Will your trustee be there tomorrow? This sounds like a stupid question, but we were just contacted by a national accounting firm and asked if we’d like to purchase their personal bankruptcy practice as they no longer think it is compatible with their other lines of business. That’s not surprising. Big accounting firms do big audits for big corporations. They aren’t set up to meet with individuals in financial trouble.

Something similar happened about twelve years ago when another national firm made the same decision. One day they were accepting new clients. The next day they were closed for business.

Industry scuttlebutt says that it is only a matter of time until all of the national firms make the same decision. After all there only are 2 or 3 left. Accountants that are dealing with multi-national companies and huge corporations aren’t all that interested in helping the average Joe deal with his debts. Well, if that’s the case then they should get on with it.

Doug Hoyes and I left a national accounting firm to set up our firm because we didn’t feel the big firm we were with was really interested in helping Joe out. We thought we could do it better.

Our firm has grown to be the fourth largest provider of personal insolvency services in Canada, numbers 1, 2 and 3 are all national firms – I suppose we’ll be third thanks to these guys closing. We’ve grown by adding new trustees and new offices. Each of our trustees sees only people in 1 or 2 locations and these offices are located in the communities where they live. I have lived in Guelph for most of my life. We don’t have people driving all over the province to meet with you in a donut shop. We know you want to see the same people when you come in, you want to know who you can call and who will sort out your problems.

If you are experiencing financial difficulties give us a call at (519) 823-0330 or e-mail me – we can walk your through your options over the phone or book you a face to face consultation with one of our professionals. We can explain how a consumer proposal can help you avoid bankruptcy. Either way there is no charge for the session and most people find it helpful.

We’re in this for the long run – it is all that we do and we’ll be here tomorrow.

What they won’t tell you is that you don’t need to be referred to a trustee – you may simply use the internet or the phone book to find the number and call a trustee directly.

What’s more, a trustee will discuss all of your options with you, including consumer proposals, bankruptcy, debt management programs and even refinancing your home. There’s no fee for this consultation and if you decide to file a consumer proposal the trustee’s fees are set out by law – there’s no up front fee or hidden costs.

There’s no polite way to say this – there is a growing industry made up of less-than honest people claiming to be “debt consultants”. They will meet with you a couple of times, sign-you up for a debt relief program, take your money, and then refer you to a trustee in bankruptcy; a trustee that would have met with you for free, if you’d gone to them first.

Here are the warning signs to watch for: if you see an ad that claims to be able to reduce your debt to something less than 100% of what you owe, that claims to be able to stop all of the interest charges and that will allow you avoid bankruptcy and the ad isn’t from a licensed trustee in bankruptcy BE CAREFUL. Certainly call them (or contact them on the web), but the first question you should be asking is “are you going to help me set up a consumer proposal?” If the answer is yes then the second question you should be asking is “why should I pay you a fee to help me when I can go see a trustee for the same advice and they won’t charge me a fee?”

Some of these consultants regularly charge in excess of $1,000 – this is money you have to pay them first before they can put their program in place (you have to pay them in full before they will refer you to a trustee).

Before you agree to pay any fees or commit to any program you should contact a licensed trustee in bankruptcy – you’ll discover that referrals are not required and that the fee the consultant wants to charge you is for something your trustee will do for free…

Every week I speak to people that have signed up for these programs and have paid some sort of fee. I have to explain to them that the consultants took advantage of them and charged a fee that they wouldn’t have had to pay had they simply called me first, so call e-mail me or call me today in Guelph at 519-823-0330, and I’ll help you set up a consumer proposal (if that’s the right solution for you) with no up front fee.

We noted that there is going to be an automatic opposition section to the Act for persons with large tax debts. Opposition is the term that is used when an individual is required to appear in Court and explain the circumstances that caused their bankruptcy to a Registrar or Master.

Under current legislation, any creditor may request such a review. Under the new law it will be automatic for Canada Revenue. Our concern is that while the threshold for this automatic provision is $200,000 we suspect that the government will petition to have that threshold lowered in future amendments to $100,000 or even $50,000. No other creditor is being afforded this special treatment and frankly, we’re concerned where this may lead.

