If you have been following our company websites, you will know that the last couple of weeks we have been providing information on Debt Consultants.

Last week I had the opportunity to hear one of those types of firms do a presentation to a business group that I belong to.  It was a very interesting presentation.

First, the presenter proceeded to inform us that he also disliked many companies in this business that provide so called debt relief services to people who have financial troubles.  If you haven’t read those stories, I invite you to look at some of these blogs:

http://www.hoyes.com/blog/2011/10/debt-consultants-horror-stories.html

Second, he also advised that his company is a not-for-profit registered charity and has a large component in their organization in giving education seminars to various companies and individuals.

Third, he advised they were located across Canada.

Was he telling me the truth?

Searching on the internet and review of the materials he handed out at the presentation show that yes, he was totally on the “up and up”.

So the moral of my story is that you need to do what most of our blogs tell you to do.  If you are not ready to make an appointment with a trustee or us in particular, search for help very carefully.

-          Check the Better Business Bureau to ensure there have been little or no complaints or they are rated highly by the Bureau for whomever you are choosing to help you with your financial troubles.

-          Check reviews to see what has happened to other people.  Remember that on their site only good stories will appear – check what has been said about them on other sites.

-          Check to see if they have offices in your area – if someone doesn’t want to meet with you face to face, it is likely they are not from your area.

-          Check to see if there are any costs related to meeting with them or becoming part of their program.  If there are payments to be made, when will your creditors be notified.  A trustee or true debt consultation firm who can help you will be contacting your creditors upon starting their program.

And if you are not sure about what you have heard, then do make an appointment with Hoyes, Michalos.  There is no cost for a consultation with us and we do not require anything to be signed or paid when we discuss the options with you.  Just a plan to get you started on the way to managing your debt and finances.

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In my last blog I talked about someone who was probably going to file a bankruptcy but then who might do a proposal.  What are the items that I check off if I feel someone is better suited for a proposal?

Here are features I look for:

-          A bankruptcy would cost more than the person’s cash flow could support.  In other words their expenses including the payment required in a bankruptcy would be more than they are earning.

-          Their debt is too high to pay under a Debt Management Plan with a credit counselor, but is not high enough to make the required proposal payment out of reach for the household budget.

-          There is equity in an asset that the debtor wishes to keep.  This could be equity in a house, RESP contributions for their children’s education, contributions to a RSP in the last twelve months, or other investments that the debtor feels they have worked for and would like to keep.

-          There are student loans involved and making a proposal to all the creditors will help pay down the student loan debt so that they are either paid off or there is not much owing by the end of the proposal.  If student loans are less than 7 years old, a bankruptcy or proposal might take care of the other debts, but during that time interest will continue to accumulate on the student loan debt.  If student loans participate in a proposal, they will hopefully be paid more than the interest costs during the same period of time.

-          The debtor is just committed to paying down a portion of the debt.  There is really not much difference to a credit rating between a personal bankruptcy and a consumer proposal, but it often just makes people feel better knowing they have paid down some of the monies they borrowed.

If you have questions about consumer proposals, you can find general information at this location on our website – http://consumer-proposals.org/consumer-proposal-questions.htm .

If you have questions about your situation and whether you would be a candidate for a consumer proposal, give us a call.  I will review your situation and be happy to let you know if you “fit” my checklist for a proposal.

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In March of this year, I was part of a presentation to various people in our Sarnia area office called “Options Besides Bankruptcy and Other Myth-Busters”.  In that presentation my fellow presenters and I talked about the various “things” people hear when they are thinking of filing for bankruptcy, most of which are probably not quite right for your situation.

It starts with the stress of already being in financial difficulties and then you hear “Well the neighbour down the road filed and they took everything”.  Or “Well the neighbour down the road filed and they got to keep everything”. Or “Don’t file a proposal”. Or “Don’t file a bankruptcy”.

And it goes on and on.

On September 24^th, Ted Michalos and Doug Hoyes will be doing a live simulcast on 570 News Radio, Ask The Experts show about “Debt Myths Exposed”. If you want to get the real deal on the “they told me” items you have heard, listen to the broadcast.  Details can be found at this website:  http://www.hoyes.com/debt-myths-exposed.htm .

