15 000 over 3, 4 or 5 years. That’s $250/month for 5 years!

Many people refuse to speak with a Trustee because of their fears, misconceptions and pride. For some people the thought of declaring bankruptcy would be the end of the world, which is why many people are choosing to use consumer proposals as their alternative to bankruptcy.

If this sounds all too familiar, then pick up the phone and call me directly at 310-PLAN or you can e-mail me.  Our consultations are free, and most people find it very helpful.

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My name is Adam Rauf and I’m the associate who works in the Guelph office for Hoyes, Michalos and Associates Inc. I’m currently in the process of becoming a licensed Trustee In Bankruptcy and I have met with many Wellington residents who have unfortunately wasted money by seeing “Debt consultants”.

Recently an article with MSNBC was published talking about the danger of working with companies that charge large up-front fees for trying to help people in debt.  After all, if you’re in debt – chances are you’re not going to have hundreds of dollars to pay these people.

How does it work?

They will tell you to stop paying all your bills (credit cards, line of credits, loans etc.) and to start paying them a monthly fee. The first 5-10 payments go straight to them for their service and after they have collected their fees, they will start pooling all your money into a savings account with the hope that your creditors (the people you owe money to) will be cooperative enough to accept a lump sum payment.

Well that’s great if it works, but what are they doing that you can do yourself?
Anyone can stop paying their bills in the hopes the creditors MIGHT accept your offer.

Possible Complications?

1.       Everyone might not agree to your offer.
What if only some of your creditors agree and other do not? There is nothing that legally binds all your creditors to this offering. Debt Consultants have no legal authority to negotiate with your creditors to reduce your interest and/or payments.

2.       Creditor Calls won’t stop.
If you stop paying your bills, you might as well stop picking up your phone. With more aggressive tactics to pressure people into meeting their financial obligations, collection agencies have been known to bother people at home, work, friends and family – they will contact anyone they can to try and force you to make your payments.

3.       Garnishment/Legal Action can pursue.
If you stop paying your bills and creditors don’t want to wait 50 months for their payments, they can obtain a judgment to start garnishing your wages directly. This debt settlement plan cannot stop you from being sued or stop your wages from being garnisheed. However a consumer proposal or a bankruptcy can.

4.       What if you owe money for taxes?
CRA will not agree to a debt settlement plan and they will take serious action to try and recover the taxes owed.  The help of a licensed Trustee In Bankruptcy however can help you resolve your debts issues with CRA.

5.       Credit Score is still affected.
By not paying your bills and being sent to a collection agency, your credit rating will be severely blemished – almost as negatively as a bankruptcy.

6.       Refer you to a Trustee anyways.
Most of the time, people that seek out the help of debt consultants need the help of a licensed Trustee from the start. Knowing this, they may charge a referral fee which is another way to waste money as you can book a free consultation with us directly.

If you think you need help, please call me directly at 310-PLAN or you can e-mail me. Our initial consultations are free and it’s a good way to explore the different options available to you.

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My name is Adam Rauf and I’m the Guelph associate with Hoyes, Michalos & Associates. Everyday I meet with residents of Guelph to help them recover from their financial problems.

Today I met with a man and the first words out of his mouth were:

“I’m scared to hell. I don’t know what’s going to happen to me, my family, my house, my livelihood. We can’t keep up with our payments and we don’t know what to do anymore.”

Obviously a very difficult situation. He was quite upset (and understandably so), as he was receiving phone calls almost every hour from collection agents who were demanding payment. He had to decide whether he should put food on the table or pay his bills.  This is something that no one should ever have to go through, but happens more frequently than many people realize

After sitting down with him and going through his options it became quite clear that he needed the help of a Trustee in Bankruptcy.

He and his wife earn $4700/month and they need about $3200/month to live (for their mortgage, cars, kids etc). They were paying $1700 every month towards their debts which was only paying interest, not even touching the principal.

What were their options?

They tried exploring the idea of a bank loan, but with a poor credit rating, no financial institution was willing to lend them the money to consolidate their debts.

They had only two real options: Bankruptcy or a Consumer Proposal.

A bankruptcy would mean they would lose their home. The house had $16, 000 of equity which they couldn’t afford to buy back right away meaning the Trustee would have to sell the house and distribute the money to the people they owed money to. Additionally, their bankruptcy would be 21 months long and every month they would end up paying close to $900 (this is called “Surplus Income”) towards their debts.

A consumer proposal however, allowed the family to stay in their home and pay down their debts. It is a simple monthly payment plan administered by your Trustee. Simply put, you offer to repay a portion of what you owe (typically 30%) and your creditors get to vote on the proposal (all of this is administered by your Trustee in Bankruptcy).

This couple was able to consolidate their debts into a very manageable payment of $800/month for 5 years – saving them $900 every month! This helped to keep them in their home and they were able to avoid a bankruptcy.

If this sounds all too familiar than you might benefit from picking up the phone and calling me for a free financial evaluation, it only takes 10 minutes and a little bit of education goes a far way in regaining control of your life. Call us at 310-PLAN and if you like what you hear you can arrange for a free initial consultation. If you prefer, you can also e-mail me and we’ll get in touch with you as soon as possible.

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The numbers are out and the Office of the Superintendent of Bankruptcy has just released the latest statistics for the number of consumer bankruptcy filings in Guelph (versus business and corporate filings). Overall it’s very positive as the percentage of people who filed bankruptcy has dropped since 2009. To be more specific:

The first half of 2010, 150 Guelph residents had to declare personal bankruptcy. An additional 108 Guelph residents filed a consumer proposal. Essentially a total of 258 Guelph Residents (310 including surrounding areas) had to seek out the help of a licensed Trustee in Bankruptcy to help resolve their money problems. If these numbers are consistent for the remainder of the year we should expect to see 300 Bankruptcies and 216 proposals for a total of 516 consumer filings this year for Guelph alone.

How does this compare to 2009?

In 2009, a total of 734 Guelph residents had to file a personal bankruptcy or a consumer proposal; 509 and 225 respectively. To be precise, bankruptcy rates should drop by 41% and consumer proposal filings should drop by 4%: Overall that should be a decrease in filings by about 29.7% for Guelph residents.

This should not be a huge surprise because in 2009 the big economic storm hit causing a huge decrease in consumer confidence which was a hard hit to the manufacturing economy of Guelph. Using the 2009 bankruptcy statistic is a little misleading as the bankruptcy laws changed on September 18, 2009 which caused a sharp increase in people filing bankruptcy before the changes were implemented (changes that would make filing a bankruptcy longer and more expensive) which inflates the numbers to an unrealistic level.

If we look at the personal filings for Guelph in 2008 we’ll notice that a total of 497 Guelph residents filed either a bankruptcy or a consumer proposal: 340 and 157 respectively. Comparing this to 2010, we can estimate a drop of 11.7% for bankruptcies and an increase of 37.6% for consumer proposals. What does this mean?

Comparing 2010 to 2008 we see a noticeable decline in bankruptcies but a large increase in consumer proposals. This is a positive sign as it illustrates more people are choosing consumer proposals as a favourable alternative to bankruptcy and more companies are willing to negotiate some sort of repayment plan for the monies they are owed.

A consumer proposal can only be administered by a licensed Trustee in Bankruptcy and is a legal remedy to help resolve consumer debts. If you are interested in learning more about consumer proposals please contact me at our Guelph office at 310-PLAN or e-mail me today to arrange a no charge initial consultation.

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