Our greatest concern with the Canada Revenue Agency is in the area of proposals to creditors. The current policy of the government is to request 100% repayment of the basic tax debt when a person files a proposal – this means that the government votes against many reasonable repayment plans.

As the law sits today, if a proposal is rejected a person is likely to become bankrupt and then be subject to the surplus income rules for a period of 9 months or longer. The new law imposes the surplus income rules for 21 to 36 months – extending the repayment and therefore rewarding the Canada Revenue Agency for rejecting the proposal.

We strongly encouraged the Senate to request the Minister of Revenue to appear and explain his agencies position in this regard.

Following our presentation the Senators present directed questions to Douglas Hoyes and I for the better part of an hour. The questions showed an excellent understanding of the issues and we were pleased with the Senators level of knowledge and interest in the subject.

We believe the experience was well worth the drive (even in a blizzard) and we are confident the Senators will put the information we provided to good use.

If you are thinking about filing bankruptcy in Guelph, you now have access to the same experts the government of Canada has called on for expert testimony. Give my Guelph Bankruptcy Office a call at 519-823-0330 or e-mail me your questions, and I will set up a meeting in our Guelph office where we can discuss your options and help you resolve your financial problems.

• It’s a way to repay your unsecured debts
• It’s a legal procedure that provides you protection from collection agents and wage garnishees
• It’s an alternative to bankruptcy for people that are in financial trouble
• It’s a procedure that many people can benefit from (if they only knew it existed!)

Here’s the long answer (and what you need to know to determine if a proposal might be the right solution for you).

A consumer proposal is a legal procedure permitted pursuant to the Bankruptcy and Insolvency Act. They were created to provide individuals considering an assignment in bankruptcy with an alternative under the law.

The concept behind filing for bankruptcy is that you are unable to repay even a portion of your debts. In exchange for singing over your rights to the things that you own and making payments based on your income, after a period of time you are released from your debts.

The concept behind a consumer proposal is that while you can’t afford to repay all of your debts (and the interest), you can afford to repay “a portion of your debts” and you voluntarily offer to do so. The portion you will be required to repay is determined by you and your creditors – basically you offer the people you owe a payment plan and they vote for or against it.

You might be asking, “Why would they accept less than everything that I owe them?” It’s a good question, but please remember, a consumer proposal is an alternative to filing for bankruptcy. If you are voluntarily offering to pay your creditors more money than they will receive if you file for bankruptcy then it is in their best interest to accept your offer.

Now you’re wondering why you might want to agree to pay more in a consumer proposal than you would have to pay in a bankruptcy. Another good question and unfortunately part of the answer will be quite technical.

When you file for bankruptcy your trustee is required to turn the things that you own into cash for your creditors. You don’t lose everything, but if you have any savings, RRSPs, more than one car, and/or equity in your house al of these things (and some others) might be seized and sold by your trustee. In addition, you will be required to make a payment into your bankruptcy based on your household income and family size – the more you earn the higher your payment and the longer you will be required to pay.

Based on the all of that there are times (quite often actually) when it makes more sense to voluntarily agree to make a fixed monthly payment for a longer period of time to avoid losing the things that you own or making the income based payments in a bankruptcy.

Let me give you an example:

Let’s say you and your spouse have run into some financial problems and you are thinking about filing bankruptcy. You’ve got two children, between you and your wife you earn $4,000 per month and you think you have $15,000 equity in your home (equity is the amount of money you’d be left with if your home was sold after the mortgage, real estate fees, legal costs, etc are paid).

If you filed for bankruptcy you would be required to pay your trustee $15,000 to keep your house (if you can’t work out a payment plan the house will be sold to raise that money) and based on your income and family size you’ll have to pay an additional $320 in surplus income payments. These payments will run for at least nine months (later this year the payments will be extended to 21 months under new laws that will be coming into affect). So, bankruptcy will cost you at least $18,000.