If you would like to talk to us about your financial situation, just give us a call at 310-PLAN or check out our website at www.hoyes.com for the office nearest you.

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I normally follow the same procedure when I meet with people to review their financial situation.  But sometimes people who I see already have their minds made up.  That is not necessarily a bad thing but sometimes they don’t know or understand all the other options available.

My first job is to make sure I understand their financial situation.  And then my next job is to make sure they understand the various options available.

Many people think I can offer them a loan.  Trustees in bankruptcy do not do that.  What we do is advise the options that are available (a loan from another source might be an option) and how they impact their situation.  Everyone’s situation is different and not every option will work for every person.

I met with someone just lately who had an investment but it appeared a creditor had taken security on that investment.  Now at first glance her situation seemed easy.  There were no assets to be redeemed by the trustee for the creditors, her income was low enough that there would be no surplus income, and the creditors involved would be happy to close the file.

Further review of her documents showed that there might be a chance that the investment would not be available to the creditor, but could be used to fund a proposal.

What to do?

In this case we filed the bankruptcy.  Doing it this way gives us, as the trustee, the right to look into the investment even more deeply.  If the investment is not secured and is available to the trustee, then we will file a proposal.  Yes, there is initially a bankruptcy, but if the proposal can be filed, then it will be completed very quickly as the investment will be offered to the creditors.  All the parties should be happy because the proposal will be completed quickly and the file can be closed by the trustee and the creditors in a very short time. And a debtor who didn’t know what to do about their debt will be going on with their life free of debt.

Now this type of situation does not happen often, but in this case the debtor was happy that I made the proposal suggestion.

So, which option would be best for you?  It depends on many factors and at Hoyes, Michalos we try to do a consumer proposal if it is at all an option.  Knowing all your options is the first step to resolving your financial difficulties and reading the information available in our websites will help. http://www.hoyes.com/learn-bankruptcy-consumer-proposals.htm.

Call us today at 519-435-1500 if you are having problems to set up a free consultation.

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Today I met a person who had reviewed our website and after talking to one of our professionals was coming in for a free consultation expecting to do a consumer proposal.  After reviewing his situation it turned out he was a much better candidate for a Debt Management Plan.  But even after talking with us he had a lot of confusion about what a consumer proposal was.

I like to call a consumer proposal a repayment plan that usually pays less than 100% to your creditors.  The amount it does pay depends on what your income is, who your creditors are and what assets you have.  In other words I will be reviewing your situation as if you were filing for bankruptcy.  That frightens a lot of people when I meet with them, but I explain that if I do not know what would happen in a bankruptcy, it will be difficult to make sure the amount being offered to the creditors is the right number.

In a consumer proposal the creditors have the right to turn down the offered amount.  And some creditors have certain standards that they require to say yes.  So sometimes the proposal will offer much more than the creditors would receive if you filed for bankruptcy.

So then why do a consumer proposal?  Normally payments in a proposal can be broken down to offer a payment amount that is less than in a bankruptcy.  This will help your cash flow so that you are not continuing to struggle to pay monies you don’t have.

Imagine that you owe about $25,000 to various creditors, but you have about $10,000 equity in your house or you have income high enough that you would need to pay more than a minimum fee in the bankruptcy.  For the above debt, a consumer proposal might offer something like $250 per month for 48 months instead of up to $1000 per month to pay off the house equity in nine months (the usual minimum amount of time in a bankruptcy for a first time bankrupt).   If your creditors are cooperative, the proposal will allow you to pay a percentage of your debt over a greater amount of time than in a bankruptcy.

Credit wise, there is not a large amount of difference between a proposal and bankruptcy initially.  But after the proposal is completed, your credit actually improves slightly. So you can normally improve your credit a little more quickly with a proposal.

Finally, it is important to understand that a consumer proposal, like a bankruptcy, is a process carried out under the Bankruptcy and Insolvency Act. It can stop creditors from garnishing wages, seizing property and bank accounts.  And this makes it a very serious step to take.  It fits nicely between a Debt Management Plan and bankruptcy for those people who cannot afford to pay all their debt but either wish or will need to make payments that would be too expensive in a bankruptcy.

Do you think a consumer proposal might be the right option for you?

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The Office of the Superintendent of Bankruptcy just released its numbers for the first six months of 2011 and it appears in London and the surrounding area, the number of bankruptcies filed is down 9% from 2010.  Is this good news?  Are people not in as much financial trouble?  Will trustees be finding themselves out of work?

The answer to all those questions is likely not.  Although bankruptcy filings are down, consumer proposal filings have increased much more dramatically.  So to make the number story short, more people are opting to repay more of their debt back.

So as a trustee, I do not feel my job is in jeopardy. There are still many people out there experiencing hardship and uncertainty – in their job situations, their debt repayments and other family situations that cause sleepless nights and constant worrying.

Most people who visit me for an assessment of their situation have accumulated debt over a long amount of time.  They have sometimes made poor choices about what they would pay first – a mortgage or a line of credit.  They have purchased a house or car and experienced payments that are much too large for their cash flow/budget.  They need relief from the large amount of funds they need to pay regular living expenses and debt repayment.

A consumer proposal is proving to be a popular choice because they can usually keep their houses and vehicles and offer more to their creditors than what would be available in a bankruptcy.  They feel good about their choice of compromising their debt and they are committed to keeping their payments something they can afford.  It has made them look more carefully at what decisions they make regarding purchases and credit.

For more information about all of these numbers, please feel free to have a look at our consumer proposal website, or take a peak at our bankruptcy statistics page.

If you feel stressed by financial worries, calling us for an assessment of your situation might start the journey to getting control of your finances.  The numbers show more people are starting a process through a consumer proposal that offers them debt relief.  We look forward to helping you.

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A lot of people who contact our offices in the London area are looking for consolidation loans or debt consolidation.  They are often reluctant to even listen to another option such as bankruptcy or proposals.  Once though they have heard about the “other” options, many choose a proposal to help solve their financial problems.

What made them change their minds?

First, the “typical” debtor – and I have to let you know now, that no one ever really is a typical debtor, but many have common traits – will have more debt than any equity in their assets.  This means they do not have enough money in investments, or could sell a house and recover enough funds to pay off the debt.  Sometimes in their efforts to pay unsecured debts such as credit cards and lines of credit, they end up losing their house or vehicles because they cannot make those payments

Second, the cash flow of a debtor does not have enough room to even make minimum payments  on their debt.  They have cashed in investments such as RSPs to continue payments to the creditors, but now are finding that once they have paid regular household bills such as food and rent/mortgage, utilities and gas for the vehicle(s) and insurances, there is not enough left to keep the credit card and lines of credit amounts paid.

Third, many people say they are paying everything, but once we go through their budget, we find out that they are paying something toward a credit card or line of credit and then taking the money right back out.  They say they take it out to pay food, but in reality it is the debt that is being paid with money put into that debt.

Now, imagine they find someone who will lend them money for a consolidation loan.  They likely have no security to give against the loan (that means the person would take that security and sell it if payments were not made), and many times the amount they earn is not enough to give the lender a comfort level they can pay so any loans given would have quite a high rate of interest.  Thus their minimum payments would be as high or even higher than their current minimum payments.

What they would do is exchange one type of debt for another without being able to change their cash flow or the amount they need to pay in total.  Often they need to pay even more since there is more interest charged.

So when I show them that a consumer proposal will pay off a portion of their debts over a period of up to five years for an amount that they can afford in their cash flow – without borrowing more money – they listen.  We work out the amounts required based on their assets, their income and the creditors involved and try to come up with a monthly amount they need to pay that will satisfy the return that the creditors would like to see.  And that is when they realize a consumer proposal will assist them much more than a consolidation.

No one likes to do a filing under the Bankruptcy and Insolvency Act but if you are experiencing any of the problems described above, call us.  You may find a consumer proposal is the answer to your debt problems, your cash flow problems, your worries about how you will pay everyone off.  Calling 310-PLAN or  checking out a consumer proposal at www.hoyes.com can get you started.