Instead of filing for bankruptcy, you might offer your creditors a consumer proposal to pay them $21,000. You’d do so by paying $350 a month for 60 months. By doing so, you no longer have to worry about paying your trustee for the equity in your house, nor do you have to worry about any payments based on your income. In the example I have given you are voluntarily offering to pay $3,000 more in your proposal than you might have to pay if you filed for bankruptcy, but the payment is manageable and you get to keep you house.

There are many other examples when a consumer might make more sense than filing for bankruptcy – it literally depends on your own situation.

I can tell you that nationally, for every six bankruptcies that are filed there is one proposal filed. In Ontario it’s five bankruptcies for every proposal, and in our practice its two to one. For every tow bankruptcy that we file we file one proposal.

They aren’t right for everyone, but for many people a consumer proposal is a great alternative to bankruptcy. The best part – if anyone asks you can honestly say that you didn’t file for bankruptcy, you worked out a deal to repay your debts…

At the end of the day, how do you decide which professional is going to help you resolve your financial problems? Why choose Hoyes – Michalos instead of one of the other guys that are out there?

It’s really a matter of personal preference. Doug Hoyes and I founded our firm in 1999 based on the premise that people deserve to be treated the way we’d want to be treated if we were looking for help. That means:

• when you call are office you get to speak to a person, not a machine
• when you meet with one of our professionals it will either be with a licensed trustee in bankruptcy or someone with many years of experience
• we’ll review all your options including consolidation loans, credit counseling, consumer proposals and bankruptcy; and
• we’ll help you with the paperwork to get things started

Very few people set out to run into financial problems – in most cases something has happened that was beyond their control to drive them into trouble. The most common reasons we hear include lay-offs at work, downsizing to a lower paying job, a marital break-up or some other family tragedy. Every case is unique and we treat you that way.

Some other advantages of dealing with us include pre-authorized payment plans, a call centre for dealing with any problems as soon as they arise, and the ability to book an appointment to meet with your trustee whenever you feel the need during your procedure.

These are all the things that we would expect if we were looking for help and we think it’s what you expect of us too.

In most of the cities where we operate there are other trustee firms and credit counseling agency that you can speak to. The basic service – your bankruptcy or proposal – are going to be the same regardless of which trustee you decide to use (credit counseling agencies do not provide these services, but are a good source of information about dealing with your debts). The differences will lie in how the service is provided and it’s something you need to look into yourself.

We encourage you to contact more than one trustee firm when you are trying to decide what to do and who to deal with. You should pick the person and the firm that you have the highest confidence in and that you feel most comfortable with. You might be able to tell this over the phone, or you may need to meet with more than one trustee in person – do what you have to do to make the decision that’s right for you and your family.

To meet with me, Ted Michalos, please call our office in Guelph at 519-823-0330.

You can also reach me at 310-PLAN (no area code required). If you prefer, you can also e-mail me your questions, and I will get back to you within two hours during normal business hours. If you are experiencing financial difficulties give me a call. There’s life after debt and we’d like to help to get you there…

Over the last few months I have noticed a significant increase in the number of people calling our Bankruptcy Guelph information line (519-823-0330), and now I know why.

In statistics just released by the Office of the Superintendent of Bankruptcy, the number of Guelph residents filing personal bankruptcy increased from 126 in the first half of 2006 to 161 in the first six months of 2007.

That’s a 28% increase, and that’s the largest increase of any major city in Ontario.

Ted Michalos, Trustee

Also on the increase are consumer proposals, increasing by 5% in Guelph so far this year.

While it’s impossible to precisely explain this increase, since I file more bankruptcies and consumer proposals than any other trustee in Guelph, I believe I have a good idea why we are seeing such a large increase in bankruptcies in Guelph.

I am meeting with an ever increasing number of people who have either lost their jobs or had their overtime cut back, and that creates financial pressure. Many residents of Guelph are home owners, and with the increase in interest rates over the past year that has led to higher mortgage payments, which is also a problem for many people.

My job is to explain to you your options, and help you work out a plan to deal with your debts, so please give me a call in Guelph at 519-823-0330 or e-mail me if you’d like to discuss your financial situation. I would be pleased to help you develop a plan to deal with your debts, and give you a fresh start.