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A very small article in the London Free Press a few weeks ago caught my eye. It indicated that according to a poll conducted by BMO Nesbitt Burns, this year almost half of Canadians who receive a tax refund plan on using it to pay down credit card or other debts.

Almost half of Canadians with a tax refund. That is a lot of money being put down against debt that is owed.

Now a tax refund could come about because you are getting too much tax taken off, you are supporting a number of family members, or your income has dropped to the extent that you paid too much income tax on the total income earned over the year.

But it also indicates that a lot of people have a lot of debt that they are finding it hard to make the monthly payments, or that they need monies from somewhere other than monthly income to help pay their debt.

Are you in this situation? Do you find yourself waiting anxiously for that tax refund each year to help pay down some of your credit card balances so that the minimum payments become manageable again? Do you need to pay off a ‘don’t pay for a year’ loan that you received to buy furniture or appliances? Do you struggle with the decision to spend or not spend your tax refund?

If yes, then it may be it is time to look at the whole situation instead of just putting a band-aid on it so you can carry on the same way for a little longer.

At Hoyes, Michalos we will review your financial situation by looking at who and how much you owe to your various creditors, what assets you have and if they have any value that is in danger of being seized by the creditors, and what your income and expenses can allow you to offer to pay back to the creditors. We discuss options like bankruptcy, consumer proposals, Debt Management Plans or maybe even refinancing, although we only do bankruptcies and consumer proposals if that is the right solution for you. But the initial consultation is free and from that appointment you will be able to make a choice that suits your situation and your budget.

If you are going to use or have just used a tax refund to pay down debt and are finding that it has not helped as much as you expected, call us today at 310-PLAN or email us for that free consultation. We will help you find the solution that will help plan for a better financial future with less stress so that tax refund might be used for something more pleasant in future years.

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You think that if you could just have a bit of cash now you could make it to the next pay day.  And where can you get that cash?

Most people find ads on the internet or see the places when they are passing by them.  You all know the names of the pay day loan companies (I won’t mention them here); they all have “Money” or “Cash” or “Loan” in their names, so all of their names sound very familiar.

Here’s how they work: you sign paperwork that says you will borrow from them an amount of money to be paid back at your next pay date.  They charge interest, and a fee for the borrowing and for the processing of the money.

Most of these places charge so many fees that the repayment amount is usually much greater than the amount borrowed.  And they are very happy to let you borrow the same amount or a greater amount the next time in order to make payments because you don’t have the money once you are paying them back. Under Ontario law they can’t keep turning over your loan, so in practice you borrow from Place #1, then next week get a loan from Place #2 to repay them, then borrow from Place #3 to repay Place #2. Then it’s back to Place #1 to repay Place #2, and the cycle continues.

And it keeps on going – borrow, repay, borrow, repay – always in increasing amounts.

The Ontario government passed legislation in 2009 that in effect says you do not have to pay more than $21 per $100 borrowed.  Previously the charges would have meant payments of anywhere from $30 to $60 on $100 borrowed.

But think about this:  $21 paid back (plus the principal of $100) on $100 borrowed is like paying 21%.  And if you don’t pay them back immediately there will be late charges and other processing charges so the actual rate could be still much higher than 21%. And that 21% is an “annual” rate; if you pay the loan back in two weeks, the annual interest rate is obviously significantly higher.

Can you afford to pay that much for a short term loan?  Will you be able from your next pay cheque be able to pay them back plus the extra amount they need (remember the $21 per $100 borrowed) plus the amounts you need to pay to other places from that next pay cheque?

If not, maybe borrowing from them is not the answer to your money problems.  Maybe calling or emailing us to set up a free consultation to talk about more options is the answer.  Yes, maybe the answer will be a bankruptcy, but it could be a consumer proposal or a Debt Management Plan.

Instead of getting on the merry-go-round of payday loans, call us today at 310-PLAN, and we will help you develop a solution to your money problems, and give you a fresh start.

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